North American Palladium Ltd.

North American Palladium Ltd.

February 25, 2005 08:00 ET

North American Palladium Ltd. Announces 2004 Financial Results


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: NORTH AMERICAN PALLADIUM LTD.

TSX SYMBOL: PDL
AMEX SYMBOL: PAL

FEBRUARY 25, 2005 - 08:00 ET

North American Palladium Ltd. Announces 2004 Financial
Results

TORONTO, ONTARIO--(CCNMatthews - Feb. 25, 2005) - North American
Palladium Ltd. (TSX:PDL)(AMEX:PAL)

Results of Operations

For the year ended December 31, 2004 the Company reported a net loss of
$92,110,000 or $1.79 per share on revenues of $185,204,000 compared to
net income of $38,378,000 or $0.75 per share on revenues of $192,141,000
for the year ended December 31, 2003. The results for 2004 include a
non-cash impairment charge of $108,000,000 (net of tax - $103,376,000 or
$2.01 per share) to write down the carrying value of mining interests.

The Company reviews and evaluates its long-lived assets for impairment
on an annual basis and records a write down 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
undiscounted cash flows are less than the carrying amounts of the
assets. During the fourth quarter, the Company performed an annual
impairment test, which resulted in a write down of the carrying value of
its mining interests. The impairment resulted from changes in key
assumptions which were affected by a continuation of low palladium
prices.

The results for 2004 include an insurance recovery of $7,148,000 (net of
tax - $4,352,000) relating to losses incurred in connection with the
failure of the primary crusher in 2002 and a foreign exchange loss of
$340,000 (net of tax - $340,000) compared to a foreign exchange gain of
$18,138,000 (net of tax - $15,055,000) in 2003. After adjusting for the
impairment charge, the insurance recovery and foreign exchange, the
adjusted net income was $7,254,000 or $0.14 per share for the year ended
December 31, 2004 compared to adjusted net income of $23,323,000 or
$0.46 per share for the year ended December 31, 2003.

In 2004, the Company's palladium revenue benefited from a 7% increase in
palladium production, together with a floor price of US$325 per ounce on
100% of production under its palladium sales contract compared to an
average palladium spot price of US$230 per ounce for the year. In
addition, revenue from by-product metal increased by 13% to $71,416,000
in 2004 compared to $63,424,000 in the prior year, reflecting the
increased production of, and improved pricing for nickel, platinum, gold
and copper. Palladium forward contracts provided $20,437,000 of
additional revenue in 2003, whereas there were no palladium forward
contracts realized in 2004.

The Company reported a net loss for the three months ended December 31,
2004 of $107,663,000 or $2.09 per share on revenues of $35,182,000
compared to a net income of $16,092,000 or $0.31 per share on revenues
of $59,805,000 for the three months ended December 31, 2003. The results
for the fourth quarter 2004 include the non-cash impairment charge
described above.

Production costs for 2004, including overheads but excluding non-cash
amortization, of $102,936,000 were comparable to $103,654,000 in the
prior year, however, unit cash costs to produce palladium (production
costs including overhead and smelter treatment, refining and freight
costs), net of by-product metal revenues and royalties, decreased to
US$159 per ounce in 2004 compared to US$175 per ounce in 2003. The
improvement in unit cash costs was achieved by a 7% increase in
palladium production combined with a 13% increase in revenue from
by-product metals. The Lac des Iles mine produced 308,931 ounces of
palladium in the current year compared to 288,703 ounces in 2003. In the
fourth quarter cash costs to produce palladium increased to US$251 per
ounce compared to US$85 per ounce in the fourth quarter of 2003. The
increase in unit costs in the current quarter was due to a decline in
ore grade and tonnes milled and a higher waste-to-ore strip ratio. The
strip ratio is expected to return to normal levels in 2005 as Phase Four
mining advances.

