6-K

SECURITIES AND EXCHANGE COMMISSION

Form 6-K

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

The Securities Exchange Act of 1934

For the month of July, 2014

Commission File Number: 1-15142

NORTH AMERICAN PALLADIUM LTD.

(Name of Registrant)

200 Bay Street

Royal Bank Plaza, South Tower

Suite 2350

Toronto, Ontario

Canada M5J 2J2

(Address of Principal Executive Offices)

Indicate by checkmark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F  ¨            Form 40-F  x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):  ¨

Indicate by checkmark whether the registrant, by furnishing the information contained in this Form is also thereby furnishing the information to the SEC pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:

Yes  ¨  Assigned File No.              No  x

If “Yes” is marked, indicate the file number assigned to the Registrant in connection with Rule 12g3-2(b).

This report on Form 6-K is specifically incorporated by reference into North American Palladium’s registration statement on Form S-8 (File No. 333-13766) and registration statement on Form F-10 (File No. 333-185656).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		NORTH AMERICAN PALLADIUM LTD.
Date:	July 30, 2014	By:	/s/ Tess Lofsky
			Tess Lofsky   Vice President, General Counsel &   Corporate Secretary

EXHIBIT INDEX

Exhibit	Description of Exhibit
1	2014 Q2 – Management’s Discussion and Analysis
2	2014 Q2 – Financial Statements
3	News Release – “North American Palladium Announces Second Quarter 2014 Results and Provides Update on Exploration”

EX-1

Exhibit 1

North American Palladium Ltd.

TABLE OF CONTENTS

	Page
Management’s Discussion and Analysis
INTRODUCTION		1
FORWARD-LOOKING INFORMATION		1
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING MINERAL RESERVES AND RESOURCES		2
OUR BUSINESS		2
QUARTERLY TRENDS		3
HIGHLIGHTS		4
LDI OPERATING & FINANCIAL RESULTS		5
OTHER EXPENSES		11
SUMMARY OF QUARTERLY RESULTS		12
CASH FLOWS, FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES		13
OUTSTANDING SHARE DATA		15
CRITICAL ACCOUNTING POLICIES AND ESTIMATES		16
RISKS AND UNCERTAINTIES		19
INTERNAL CONTROLS		20
OTHER INFORMATION		20
NON-IFRS MEASURES		21

North American Palladium Ltd.

Management’s Discussion and Analysis

INTRODUCTION

Unless the context suggests otherwise, references to “NAP” or the “Company” or similar terms refer to North American Palladium Ltd. and its subsidiaries. “LDI” refers to Lac des Iles Mines Ltd. and “NAP Quebec” refers to its previously held subsidiary, NAP Quebec Mines Ltd.

The following is management’s discussion and analysis of the financial condition and results of operations (“MD&A”) to enable readers of the Company’s condensed interim consolidated financial statements and related notes to assess material changes in financial condition and results of operations for the three and six months ended June 30, 2014, compared to those of the respective periods in the prior year. This MD&A has been prepared as of July 29, 2014 and is intended to supplement and complement the condensed interim consolidated financial statements and notes thereto for the three and six months ended June 30, 2014 (collectively, the “Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB. Readers are encouraged to review the Financial Statements in conjunction with their review of this MD&A, the Company’s MD&A for the year ended December 31, 2013, and the most recent Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission (“SEC”) and Canadian provincial securities regulatory authorities, available at www.sec.gov and www.sedar.com, respectively.

All amounts are in Canadian dollars unless otherwise noted and all references to production ounces refer to payable production.

