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

North American Palladium Ltd.

May 07, 2009 17:49 ET

North American Palladium Announces First Quarter 2009 Results

TORONTO, ONTARIO--(Marketwire - May 7, 2009) - North American Palladium Ltd. (TSX:PDL)(NYSE Amex:PAL) today announced financial results for the first quarter ended March 31, 2009.

"I am pleased with the progress made on advancing our strategic initiatives in the first quarter," said Bill Biggar, President and CEO. "The previously announced acquisition of Cadiscor Resources Inc., expected to close in late May following approval by Cadiscor's shareholders, is an important step towards our vision of creating a mid-tier precious metals company operating multiple mines in mining-friendly jurisdictions. Cadiscor's Sleeping Giant gold mine is expected to resume operations in the fourth quarter, at a production rate of 50,000 ounces per year. At our Lac des Iles mine, our $7 million exploration program is well underway. Our operations team is also working on a prefeasibility study to verify our belief that the Roby underground mine and the Offset Zone will allow for another 12 years of underground mining. In addition, mine site personnel are refining a restart plan for the Lac des Iles mine with the objective of streamlining processes and lowering operating costs. From an operational perspective, we expect to be able to resume mining within three months of making a "go" decision."

FINANCIAL HIGHLIGHTS

- On March 31, 2009 the Company announced the planned acquisition of Cadiscor Resources Inc. in an all share transaction. Coincident with the signing of the agreement, the Company advanced $7.5 million to Cadiscor to assist with the restart of the Sleeping Giant gold mine in Quebec, expected to be producing in the fourth quarter of 2009.

- For the quarter ended March 31, 2009 there was no palladium production as compared to 61,091 ounces in the first quarter last year due to the Lac des Iles mine being on a care and maintenance basis during the quarter.

- Revenue after pricing adjustments for the quarter ended March 31, 2009 was $5.0 million compared to $70.8 million in the first quarter last year. The first quarter 2009 revenue is entirely attributable to positive commodity and foreign exchange pricing adjustments, as compared to $19.7 million of positive pricing adjustments in the first quarter of 2008.

- During the three months ended March 31, 2009, the first full quarter that the Lac des Iles mine was on care and maintenance, the Company incurred care and maintenance costs of $3.2 million, general and administration costs of $2.0 million and exploration expenditures of $2.4 million, primarily on the Offset Zone project at Lac des Iles.

- Net income for the quarter ended March 31, 2009 was $0.3 million or $0.00 per share compared to net income of $12.6 million or $0.16 per share in the first quarter last year.

- Palladium sales settled during the quarter ended March 31, 2009 were realized at an average price of US$197 per ounce compared to US$434 per ounce in the first quarter last year, a decrease of 55%.

- Concentrate awaiting settlement as at March 31, 2009 was $20.1 million and included 45,146 ounces of palladium provisionally valued at the spot price of US$215 per ounce or contractually agreed upon prices. The Company's performance is highly correlated to prevailing palladium and by-product metal prices as it continues to sell all its metal production into the spot markets.

- Net working capital as at March 31, 2009 was $79.4 million (including cash and cash equivalents of $47.5 million) compared to $86.1 million as at December 31, 2008.

Outlook

As of May 6, 2009 the spot price of palladium and platinum, the Company's two main metals, was US$226 per ounce and US$1,136 per ounce respectively, representing an increase of 23% and 27% respectively, compared to December 31, 2008. Palladium and platinum prices have not yet reached a level at which the Company's management would consider the restart of production at the Lac des Iles mine.

Approximately 50% of palladium and platinum demand is for the manufacture of automotive catalytic converters. While there are some signs of a global economic recovery, the outlook for the automotive industry over the near term remains challenging. On the other hand, the medium to longer term outlook for the pricing of palladium and platinum appears to be quite positive based on credible third party forecasts predicting renewed growth in global automotive sales, particularly in the BRIC (Brazil, Russia, India and China) countries.

As at March 31, 2009 the Company had net working capital of $79.4 million, including cash and cash equivalents of $47.5 million. In addition to the cash on hand, management expects to realize additional cash flow over the next few months as payment is received for metal sales made prior to the mine closure.

While in care and maintenance mode, the Company has retained senior mine management and its exploration team. Management estimates that mine site personnel costs, care and maintenance expenditures at the mine, and corporate overhead costs will continue to be in the range of $5 million to $6 million per quarter. This estimate does not include discretionary investment in exploration activities.

Going forward, management intends to focus on strategic initiatives, including:

1. Continuing the work required to complete a prefeasibility study on the Offset Zone to a depth of up to 1,200 metres below surface. This project has the potential to extend the life of the Lac des Iles mine significantly. Mineralization is currently known to exist to a depth of at least 1,670 metres. The results of the prefeasibility study are expected to be available in the third quarter of 2009.