During the fourth quarter of 2004, the mill processed 1,202,942 tonnes
of ore, or an average of 13,075 tonnes per day, with a palladium grade
of 2.17 grams per tonne, producing 62,526 ounces of palladium at a
recovery rate of 74.6%. This compares with the fourth quarter of 2003,
when the mill processed 1,500,684 tonnes of ore, or 16,312 tonnes per
day, with a palladium grade of 2.47 grams per tonne, producing 94,114
ounces of palladium at a recovery rate of 75.1%. Mill availability
during the fourth quarter was affected by down time caused by the tie-in
of the new secondary crusher in addition to increased maintenance on
conveyor belts and chutes. During the fourth quarter, the waste strip
ratio increased to 3.46:1 compared to 1.89:1 in the fourth quarter of
2003. In 2004, mining moved into Phase Four, requiring a higher level of
waste removal whereas in the fourth quarter of 2003, mining was from the
final stage of Phase Three.

While palladium production increased 7% in 2004 compared to the prior
year, tonnes of concentrate treated increased 24% due to a drop in
concentrate grade. In an effort to improve the concentrate grade,
various milling parameters are currently under investigation, including
changes made to the mill flow sheet, reagent mix and recycle water
quality. The concentrate quality also declined in the year resulting in
higher smelter penalty charges. In aggregate, smelter treatment,
refining and freight cost increased by 24% to $23,602,000 compared to
$19,048,000 in 2003.

Non-cash amortization expense increased to $36,710,000 in 2004 compared
to $28,590,000 in 2003. The higher amortization amount is attributable
to the 7% increase in palladium production and the increase in the unit
of production amortization rate due to a restatement of reserves in mid
2003 that resulted in a 20% reduction in palladium reserve ounces.

With the increased activities on the Company's exploration projects,
exploration expense was $2,479,000 in 2004 compared to $1,942,000 in the
prior year. In 2004, the Company incurred interest expense on long-term
debt of $1,756,000 compared to $3,158,000 in 2003. The reduced interest
expense in the current year reflects the reduction in the level of
average debt year-over-year.

Cash Flow and Financial Position

Cash provided by operations (prior to changes in non-cash working
capital) was $958,000 for the fourth quarter of 2004 and $52,059,000 for
the year ended December 31, 2004. This compares with cash provided by
operations (prior to changes in non-cash working capital) of $21,792,000
for the fourth quarter 2003 and $59,802,000 for the year ended December
31, 2003. Changes in non-cash working capital provided $29,731,000 in
the current year compared to a consumption of cash of $5,235,000 in
2003. The primary non-cash working capital change was a $26,351,000
reduction in concentrate inventory awaiting settlement. This reduction
was caused by a decrease in the physical quantity of palladium in
concentrate awaiting settlement, which declined to 114,186 ounces at
December 31, 2004 compared to 147,570 ounces at December 31, 2003. After
allowing for working capital changes, cash provided by operations was
$81,790,000 in 2004 compared to $54,567,000 in 2003.

Investing activity required $26,464,000 of cash in 2004. Two major
projects were undertaken during the year. The secondary crusher
installation was completed at a cost of $10.2 million and the
underground development, which commenced in mid year and will extend
into late 2005, required $6.9 million excluding $3.6 million of mining
equipment purchased under capital leases. This compares with $8,279,000
of net investing activities in 2003.

During the year, the Company completed a private placement flow-through
share financing for proceeds of $4,050,000. These proceeds are being
used to fund the increased level of exploration activity, as well as to
fund exploration on new acquisitions currently being pursued. The
Company also received $7,148,000 as an interim payment against a claim
filed with its insurance company relating to losses incurred in
connection with the failure of the primary crusher in 2002. The Company
has included this insurance recovery in income from mining operations.
The Company is pursuing the balance of its insurance claim and will
record any additional recovery in income if and when received.

In 2004, the Company's financial position was further strengthened. The
Company's long-term debt position was reduced to $50.2 million at
December 31, 2004 compared to $58.8 million at December 31, 2003. At
December 31, 2004, the Company had cash and cash equivalents of $65.8
million of which approximately $54 million was invested in short-term
deposits.