FORWARD-LOOKING INFORMATION

Certain information contained in this MD&A constitutes ‘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. All statements other than statements of historical fact are forward-looking statements. The words ‘expect’, ‘believe’, ‘anticipate’, ‘contemplate’, ‘target’, ‘may’, ‘will’, ‘could’, ‘intend’, ‘estimate’ and similar expressions identify forward-looking statements. Forward-looking statements included in this MD&A include, without limitation: information as to our strategy, plans or future financial or operating performance, such as the ramp-up of the Company’s mine, project timelines, production plans, projected cash flows or expenditures, operating cost estimates, mining methods, expected mining rates and other statements that express management’s expectations or estimates of future performance. The Company cautions the reader that such forward-looking statements involve known and unknown risk factors that may cause the actual results to be materially different from those expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to: the risk the Company may not be able to continue as a going concern, the possibility that the Company may not be able to obtain sufficient financing, that the Company may not be able to generate sufficient cash to service all its indebtedness and may be forced to take other actions to satisfy its obligations, events of default on its indebtedness, hedging could expose it to losses, competition, the possibility title to its mineral properties will be challenged, dependency on third parties for smelting and refining, the possibility that metal prices and foreign exchange rates may fluctuate, inherent risks associated with development, exploration, mining and processing including risks related to tailings capacity and ground conditions, the mine transition from mining via ramp to mining via shaft, environmental hazards, uncertainty of mineral reserves and resources, the possibility that the mine may not perform as planned, changes in legislation, regulations or political and economic developments in Canada and abroad, risks related to employee relations and to the availability of skilled labour, litigation and the risks associated with obtaining necessary licenses and permits. For more details on these and other risk factors see the Company’s most recent Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities. Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions contained in this MD&A, which may prove to be incorrect, include, but are

SECOND QUARTER REPORT 2014

1

North American Palladium Ltd.

not limited to: that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business, that metal prices and exchange rates between the Canadian and United States dollar will be consistent with the Company’s expectations, that there will be no material delays affecting operations or the timing of ongoing projects including the mine ramp-up, that prices for key mining and construction supplies, including labour costs, will remain consistent with the Company’s expectations, and that the Company’s current estimates of mineral reserves and resources are accurate. The forward-looking statements are not guarantees of future performance. 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.

CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING MINERAL RESERVES AND RESOURCES

Mineral reserve and mineral resource information contained herein has been calculated in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects, as required by Canadian provincial securities regulatory authorities. Canadian standards differ significantly from the requirements of the SEC, and mineral reserve and mineral resource information contained herein is not comparable to similar information disclosed in accordance with the requirements of the SEC. While the terms “measured”, “indicated” and “inferred” mineral resources are required pursuant to National Instrument 43-101, the SEC does not recognize such terms. U.S. investors should understand that “inferred” mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. In addition, U.S. investors are cautioned not to assume that any part or all of NAP’s mineral resources constitute or will be converted into reserves. For a more detailed description of the key assumptions, parameters and methods used in calculating NAP’s mineral reserves and mineral resources, see NAP’s most recent Annual Information Form/Form 40-F on file with Canadian provincial securities regulatory authorities and the SEC.

OUR BUSINESS

NAP is an established precious metals producer that has been operating its LDI Mine located in Ontario, Canada since 1993. LDI is one of only two primary producers of palladium in the world, offering investors exposure to the price of palladium.

The Company recently expanded the underground LDI Mine and is transitioning from ramp access to shaft access while utilizing long hole open stope mining. Through the utilization of the shaft and bulk mining methods, operations are expected to benefit from increased mining rates and decreased operating costs, transforming LDI into a low cost producer with a rising production profile.

The Company is conducting an exploration program in 2014 targeting the lower portion of the Offset Zone, with the intention to perform a preliminary economic assessment that would entail deepening the shaft and installation of a lower level bulk ore handling system that would increase production and extend the mine life.

The Company has significant exploration potential near the LDI Mine, where a number of growth targets have been identified, and is engaged in an exploration program aimed at increasing its palladium reserves and resources. As an established palladium-platinum group metal (“PGM”) producer with excess mill and shaft capacity on a permitted property, NAP has potential to convert exploration success into production and cash flow on an accelerated timeline.