2. Carrying out drilling and exploration operations on the largely unexplored Lac des Iles property to discover new resources.

3. Leveraging the Company's strong balance sheet to pursue potential acquisitions and joint venture opportunities that may emerge in these difficult and volatile markets.

In the current environment, management expects that there will be many attractive strategic opportunities to consider. The Company will pursue acquisition and joint venture opportunities aggressively but with discipline to ensure that only those transactions that can deliver enhanced shareholder value over the long-term are pursued.

While the Lac des Iles mine is on care and maintenance, management is re-evaluating the current mine plan and mill configuration with a view to reducing operating costs and ensuring that the Company is well positioned to profit when metal prices recover and operations resume.

Conference Call and Webcast

The Company will host its first quarter earnings conference call at 2:00 p.m. ET on Friday, May 8, 2009. The toll-free conference call dial-in number in North America is 1-888-789-0150 and the local and overseas dial-in number is 416-695-6622.

The conference call will be simultaneously webcast and archived at www.napalladium.com and at www.investorcalendar.com/IC/CEPage.asp?ID=144492. A replay of the conference call will be available until May 29, 2009 toll-free at 1-800-408-3053, locally and overseas at 416-695-5800, access code #5585268.

Further information about the first quarter results are available in the Company's financial statements and MD&A, which will be filed on its website, with Canadian provincial securities authorities (www.sedar.com) and with the U.S. Securities and Exchange Commission (www.sec.gov).

About North American Palladium

North American Palladium is a precious metals company that owns one of North America's largest palladium mines, historically producing approximately 4% of global palladium supply. The Company's palladium production at its Lac des Iles mine is strengthened by a significant contribution from platinum, gold, nickel and copper by-product metals.

The Lac des Iles mine was placed on temporary care and maintenance in October 2008 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 mine, which can be quickly restarted upon a strengthening of metal prices, hosts in situ measured and indicated mineral resources of 3.7 million ounces of palladium, 300,000 ounces of platinum and 250,000 ounces of gold, giving investors significant leverage to an increase in commodity prices. The Company benefits from operating in a politically stable jurisdiction with developed infrastructure and a history of innovation and excellence in mining. Please visit www.napalladium.com for more information.

Cautionary Statement on Forward-Looking Information

Certain information included in this press release, including any information as to our future financial or operating performance and other statements that express management's expectations or estimates of future performance, 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 acquisition of Cadiscor will be completed or, if completed, that it will be successful, and there can be no assurance that the Sleeping Giant mine will be successfully restarted or that Cadiscor's 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.



Consolidated Balance Sheets
(expressed in thousands of Canadian dollars)
---------------------------------------------------------------------------
March 31 December 31
2009 2008
---------------------------------------------------------------------------
(unaudited) (audited)

ASSETS
Current Assets
Cash and cash equivalents $47,485 $43,068
Concentrate awaiting settlement 20,083 43,051
Taxes recoverable 385 638
Inventories 19,089 16,590
Other assets 2,666 3,193
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89,708 106,540

Debentures receivable 7,500 -
Mining interests 31,462 31,640
Mine restoration deposit 8,728 8,724
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$137,398 $146,904
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $5,824 $13,996
Current portion of obligations under
capital leases 1,772 1,992
Senior credit facility 2,751 4,430
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10,347 20,418
Mine restoration obligation 8,549 8,455
Obligations under capital leases 831 1,130
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19,727 30,003

Shareholders' Equity
Common share capital and purchase warrants 485,597 485,386
Stock options 2,517 2,305
Contributed surplus 12,336 12,336
Deficit (382,779) (383,126)
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Total shareholders' equity 117,671 116,901
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$137,398 $146,904
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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,
available online at www.sedar.com and www.sec.gov and on the Company's
website at www.napalladium.com.



Consolidated Statements of Operations,
Comprehensive Income and Deficit
(expressed in thousands of Canadian dollars,
except share and per share amounts)
(unaudited)
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Three months ended
March 31
2009 2008
---------------------------------------------------------------------------
Revenue - before pricing adjustments $ - $51,052
Pricing adjustments:
Commodities 4,018 15,178
Foreign exchange 1,012 4,558
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Revenue - after pricing adjustments 5,030 70,788
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Operating expenses
Care and maintenance costs 3,216 -
Production costs - 30,600
Inventory pricing adjustment (2,688) (144)
Smelter treatment, refining and freight costs 66 5,410
Amortization 50 9,162
Loss on disposal of equipment - 695
Asset retirement costs 94 151
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Total operating expenses 738 45,874
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Income from mining operations 4,292 24,914
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Other expenses
General and administration 2,047 357
Exploration 2,408 7,054
Interest and other financing costs (income) (140) 1,629
Foreign exchange loss (gain) (370) 914
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Total other expenses 3,945 9,954
---------------------------------------------------------------------------
Income before taxes 347 14,960
Income and mining tax expense - 2,365
---------------------------------------------------------------------------
Net income and comprehensive income for the period 347 12,595
Deficit, beginning of period (383,126) (222,447)
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Deficit, end of period $(382,779) $(209,852)
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Net income per share
Basic $0.00 $0.16
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Diluted $0.00 $0.15
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Weighted average number of shares outstanding
Basic 86,750,500 79,755,805
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Weighted average number of shares outstanding
Diluted 86,750,500 82,161,057
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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,
available online at www.sedar.com and www.sec.gov and on the Company's
website at www.napalladium.com.