Production Statistics

---------------------------------------------------------------------
Fourth Quarter Twelve Months
December 31 December 31
2004 2003 2004 2003
----------------------------------------------
Palladium (oz) 62,526 94,114 308,931 288,703
Payable Palladium (oz) 56,756 83,358 281,743 261,247
Platinum (oz) 5,474 7,354 25,128 23,742
Gold (oz) 4,930 7,722 25,679 23,536
Copper (lbs) 1,604,009 2,294,258 7,836,183 7,142,674
Nickel (lbs) 848,519 1,405,730 4,320,970 4,070,785
---------------------------------------------------------------------
Ore Tonnes Milled 1,202,942 1,500,684 5,298,544 5,159,730
Ore Tonnes Mined 1,036,093 1,322,278 4,574,134 4,396,847
Waste Tonnes Mined 3,581,858 2,492,667 12,275,889 10,164,806
---------------------------------------------------------------------
Waste Strip Ratio 3.46:1 1.89:1 2.68:1 2.31:1
---------------------------------------------------------------------


Exploration

The greatest potential for near term expansion of the Company's mineral
resources remains within the immediate Lac des Iles area. Currently the
Company has two drills active, testing the down-dip extension of the
Offset High Grade Zone. One of the holes has been designed to intersect
the Offset High Grade Zone 1,200 metres below surface while the second
hole is designed to test the target horizon at 1,500 metres or
approximately 600 metres below the last drill hole intercept. A third
drill is expected to be mobilized to the property late in the first
quarter to start testing other priority geological/geophysical targets.

At the Shebandowan Lake Project, drilling will attempt to extend a
previously discovered high grade PGE bearing breccia hosted
mineralization, while additional drilling will test geophysical targets
along strike of the past producing Shebandowan Ni, Cu mine. More
recently, the Company optioned a new Ni, Cu, PGE discovery and is
currently acquiring additional ground surrounding this prospect.

Management's Outlook

North American Palladium has established a solid foundation to progress
through a transition period in 2005. The secondary crusher was
successfully commissioned in December 2004, paving the way for increased
mill throughput and further cost reductions. When the underground mine
achieves full production in 2006, the combined palladium production from
the open pit and underground is expected to be approximately 350,000
ounces per year, as well as increased by-product metal production.

Currently, the platinum group metal markets continue to benefit from
strong global fundamentals, particularly an expectation of further
economic growth in China and United States. Recent economic data
released from both countries suggest consumer spending and business
investment will remain firm in 2005. Platinum has traded up on these
fundamentals and is testing levels around US$850 per ounce, while
palladium continues to test support in the US$180 per ounce to US$190
per ounce range. In view of the large discount between the palladium and
platinum price, autocatalyst and jewellery fabricators are adjusting
their consumption to take advantage of the readily available and less
expensive palladium alternative. The Company expects that this increased
palladium demand should lead to a closing of the price spread between
the two metals.

The Company continues to search for growth in reserves and resources at
the mine site and on favourable grassroots exploration projects.
Emerging ore bodies and projects, both in Canada and internationally,
are being investigated to further enhance North American Palladium's
strategic expansion plan.

Reconciliation Between Net Income in Accordance with Canadian GAAP
and Adjusted Net Income

The adjusted net income reported in this release has not been calculated
in accordance with Canadian GAAP, the accounting principles under which
our consolidated financial statements are prepared, and there is no
standard definition in such principles for such adjusted net income or
loss. Accordingly, it is unlikely that comparisons can be made among
different companies in terms of such adjusted results reported by them.

The following table provides a reconciliation between our adjusted net
income and net income (loss) as reported in accordance with Canadian
GAAP for the years ended December 31, 2004 and December 31, 2003:



Basic Net Income
Net Income Per Share
Year Ended Year Ended
(in thousands except per December 31 December 31
share amounts) 2004 2003 2004 2003
---------------------------------------
Canadian GAAP net income
(loss) as reported $(92,110) $38,378 $ (1.79) $ 0.76
Impairment charge net of tax 103,376 -- 2.01 --
Foreign exchange (gain) loss
net of tax 340 (15,055) 0.01 (0.30)
Insurance recovery net of tax (4,352) -- (0.09) --
---------------------------------------
Adjusted net income $ 7,254 $23,323 $ 0.14 $ 0.46
---------------------------------------------------------------------

---------------------------------------------------------------------


The Company will host its year-end conference call at 1 p.m. EST on
Wednesday, March 2, 2005. The toll-free conference call dial-in number
is 1-877-461-2814 and the local and overseas dial-in number is
416-695-5261. The conference call will be simultaneously web cast and
archived at www.napalladium.com in the Investor Centre under Conference
Calls. A replay of the conference call will be available until March 16,
2005; toll-free at 1-888-280-8039 locally and overseas at 416-695-6054,
access code 2400.