NAP trades on the TSX under the symbol PDL and on the NYSE MKT under the symbol PAL.

SECOND QUARTER REPORT 2014

2

North American Palladium Ltd.

QUARTERLY TRENDS

During the first six months of 2014, upgrades to the ore handling system were completed, transportation of men and material via the shaft commenced and mill recoveries remained high; however, production was impacted by repairs to the primary surface crusher, oversized muck and equipment availability. The fatality at the mine site in July 2014 is expected to result in lower production in the third quarter. Remediation steps for production issues are ongoing.

	For the three months ended
	June 30 2014			March 31 2014			December 31 2013			September 30 2013
Palladium production – payable oz		39,223			42,641			30,979			30,097
US$ cash cost per palladium oz sold1		US$510			US$492 (US$422(2)	)		US$620			US$581
Underground mining – tonnes		263,904			275,845			231,346			208,097
Underground mining – tonnes per day		2,900			3,065			2,515			2,262
Milling – palladium head grade (g/t)		3.1			3.3			2.9			2.5
Milling – palladium recovery		83.6	%		84.5	%		81.5	%		80.7	%
Adjusted EBITDA ($000s)	$	10,444		$	9,743		$	1,369		$	3,189

¹  Non-IFRS measure. Please refer to Non-IFRS Measures on pages 21-23.

² After adjusting for the impact of approximately $2.7 million of power and propane costs associated with an unusually cold winter.

SECOND QUARTER REPORT 2014

3

North American Palladium Ltd.

HIGHLIGHTS

	Three months ended June 30				Six months ended June 30
OPERATIONAL HIGHLIGHTS	2014		2013		2014		2013
Mining
Tonnes ore mined		506,945		433,580		1,037,084		974,274
Palladium grade (g/t)		3.1		2.8		3.1		3.0
Milling
Tonnes ore milled		521,478		483,266		1,037,989		986,851
Palladium head grade (g/t)		3.1		3.1		3.2		3.2
Palladium recovery (%)		83.6		80.7		84.1		80.4
Palladium production – payable oz		39,223		35,428		81,863		74,082
Palladium sales – payable oz		40,716		32,620		80,201		72,380
Realized palladium price per ounce (US$)	$	806	$	719	$	775	$	724
Cash cost per ounce palladium sold (US$)1	$	510	$	564	$	498	$	524

FINANCIAL HIGHLIGHTS ($000s except per share amounts)	2014			2013			2014			2013
Revenue	$	50,497		$	33,213		$	99,233		$	80,303
Production costs		30,355			25,701			60,090			54,642
Depreciation and amortization		8,174			7,004			18,542			13,089
Income (loss) from mining operations		4,881			(4,215	)		6,810			909
Earnings
Loss from continuing operations	$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(31,625	)
Loss from continuing operations per share	$	(0.03	)	$	(0.15	)	$	(0.13	)	$	(0.17	)
Loss and comprehensive loss	$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(29,116	)
Loss per share	$	(0.03	)	$	(0.15	)	$	(0.13	)	$	(0.16	)
Adjusted net income (loss)1	$	(9,680	)	$	(5,116	)	$	(23,566	)	$	(5,047	)
EBITDA1	$	15,888		$	(6,084	)	$	16,887		$	(3,450	)
Adjusted EBITDA1	$	10,444		$	871		$	20,187		$	8,850
Capital spending, continuing operations	$	5,569		$	27,805		$	8,457		$	65,873

¹ Non-IFRS measure. Please refer to Non-IFRS Measures on pages 21-23.

In 2014, the Company continues to transition from ramp to shaft based underground mining and the sources of ore milled have changed significantly. In the second quarter of 2014:

• 506,945 tonnes at an average grade of 3.1g/t palladium were mined and processed from the Offset and Roby zones and low grade stockpile.

• The mill processed 521,478 tonnes of ore at an average palladium head grade of 3.1 grams per tonne and a recovery of 83.6% to produce 39,223 ounces of payable palladium.