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

Three months ended
March 31
2009 2008
---------------------------------------------------------------------------
Cash provided by (used in)

Operations
Net income for the period $347 $12,595
Operating items not involving cash
Accretion expense relating to convertible
notes payable - 1,831
Amortization 50 10,089
Amortization of deferred financing costs 9 104
Interest on convertible notes settled in shares - 256
Accrued interest on mine restoration deposit (4) (73)
Unrealized foreign exchange gain (1,146) (3,180)
Unrealized commodity price adjustment (6,059) (16,933)
Asset retirement costs 94 151
Future income tax recovery - 2,365
Stock based compensation and employee benefits 423 253
Loss on disposal of equipment - 695
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(6,286) 8,153
Changes in non-cash working capital 20,750 1,947
---------------------------------------------------------------------------
14,464 10,100
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Financing Activities
Issuance of common shares and warrants,
net of issue costs - 10,504
Repayment of senior credit facility (1,759) (1,518)
Repayment of obligations under capital leases (578) (422)
Mine restoration deposit - (266)
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(2,337) 8,298
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Investing Activities
Advances to Cadiscor Resources Inc. (7,500) -
Additions to mining interests 210 (11,029)
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(7,710) (11,029)
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Increase in cash and cash equivalents 4,417 7,369
Cash and cash equivalents, beginning of period 43,068 74,606
---------------------------------------------------------------------------
Cash and cash equivalents, end of period $47,485 $81,975
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Cash and cash equivalents consisting of:
Cash $6,653 $11,768
Short-term investments 40,832 70,207
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$47,485 $81,975
---------------------------------------------------------------------------
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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,
available online at www.sedar.com and www.sec.gov and on the Company's
website at www.napalladium.com.



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:
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) -
Stock-based compensation
expense 106,443 211 - 212
Net income and comprehensive
income for the three months
ended March 31, 2009 - - - -
----------------------------------------------------------------------------
Balance, March 31, 2009 86,767,056 $471,505 $ - $2,517
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Equity
component
of
convertible 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:
For principal
repayments
on convertible
notes payable - - - - -
For interest
payments on
convertible
notes payable - - - - -
Stock-based
compensation
expense - - - - 423
Net income and
comprehensive
income for
the three
months ended
March 31, 2009 - - - 347 347
----------------------------------------------------------------------------
Balance, March
31, 2009 $14,092 $ - $12,336 $(382,779) $117,671
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Number of Capital Shares Stock
shares stock issuable options
----------------------------------------------------------------------------
Balance, December 31, 2007 75,770,570 $430,793 $ - $1,673
Common shares
issued/issuable:
For principal repayments
on convertible notes payable 6,111,869 28,270 2,062 -
For interest payments on
convertible notes payable 165,185 714 18 -
Tax effect of flow-through
shares - (1,452) - -
Pursuant to unit offering,
net of issue costs 2,800,000 9,575 - -
Warrants issued:
Pursuant to unit offering,
net of issue costs - - - -
Warrants exercised 100 1 - -
Stock-based compensation
expense 311,251 1,313 - 632
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
convertible Total
notes Contributed shareholders'
Warrants payable surplus Deficit equity
----------------------------------------------------------------------------
Balance,
December 31,
2007 $13,193 $6,044 $6,292 $(222,447) $235,548
Common shares
issued/issuable:
For principal
repayments on
convertible
notes payable - (6,044) 6,044 - 30,332
For interest
payments on
convertible
notes payable - - - - 732
Tax effect of
flow-through
shares - - - - (1,452)
Pursuant to
unit offering,
net of issue
costs - - - - 9,575
Warrants issued:
Pursuant to
unit offering,
net of issue
costs 899 - - - 899
Warrants
exercised - - - - 1
Stock-based
compensation
expense - - - - 1,945
Net loss and
comprehensive
loss for the
year ended
December 31,
2008 - - - (160,679) (160,679)
----------------------------------------------------------------------------
Balance, December
31, 2008 $14,092 $ - $12,336 $(383,126) $116,901
----------------------------------------------------------------------------
----------------------------------------------------------------------------

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,
available online at www.sedar.com and www.sec.gov and on the Company's
website at www.napalladium.com.


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