North American Palladium's Lac des Iles Mine is Canada's only primary
producer of platinum group metals and is one of the largest open pit
bulk mineable palladium reserves in the world. In addition to palladium,
the Company earns substantial revenue from by-product nickel, platinum,
gold and copper. Palladium use in the auto industry continues to be an
important component in controlling exhaust emissions as mandated by more
stringent hydrocarbon emissions standards for cars, particularly in the
United States, Europe and Japan. Palladium is also used in the dental,
electronics, jewellery and chemical sectors.

Forward-Looking Statements - Certain statements included in this news
release are forward-looking statements which are made pursuant to the
"safe harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995. They include estimates and statements
that describe the Company's future plans, objectives and goals,
including words to the effect that the Company or management expects a
stated condition or result to occur. When used herein, words such as
"estimate", "expect", "believe", "intend", "budget", "plan",
"projection" and other similar expressions are intended to identify
forward-looking statements. In particular statements relating to the
impairment charge and the estimated future metal prices, cash flows,
expenses, capital costs, ore production, mine life, financing,
construction and commissioning are forward-looking statements. Such
forward-looking statements involve inherent risks and uncertainties and
are subject to factors, many of which are beyond our control, that may
cause actual results or performance to differ materially from those
currently anticipated in such statements. Important factors that could
cause actual results to differ materially from those expressed or
implied by such forward-looking statements include among others metal
price volatility, changes in the US/CDN dollar exchange rate, economic
and political events affecting metal supply and demand, fluctuations in
ore grade, ore tonnes milled, geological, technical, mining or
processing problems, recoverability of metals, future profitability and
production, availability of financing on acceptable terms and unexpected
problems during the development, construction and start-up phases of the
underground mine, and the salvage value of equipment. For a more
comprehensive review of risk factors, please refer to the Company's most
recent Annual Report under "Management's Discussion and Analysis of
Financial Results" and Annual Information Form under "Risk Factors" on
file with the U.S. Securities and Exchange Commission and Canada
provincial securities regulatory authorities. The Company disclaims any
obligation to update or revise any forward-looking statements whether as
a result of new information, events or otherwise. Readers are cautioned
not to put undue reliance on these forward-looking statements.



North American Palladium Ltd.
Consolidated Balance Sheets
(Canadian funds in thousands of dollars)


December 31
2004 2003
-----------------------

Assets
Current Assets
Cash and cash equivalents $ 65,755 $ 11,950
Restricted cash equivalents -- 1,813
Concentrate awaiting settlement, net - Note 2 68,259 94,610
Inventories 8,954 9,141
Crushed and broken ore stockpiles - Note 3 9,256 6,251
Accounts receivable and other assets 1,615 1,387
Future tax asset -- 84
-----------------------
153,839 125,236

Mining interests, net 136,009 247,116
Mine restoration deposit - Note 4 5,973 4,733
Crushed and broken ore stockpiles - Note 3 1,379 5,983
Future tax asset -- 9,334
Deferred financing costs 697 1,290
-----------------------
$ 297,897 $ 393,692
-----------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities $ 20,231 $ 16,041
Taxes payable 521 1,311
Future tax liability -- 216
Current portion of obligations under
capital leases 1,481 1,070
Current portion of long-term debt - Note 5 6,815 34,538
-----------------------
29,048 53,176

Mine restoration obligation 7,592 7,300
Obligations under capital leases 3,182 1,015
Long-term debt - Note 5 24,851 7,272
Kaiser-Francis credit facility - Note 5 13,842 14,866
Future mining tax liability 1,549 10,108
-----------------------
80,064 93,737
Shareholders' Equity
Capital stock - Note 7 322,904 313,489
Contributed surplus 573 --
Deficit (105,644) (13,534)
-----------------------
Total shareholders' equity 217,833 299,955
-----------------------
$ 297,897 $ 393,692
-----------------------