• Payable palladium production was 39,223 ounces while payable palladium sales were 40,716 ounces.

• Revenue increased by $17.3 million compared to 2013 primarily due to more favourable exchange rates, higher palladium ounces sold and higher palladium prices.

• Production costs increased $4.7 million compared to 2013 to $30.4 million primarily due to mining 101% more underground tonnes, milling 8% more tonnes and unfavourable inventory and other cost movements.

• Adjusted EBITDA increased $9.6 million compared to 2013 to $10.4 million.

• Incurred a net loss of $10.0 million which included non-cash items of $8.2 million of depreciation and amortization, $7.0 million of foreign exchange gains and $16.8 million of interest expense and other costs.

SECOND QUARTER REPORT 2014

4

North American Palladium Ltd.

LDI OPERATING & FINANCIAL RESULTS

The LDI mine consists of an underground mine, an open pit (currently inactive), a mill with a processing capacity of approximately 15,000 tonnes per day and a shaft with a capacity of approximately 8,000 tonnes per day. The primary underground deposits on the property are the Offset zone and the Roby zone. During the first six months of 2014, production was impacted by upgrades to the ore handling system, commencement of transportation of men and material via the shaft, repairs to the primary surface crusher, oversized muck and equipment availability. Remediation steps for production issues are ongoing.

Operating Results

The key operating results for the palladium operations are set out in the following table.

	Three months ended June 30				Six months ended June 30
	2014		2013		2014		2013
Ore mined (tonnes)
Underground
Offset		219,977		131,606		489,920		234,225
Roby		43,927		—		49,829		143,037
		263,904		131,606		539,749		377,262
Surface
Low grade stockpile		243,041		—		497,335		4,669
Open pit		—		247,954		—		538,323
High grade stockpile		—		54,020		—		54,020
		243,041		301,974		497,335		597,012
Total		506,945		433,580		1,037,084		974,274
Mined ore grade (Pd g/t)
Underground
Offset		4.7		4.4		4.8		4.2
Roby		6.3		—		6.0		4.2
		4.9		4.4		4.9		4.2
Surface
Low grade stockpile		1.0		—		1.0		1.0
Open pit		—		2.3		—		2.4
High grade stockpile		—		1.5		—		1.5
		1.0		2.1		1.0		2.3
Average		3.1		2.8		3.1		3.0
Milling
Tonnes of ore milled		521,478		483,266		1,037,989		986,851
Palladium head grade (g/t)		3.1		3.1		3.2		3.2
Palladium recoveries (%)		83.6		80.7		84.1		80.4
Tonnes of concentrate produced		4,696		4,380		9,699		8,882
Production cost per tonne milled	$	56	$	55	$	59	$	56
Payable production
Palladium (oz)		39,223		35,428		81,863		74,082
Platinum (oz)		2,716		2,780		5,721		5,622
Gold (oz)		2,513		2,844		5,491		5,845
Nickel (lbs)		374,385		430,629		775,104		822,135
Copper (lbs)		632,155		798,468		1,432,026		1,500,391
Cash cost per ounce of palladium sold (US$)1	$	510	$	564	$	498	$	524

¹ Non-IFRS measure. Please refer to Non-IFRS Measures on pages 21-23.

SECOND QUARTER REPORT 2014

5

North American Palladium Ltd.

Mining

In the second quarter of 2014, underground tonnes mined from the Offset and Roby zones were blended with the low grade surface stockpile material for processing in the mill. Underground ore mined at LDI during the three months ended June 30, 2014, consisted of 263,904 tonnes at an average grade of 4.9g/t palladium compared to 131,606 tonnes at an average palladium grade of 4.4g/t in the prior year from the Offset zone. LDI processed 243,041 tonnes of the low grade surface stockpile at an average grade of 1.0g/t in the second quarter of 2014 compared to 247,954 tonnes and 54,020 tonnes at average grades of 2.3g/t and 1.5g/t mined from the open pit and high grade stockpile respectively in the prior year. On a combined basis, 17% more tonnes at 11% higher grade of ore was mined and processed in 2014 as in 2013 despite significant changes in the sources of ore.

