North American Palladium Ltd.
TSX : PDL
NYSE Amex : PAL

North American Palladium Ltd.

November 12, 2009 19:17 ET

NAP Announces Third Quarter Results

Balance sheet strengthened, Sleeping Giant gold pour, continued exploration success at LDI

TORONTO, ONTARIO--(Marketwire - Nov. 12, 2009) - North American Palladium Ltd. ("NAP" or the "Company") (TSX:PDL)(NYSE Amex:PAL) today announced financial results for the third quarter ended September 30, 2009.

"We achieved several significant milestones during the third quarter," said William J. Biggar, NAP's President and Chief Executive Officer. "We strengthened our balance sheet by raising over $70 million in equity, which will underpin our growth objectives. We also had further exploration success at Lac des Iles, and continue to be on schedule for reaching full commercial production at our Sleeping Giant gold mine in early 2010."

Third Quarter Highlights

- Completed an equity offering of 16.0 million units at a price of $3.15 per unit for gross proceeds of $50.4 million on September 30, 2009. Subsequent to quarter end, the underwriters' over-allotment option was exercised and a private placement of 4,000,000 flow-through common shares was completed on October 8, 2009, providing additional gross proceeds of $7.6 million and $15.0 million respectively. Total gross proceeds raised were $73.0 million.

- NAP poured its first gold at its Sleeping Giant mine shortly after quarter end on October 6, 2009.

- In September 2009, the Company exercised its right to buy back a 1% net smelter return royalty on the Sleeping Giant gold mine for $1.0 million.

- Net working capital as at September 30, 2009 was $109.6 million, including cash and cash equivalents of $93.1 million. In addition, NAP has no long-term debt.

- There was no palladium production for the quarter ended September 30, 2009, as compared to 63,791 ounces in the third quarter last year due to the Lac des Iles ("LDI") mine being on care and maintenance during the quarter.

- Cash used in operations for the quarter ended September 30, 2009 was $9.0 million, a decline of $16.5 million, compared to cash provided by operations of $7.5 million in the third quarter last year.

- The net loss for the quarter ended September 30, 2009 was $6.2 million or $0.06 per share compared to a net loss of $71.2 million or $0.85 per share in the third quarter last year.

- The Company added to its land package in Quebec, signing an agreement to earn a 50% interest in the Laflamme gold property, and, after quarter end, acquired the Harricana North Property. Both properties are in the prolific Abitibi region of Quebec and strategically located in relation to the Sleeping Giant mill.

LDI Mine - Update

The third quarter of 2009 saw a continued improvement in the price of palladium and platinum and as at November 12, 2009 the spot price was US$355 per ounce and US$1,365 per ounce respectively. While encouraging, the metal price increases did not warrant the restart of the LDI mine, which the Company placed on care and maintenance in October 2008. NAP continues to evaluate the economic viability of restarting the LDI Mine as a higher grade, lower tonnage operation with ore processed from the Roby underground zone. NAP believes it will be well-positioned to restart production at the LDI mine when a sustainable recovery in the price of palladium in combination with stronger by-product metal prices and US/Canadian dollar exchange rates is achieved.

Sleeping Giant Mine - Update

Sleeping Giant remains on track and on budget to reach an annual commercial production rate of 50,000 ounces of gold at the start of 2010. The Company poured its first gold on October 6, 2009, and during the three months ended September 30, 2009, 10,230 tonnes of ore was hoisted from the underground mine, with 9,774 tonnes being processed by the mill.

Exploration Highlights

The Company's exploration focus at the LDI mine has been to increase its understanding of the mineralization and increase its reserves and resources. Exploration has been targeted on the Offset Zone, the Cowboy Zone, and, since their recent discoveries, the Outlaw Zone and West Pit. NAP invested $2.6 million in exploration in the quarter.

The discovery of the Cowboy and Outlaw Zones has resulted in the decision to increase the exploration effort at the LDI mine to define the limits, size and grade of what is effectively an enlarged Offset Zone, and pursue other possible mineralized zones that were identified during the 2009 exploration program.