North American Palladium Ltd.
Consolidated Statements of Earnings (Loss) and Deficit
(Canadian funds in thousands of dollars, except
share and per share amounts)

Year ended December 31
2004 2003 2002
----------------------------------

Revenue from metal sales - Note 9 $ 185,204 $ 192,141 $ 176,773
----------------------------------
Operating expenses
Production costs, excluding
amortization and asset
retirement costs 102,936 103,654 100,599
Smelter treatment, refining and
freight costs 23,602 19,048 16,909
Insurance recovery (7,148) -- --
Amortization 36,710 28,590 20,190
Administrative 5,557 3,788 4,212
Exploration expense 2,479 1,942 850
Loss on disposal of capital
assets 277 788 99
Asset retirement costs 905 921 587
Write-down of mining interests 108,000 2,315 --
----------------------------------
Total operating expenses 273,318 161,046 143,446
----------------------------------

Income (loss) from mining
operations (88,114) 31,095 33,327
----------------------------------

Other income (expenses)
Interest on long-term debt (1,756) (3,158) (5,405)
Write off of deferred financing
costs (788) -- --
Foreign exchange gain (loss) (340) 18,138 792
Interest income 494 474 663
Derivative income 213 -- --
Interest expense (29) (17) (433)
----------------------------------
Total other income (expenses) (2,206) 15,437 (4,383)
----------------------------------

Income (loss) before income
taxes (90,320) 46,532 28,944
Provision for income taxes -
Note 6 1,790 8,154 13,862
----------------------------------
Net income (loss) for the year (92,110) 38,378 15,082

Deficit, beginning of year (13,534) (51,912) (66,994)
----------------------------------
Deficit, end of year $ (105,644) $ (13,534) $ (51,912)
----------------------------------

Net income (loss) per share
Basic $ (1.79) $ 0.76 $ 0.30
----------------------------------
Diluted $ (1.79) $ 0.75 $ 0.30
----------------------------------
Weighted average number of
shares outstanding - basic 51,379,542 50,763,566 50,544,634
----------------------------------
Weighted average number of
shares outstanding - diluted 51,379,542 50,832,904 50,593,508
----------------------------------



North American Palladium Ltd.
Consolidated Statements of Cash Flows
(Canadian funds in thousands of dollars)


Year ended December 31
2004 2003 2002
----------------------------------

Cash provided by (used in)
Operations
Net income (loss) for the year $ (92,110) $ 38,378 $ 15,082
Operating items not involving
cash
Future income tax expense 643 7,392 13,046
Amortization 36,710 28,590 20,190
Accrued interest on mine
restoration deposit (40) (63) (38)
Write-down of mining interests 108,000 2,315 --
Unrealized foreign exchange gain (3,687) (18,519) (1,494)
Loss on disposal of capital assets 277 788 99
Provision for asset retirement
costs 905 921 587
Write off of deferred financing
costs 788 -- --
Stock based compensation 573 -- --
----------------------------------
52,059 59,802 47,472

Changes in non-cash working
capital - Note 8 29,731 (5,235) (5,369)
----------------------------------
81,790 54,567 42,103
----------------------------------
Financing Activities
Repayment of long-term debt (44,290) (45,134) (33,233)
Increase in long-term debt 36,809 -- --
Issuance of common shares 9,415 1,506 1,199
Mine restoration deposit (1,200) (1,200) (1,200)
Repayment of obligations under
capital leases (1,751) (1,046) (1,419)
Deferred financing costs (504) -- --
Increase in Kaiser-Francis
credit facility -- -- 10,372
----------------------------------
(1,521) (45,874) (24,281)
----------------------------------
Investing Activities
Additions to mining interests (28,728) (11,707) (8,446)
Proceeds on disposal of mining
interests 451 114 513
Restricted cash equivalents 1,813 3,314 (128)
----------------------------------
(26,464) (8,279) (8,061)
----------------------------------

Increase (decrease) in cash and
cash equivalents 53,805 414 9,761
Cash and cash equivalents,
beginning of year 11,950 11,536 1,775
----------------------------------
Cash and cash equivalents, end
of year $ 65,755 $ 11,950 $ 11,536
----------------------------------



North American Palladium Ltd.
Notes to the December 31, 2004 Consolidated Financial Statements
(in thousands of Canadian dollars except per share and
per ounce amounts)
(Unaudited)


1. Basis of Presentation

These unaudited consolidated financial statements have been prepared
using disclosure standards appropriate for interim financial statements
and do not contain all the explanatory notes, descriptions of accounting
policies or other disclosures required by Canadian generally accepted
accounting principles for annual financial statements. Such notes,
descriptions of accounting policies and other disclosures will be
included in the Company's audited annual consolidated financial
statements included in the Company's annual report to shareholders for
the year ended December 31, 2004. Accordingly, these consolidated
financial statements should be read in conjunction with the audited
annual consolidated financial statements for 2004.

2. Concentrate Awaiting Settlement

The gross value of concentrate awaiting settlement represents the value
of platinum group metals and base metals from production shipped to the
smelters unprocessed at the balance sheet date. At December 31, 2004,
concentrate awaiting settlement included 114,186 ounces of palladium
(December 31, 2003 - 147,570). Concentrate awaiting settlement was
entirely from two domestic customers at December 31, 2004 and December
31, 2003. Revaluations of the net realizable value of concentrate
awaiting settlement are included in revenue at each reporting period and
are adjusted for the effects of hedging instruments, sales contracts and
foreign exchange.

3. Crushed and Broken Ore Stockpiles

Crushed and broken ore stockpiles are valued at the lower of average
production cost and estimated net realizable value. The amount of
stockpiled ore that is not expected to be processed within one year is
shown as a long-term asset.

4. Mine Restoration Deposit

As part of the expansion project, the Company established a revised mine
closure plan for the eventual clean-up and restoration of the mine site
with the Ontario Ministry of Northern Development and Mines (the
"Ministry"), which requires a total amount of $7,802 to be accumulated
in a Trust Fund controlled by the Ministry. At December 31, 2004, the
Company had $5,973 on deposit with the Ministry and has agreed to make
monthly deposits of $100.

5. Long-Term Debt

The Company's long-term debt, is comprised of a senior credit facility
with a leading equipment finance company and the Kaiser-Francis credit
facility. At December 31, 2004, the outstanding long-term debt,
including current and long-term portions was $45,508 compared to $56,676
at December 31, 2003. The interest rate under both facilities is LIBOR
plus 250 basis points, or 4.81% at December 31, 2004. The senior credit
facility is repayable in equal quarterly installments over a five-year
period with a final maturity of November 24, 2009 and the Kaiser-Francis
facility matures on June 30, 2006.

6. Income Taxes

The provision for income and mining taxes differs from the amount that
would have resulted by applying the combined Canadian Federal and
Ontario statutory income tax rates of approximately 39%.



Year Ended
December 31, 2004
2004 2003 2002
------------------------------
Income tax provision using statutory
income tax rates $(35,406) $18,147 $11,888
Increase (decrease) in taxes
resulting from:
Write down of mining interests not
tax benefited 35,694 -- --
Resource allowance 6,439 (3,342) (5,320)
Non-taxable portion of capital gains (2) (2,908) --
Increase in valuation allowance on
assets previously recognized 2,525 -- --
Changes in income tax rates and laws -- (3,546) --
Benefits of income taxes not
previously recognized (437) (811) --
Federal large corporations tax 465 837 817
Ontario mining taxes (7,979) 983 4,357
Other 491 (1,206) 2,120
------------------------------
Income tax expense $ 1,790 $ 8,154 $13,862
------------------------------



7. Capital Stock


2004 2003
Shares Amount Shares Amount
---------------------------------------------
Common shares issued,
beginning of year 50,895,338 $ 313,489 50,647,955 $ 311,983
Common shares issued:
Pursuant to stock
options exercised 459,380 4,637 13,450 101
To Group Registered
Retirement Savings
Plan participants 84,357 956 190,605 905
Private placement 270,000 3,822 43,328 500
---------------------------------------------
Common shares
issued, end of year 51,709,075 $ 322,904 50,895,338 $ 313,489
---------------------------------------------