The Company has retained Scott Wilson Roscoe Postle Associates Inc. ("RPA") to prepare a resource update that will include the results of all the drilling completed in 2009. NAP expects this resource update to be available early in the second quarter of 2010. The Company, assisted by Nordmin Engineering Ltd., will then work towards completing an advanced preliminary economic assessment that will incorporate the resource update prepared by RPA. This advanced preliminary economic assessment is expected to be available in the third quarter of 2010.

At Sleeping Giant, the Company has commenced an extensional drill program aimed at upgrading the mine's existing resources, finding additional resources, and extending the mine's life.

Outlook

The Company's management team believes it is delivering on its vision to create a diversified mid-tier precious metals company. Its palladium mine offers significant leverage to the price of palladium, which NAP believes will increase due to increasing demand and limited supply. The Company's renewed commitment to exploration is yielding results at the LDI mine, and investments in the Abitibi region of Quebec are consistent with NAP's goal of becoming a 250,000 ounce annual producer of gold.

Management expects there will be many other attractive strategic opportunities to consider in the current environment. The Company will use its strong balance sheet to pursue gold acquisition and joint venture opportunities aggressively, but with discipline to ensure it pursues only those transactions that can deliver enhanced and sustainable shareholder value.

Financial Statements

NAP's unaudited consolidated balance sheets; consolidated statements of operations, comprehensive income and deficit; consolidated statements of cash flows; and, consolidated statements of equity are available in the Appendix of this press release. Certain prior period amounts have been reclassified to conform to the presentation adopted in 2009. These financial statements should be read in conjunction with the notes and management's discussion and analysis for the nine months ended September 30, 2009 available at www.nap.com, www.sedar.com, and www.sec.gov.

Conference Call and Webcast

NAP will host a conference call with its management team, including William J. Biggar, President and Chief Executive Officer, and Jeffrey A. Swinoga, Vice President, Finance and Chief Financial Officer, to discuss the Company's third quarter results on Friday, November 13, 2009:



Date: Friday, November 13, 2009
Time: 2:00 p.m. (Eastern Time)
Webcast: www.nap.com
Dial in: 416-340-8018 or 866-223-7781
Replay: 416-695-5800 or 800-408-3053
Replay Passcode: 8407776


The conference call will be simultaneously webcast and archived at www.nap.com. The conference call replay will be available until midnight (Eastern Time) on December 4, 2009, and an archived audio webcast of the call also will be posted to NAP's website.

North American Palladium: Re-engineering the Future

NAP is a precious metals company that owns the Lac des Iles mine, which produced platinum group metals for 15 years until October 2008 when it was placed on temporary care and maintenance due to low metal prices. Prior to the temporary shutdown, the mine had annual production of 270,000 ounces of palladium, 20,000 ounces of platinum and 20,000 ounces of gold. The company also owns and operates the Sleeping Giant gold mine located in the Abitibi region of Quebec, which produced over 1 million ounces of gold from 1988-2008 at an average grade of 11.44 g/t. North American Palladium has resumed gold production at the Sleeping Giant mine and expects to achieve commercial production at the start of 2010 at an annual rate of 50,000 ounces.

Cautionary Statement on Forward Looking Information

Certain information included in this press release constitute 'forward-looking statements' within the meaning of the 'safe harbor' provisions of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities laws. The words 'expect', 'believe', 'will', 'intend', 'estimate' and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties, risks and contingencies. The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of North American Palladium to be materially different from the Company's estimated future results, performance or achievements expressed or implied by those forward-looking statements and that the forward-looking statements are not guarantees of future performance. These statements are also based on certain factors and assumptions. For more details on these estimates, risks, assumptions and factors, see the Company's most recent Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities. In addition, there can be no assurance that the Company's Lac des Iles or Sleeping Giant mines will be successfully restarted or that other properties can be successfully developed. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise, except as expressly required by law. Readers are cautioned not to put undue reliance on these forward-looking statements.