At December 31, 2004, the Company had 825,610 options outstanding at a
weighted- average exercise price of $9.88, expiring at various dates
from March 3, 2005 to November 1, 2012. The fair market value of the
options granted in 2004 has been estimated at the date of grant using
the Black-Scholes option pricing model with the following assumptions:
risk free interest rate of 3.7% (2003 - 4%; 2002 - 4%), expected
dividend yield of nil (2003 - nil; 2002 - nil), expected volatility of
55% (2003 - 48%; 2002 - 60%) and expected option life of 4 years (2003 -
3 years; 2002 - 3 years). The estimated fair value of the options is
being expensed over the three year option vesting period. The
weighted-average fair market value of options granted in 2004 was $5.48
(2003 - $2.13; 2002 - $4.33).



8. Changes in Non-Cash Working Capital


2004 2003 2002
--------------------------------
Decrease (increase) in:
Concentrate awaiting settlement $ 26,351 $ (9,298) $ (2,778)
Inventories and stockpiles 1,786 3,179 507
Accounts receivable and other assets (229) 296 943
Accounts payable and accrued liabilities 2,613 1,218 (2,442)
Taxes payable (790) (630) (1,599)
--------------------------------
$ 29,731 $ (5,235) $ (5,369)
--------------------------------


9. Revenue from Metal Sales


2004 2003 2002
----------------------------------
Palladium (a) $ 112,879 $ 109,443 $ 101,317
Palladium forward contracts (b) -- 20,437 46,033
Adjustments for mark-to-market 909 (1,163) (9,243)
Nickel 25,735 26,010 12,111
Platinum 21,476 18,847 14,069
Gold 10,665 9,826 7,094
Copper 10,945 7,722 4,723
Other metals 2,595 1,019 669
----------------------------------
$ 185,204 $ 192,141 $ 176,773
----------------------------------


(a) The Company has a Palladium Sales Contract with a major automobile
manufacturer, which provides for a floor price of US$325 per ounce on
100% of palladium production and a cap of US$550 per ounce on 50% of
palladium production delivered by June 30, 2005. Palladium revenue
includes the impact of the Palladium Sales Contract.

(b) The Company entered into palladium forward contracts in 2001 for
100,800 ounces of palladium at an average price of US$922 per ounce, the
revenue from which was fully realized by June 30, 2003. The effect of
palladium forward contracts represents the difference between the fixed
price realized under the palladium forward contracts and the palladium
price at the time of revenue recognition.

10. Commitments

The Company enters into forward contracts from time to time to hedge the
effects of changes in the prices of metals it produces and foreign
exchange on the Company's revenues. Gains and losses realized on
derivative financial instruments used to mitigate metal price risk are
recognized in revenue from metal sales when the hedge transaction occurs.

(a) Platinum Forward Contracts

At December 31, 2004, the Company had forward sales contracts for 10,500
ounces of platinum at an average price of US$831 per ounce maturing at
various dates through December 2005. The fair value of these forward
sales contracts was below their carrying value by $313 as at December
31, 2004.

(b) Nickel Swap Contracts

At December 31, 2004 , the Company had swap contracts for 1,190,000 lbs.
of nickel at an average fixed price of US$6.58 per lb. maturing at
various dates through June 2005. The fair value of these swap contracts
was below their carrying value by $123 at December 31, 2004.

(c) Copper Swap Contracts

At December 31, 2004, the Company had swap contracts for 1,984,000 lbs.
of copper at an average fixed price of US$1.25 per lb. maturing at
various dates through December 2005. The fair value of these swap
contracts was below their carrying value by $176 as at December 31, 2004.

(d) Gold Forward Contracts

At December 31, 2004, the Company had forward sales contracts for 12,000
ounces of gold at an average price of US$435 per ounce maturing at
various dates through December 2005. The fair value of these forward
sales contracts was below their carrying value by $140 as at December
31, 2004.

11. Comparative Period Figures

Certain prior period amounts have been reclassified to conform to the
classification adopted in the current period.


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