APPENDIX TO NORTH AMERICAN PALLADIUM NEWS RELEASE ANNOUNCING THIRD
QUARTER 2009 RESULTS

Consolidated Balance Sheets
(expressed in thousands of Canadian dollars)

September 30 December 31
2009 2008
----------------------------------------------------------------------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $93,128 $43,068
Concentrate awaiting settlement - Note 4 59 43,051
Taxes recoverable 979 638
Inventories - Note 5 22,710 16,590
Other assets - Note 6 1,443 3,193
----------------------------------------------------------------------------
118,319 106,540
Mining interests 75,603 31,640
Mine restoration deposits 10,501 8,724
----------------------------------------------------------------------------
$204,423 $146,904
----------------------------------------------------------------------------
----------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $7,364 $13,996
Current portion of obligations under
capital leases 856 1,992
Senior credit facility - Note 7 500 4,430
----------------------------------------------------------------------------
8,720 20,418
Mine restoration obligations 11,312 8,455
Obligations under capital leases 632 1,130
----------------------------------------------------------------------------
20,664 30,003
Shareholders' Equity
Common share capital and purchase
warrants - Note 8 566,466 485,386
Stock options 3,066 2,305
Contributed surplus 13,006 12,336
Deficit (398,779) (383,126)
----------------------------------------------------------------------------
Total shareholders' equity 183,759 116,901
----------------------------------------------------------------------------
$204,423 $146,904
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.



Consolidated Statements of Operations, Comprehensive Loss and Deficit
(expressed in thousands of Canadian dollars, except share and per share
amounts)
(unaudited)

Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
----------------------------------------------------------------------------
Revenue - before pricing
adjustments $ - $35,331 $ - $138,786
Pricing adjustments:
Commodities 10 (47,203) 4,382 (31,444)
Foreign exchange (9) 2,992 (565) 6,807
----------------------------------------------------------------------------
Revenue - after pricing
adjustments - Note 9 1 (8,880) 3,817 114,149
----------------------------------------------------------------------------
Operating expenses
Care and maintenance costs 2,533 - 8,799 -
Production costs - 31,350 - 92,679
Inventory pricing adjustment -
Note 5 (639) 5,618 (3,634) 5,474
Smelter treatment, refining
and freight costs 4 6,528 82 18,070
Amortization 95 12,958 197 32,872
Insurance recovery - - - (13,800)
Loss (gain) on disposal of
equipment (21) 515 (21) 1,573
Asset retirement costs 131 155 320 463
----------------------------------------------------------------------------
Total operating expenses 2,103 57,124 5,743 137,331
----------------------------------------------------------------------------
Loss from mining operations (2,102) (66,004) (1,926) (23,182)
----------------------------------------------------------------------------
Other expenses
General and administration 1,790 3,831 6,059 5,837
Exploration 2,623 4,231 8,947 18,400
Interest and other costs
(income) - Note 10 (206) 76 (1,546) 2,980
Foreign exchange loss (gain) (115) (244) 267 (467)
----------------------------------------------------------------------------
Total other expenses 4,092 7,894 13,727 26,750
----------------------------------------------------------------------------
Loss before taxes (6,194) (73,898) (15,653) (49,932)
Income and mining tax recovery - (2,656) - (1,672)
----------------------------------------------------------------------------
Net loss and comprehensive
loss for the period (6,194) (71,242) (15,653) (48,260)
Deficit, beginning of period (392,585) (199,465) (383,126) (222,447)
----------------------------------------------------------------------------
Deficit, end of period $(398,779) $(270,707) $(398,779) $(270,707)
----------------------------------------------------------------------------
Net loss per share
Basic and diluted $(0.06) $(0.85) $(0.17) $(0.59)
----------------------------------------------------------------------------
Weighted average number of
shares outstanding
Basic and diluted 104,099,989 83,832,622 94,592,696 81,903,252
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.



Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)
(unaudited)


Three months ended Nine months ended
September 30 September 30
2009 2008 2009 2008
----------------------------------------------------------------------------
Cash provided by (used in)
Operations
Net loss for the period $(6,194) $(71,242) $(15,653) $(48,260)
Operating items not involving
cash
Accretion expense relating
to convertible notes payable - 400 - 3,285
Amortization 95 10,259 197 30,892
Amortization of deferred
financing costs - 21 18 184
Accrued interest and accretion
on convertible debentures - - (359) -
Interest on convertible notes
settled in shares - 85 - 682
Accrued interest on mine
restoration deposit (1) (45) (8) (129)
Unrealized foreign exchange
loss (gain) 887 1,706 1,723 (6,394)
Unrealized commodity price
loss (gain) (1,720) 49,830 (9,643) 33,971
Asset retirement costs 131 155 320 463
Future income tax recovery - (2,925) - (2,121)
Stock based compensation and
employee benefits 168 550 948 1,377
Loss (gain) on disposal of
equipment (21) 515 (21) 1,573
----------------------------------------------------------------------------
(6,655) (10,691) (22,478) 15,523
Changes in non-cash working
capital - Note 11 (2,295) 18,174 39,441 7,890
----------------------------------------------------------------------------
(8,950) 7,483 16,963 23,413
----------------------------------------------------------------------------
Financing Activities
Issuance of common shares and
warrants, net of issue costs 47,411 - 47,411 10,475
Repayment of senior credit
facilities (500) (1,539) (3,926) (4,575)
Repayment of obligations under
capital leases (429) (469) (1,519) (1,322)
Mine restoration deposit - (51) - (317)
----------------------------------------------------------------------------
46,482 (2,059) 41,966 4,261
----------------------------------------------------------------------------
Investing Activities
Investment and advances to
Cadiscor Resources Inc. - - (1,135) -
Additions to mining interests (5,647) (11,622) (7,755) (36,147)
Proceeds on disposal of mining
interests 21 77 21 294
----------------------------------------------------------------------------
(5,626) (11,545) (8,869) (35,853)
----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents 31,906 (6,121) 50,060 (8,179)
Cash and cash equivalents,
beginning of period 61,222 72,548 43,068 74,606
----------------------------------------------------------------------------
Cash and cash equivalents,
end of period $93,128 $66,427 $93,128 $66,427
----------------------------------------------------------------------------
Cash and cash equivalents
consisting of:
Cash $77,775 $11,071 $77,775 $11,071
Short-term investments 15,353 55,356 15,353 55,356
----------------------------------------------------------------------------
$93,128 $66,427 $93,128 $66,427
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.



Consolidated Statements of Shareholders' Equity
(expressed in thousands of Canadian dollars, except share amounts)
(unaudited)

Number of Capital Shares Stock
shares stock issuable options
----------------------------------------------------------------------------
Balance, December 31, 2008 85,158,975 $469,214 $2,080 $2,305
Common shares issued/issuable:
Pursuant to acquisition of
Cadiscor 14,457,685 27,325 - -
Pursuant to conversion of
convertible debenture 2,457,446 4,644 - -
For principal repayments on
convertible notes payable 1,486,900 2,062 (2,062) -
For interest payments on
convertible notes payable 14,738 18 (18) -
Pursuant to unit offering,
net of issue costs 16,000,000 45,220 - -
Warrants issued:
Pursuant to acquisition of
Cadiscor - - - -
Pursuant to unit offering,
net of issue costs - - - -
Warrants exercised 215,998 575 - -
Stock options issued:
Pursuant to acquisition of
Cadiscor - - - 1,014
Stock options exercised 85,800 113 - -
Fair value of stock options
exercised - 139 - (139)
Fair value of stock options
cancelled - - - (752)
Stock-based compensation
expense 192,590 392 - 638
Net loss and comprehensive
loss for the nine months
ended September 30, 2009 - - - -
----------------------------------------------------------------------------
Balance, September 30, 2009 120,070,132 $549,702 $ - $3,066
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Equity
component
of conver-
tible Total
notes Contributed shareholders'
Warrants payable surplus Deficit equity
----------------------------------------------------------------------------
Balance, December
31, 2008 $14,092 $ - $12,336 $(383,126) $116,901
Common shares
issued/issuable:
Pursuant to
acquisition of
Cadiscor - - - - 27,325
Pursuant to
conversion of
convertible
debenture - - - - 4,644
For principal
repayments on
convertible
notes payable - - - - -
For interest
payments on
convertible
notes payable - - - - -
Pursuant to unit
offering, net of
issue costs - - - - 45,220
Warrants issued:
Pursuant to
acquisition of
Cadiscor 1,168 - - - 1,168
Pursuant to unit
offering, net of
issue costs 1,686 - - - 1,686
Warrants exercised (182) - - - 393
Stock options issued:
Pursuant to
acquisition of
Cadiscor - - - - 1,014
Stock options
exercised - - - - 113
Fair value of
stock options
exercised - - - - -
Fair value of
stock options
cancelled - - 670 - (82)
Stock-based
compensation
expense - - - - 1,030
Net loss and
comprehensive
loss for the
nine months ended
September 30, 2009 - - - (15,653) (15,653)
----------------------------------------------------------------------------
Balance,
September 30, 2009 $16,764 $ - $13,006 $(398,779) $183,759
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Number of Capital Shares Stock
shares stock issuable options
----------------------------------------------------------------------------
Balance, December 31, 2007 75,770,570 $430,793 $ - $1,673
Transitional adjustment
on adoption of inventory
standard - Note 2 - - - -
Common shares issued/issuable:
For principal repayments on
convertible notes payable 5,417,830 26,501 - -
For interest payments on
convertible notes payable 151,427 682 - -
Pursuant to unit offering,
net of issue costs 2,800,000 9,575 - -
Tax effect of flow-through
shares - (1,452) - -
Warrants issued:
Pursuant to unit offering,
net of issue costs - - - -
Warrants exercised 100 1 - -
Stock-based compensation
expense 198,678 1,015 - 362
Net income and comprehensive
income for the nine months
ended September 30, 2008 - - - -
----------------------------------------------------------------------------
Balance, September 30, 2008 84,338,605 $467,115 $ - $2,035
Common shares issued/issuable:
For principal repayments on
convertible notes payable 694,039 1,769 2,062 -
For interest payments on
convertible notes payable 13,758 32 18 -
Stock-based compensation
expense 112,573 298 - 270
Net loss and comprehensive
loss for the year ended
December 31, 2008 - - - -
----------------------------------------------------------------------------
Balance, December 31, 2008 85,158,975 $469,214 $2,080 $2,305
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Equity
component
of conver-
tible Total
notes Contributed shareholders'
Warrants payable surplus Deficit equity
----------------------------------------------------------------------------
Balance,
December 31, 2007 $13,193 $6,044 $6,292 $(222,044) $235,951
Transitional
adjustment on
adoption of
inventory
standard - Note 2 - - - (403) (403)
Common shares
issued/issuable:
For principal
repayments on
convertible
notes payable - (5,469) 5,469 - 26,501
For interest
payments on
convertible
notes payable - - - - 682
Pursuant to unit
offering, net
of issue costs - - - - 9,575
Tax effect of
flow-through
shares - - - - (1,452)
Warrants issued:
Pursuant to unit
offering, net
of issue costs 899 - - - 899
Warrants exercised - - - - 1
Stock-based
compensation
expense - - - - 1,377
Net income and
comprehensive
income for the
nine months
ended
September 30, 2008 - - - (48,260) (48,260)
----------------------------------------------------------------------------
Balance,
September 30, 2008 $14,092 $575 $11,761 $(270,707) $224,871
Common shares
issued/issuable:
For principal
repayments on
convertible
notes payable - (575) 575 - 3,831
For interest payments
on convertible
notes payable - - - - 50
Stock-based
compensation
expense - - - - 568
Net loss and
comprehensive loss
for the year ended
December 31, 2008 - - - (112,419) (112,419)
----------------------------------------------------------------------------
Balance,
December 31, 2008 $14,092 $ - $12,336 $(383,126) $116,901
----------------------------------------------------------------------------
----------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


Contact Information

  • North American Palladium Ltd.
    Jeff Swinoga
    Vice President, Finance and CFO
    416-360-7590 Ext. 222
    jswinoga@nap.com
    or
    North American Palladium Ltd.
    Annemarie Brissenden
    Director, Investor Relations
    416-360-7590 Ext. 226
    abrissenden@nap.com
    www.nap.com