In the first six months of 2014, underground tonnes mined from the Offset and Roby zones were blended with the low grade surface stockpile material for processing in the mill. Underground ore mined at LDI during the six months ended June 30, 2014, consisted of 539,749 tonnes at an average grade of 4.9g/t palladium compared to 377,262 tonnes at an average palladium grade of 4.2g/t in the prior year from the Offset and Roby zones. LDI processed 497,335 tonnes of the low grade surface stockpile at an average grade of 1.0g/t in the first six months of 2014 compared to 597,012 tonnes at an average grade of 2.3g/t mined primarily from the open pit and high grade stockpile in the prior year. On a combined basis, 6% more tonnes of ore were mined and processed in 2014 at similar grades as in 2013 despite significant changes in the sources of ore.

Milling

During the three months ended June 30, 2014, the LDI mill processed 521,478 tonnes of ore at an average palladium head grade of 3.1g/t and a recovery of 83.6% to produce 39,223 ounces of payable palladium (2013 – 483,266 tonnes milled, average palladium head grade of 3.1g/t, recovery of 80.7 %, produced 35,428 ounces of payable palladium).

During the six months ended June 30, 2014, the LDI mill processed 1,037,989 tonnes of ore at an average palladium head grade of 3.2g/t and a recovery of 84.1% to produce 81,863 ounces of payable palladium (2013 – 986,851 tonnes milled, average palladium head grade of 3.2g/t, recovery of 80.4%, produced 74,082 ounces of payable palladium).

The higher mill recovery for the three and six months ended June 30, 2014 compared to the respective 2013 periods was primarily due to improvements in the mill circuit late in 2013 which increased the percentage of palladium recovered while processing similar ore grades in both periods.

Production Costs per Tonne Milled

Production costs per tonne milled were $56 and $59 in the three and six month periods ended June 30, 2014 respectively compared to $55 and $56 per tonne in the comparable 2013 periods. The increases were primarily due to higher costs associated with mining greater quantities of underground ore (which costs more per tonne to mine) in 2014 compared with 2013 as well as the cost changes noted in the production cost section noted below.

Payable Production

Payable production was higher for palladium and lower for all other payable metals in the second quarter of 2014 compared to 2013. Payable production was higher for palladium and platinum and lower for all other payable metals in the first six months of 2014 compared to 2013.

The changes in payable metal production for the three and six month periods ended June 30, 2014 compared to the respective periods in 2013 was primarily due to greater tonnes milled and higher recoveries for all metals except nickel being offset by lower head grades for all payable metals except palladium that had similar head grades. The blend of ore milled was significantly impacted by the change in ore zones mined in 2014 compared with 2013.

SECOND QUARTER REPORT 2014

6

North American Palladium Ltd.

Cash Cost per Ounce of Palladium Sold

Cash cost per ounce of palladium sold is a non-IFRS measure and the calculation is provided in the Non-IFRS Measures section of this MD&A. In 2013, the Company was in transition, sinking a shaft and completing related infrastructure at the same time it was developing and transitioning to mining the Offset zone. In 2014, the development and transitioning to the Offset zone was virtually complete.

The cash cost per ounce of palladium sold decreased to US$510¹ and US$498¹ for the three and six month periods ended June 30, 2014 compared to US$564¹ and US$524¹ respectively in the comparable periods in the prior year. More payable palladium ounces sold and a favourable movement of the Canadian dollar were partially offset by increased production costs. Please refer to the LDI revenue, production costs, smelting, refining and freight costs and royalty expense sections of this MD&A for additional details.

Financial Results

Income from mining operations for the LDI operations is summarized in the following table.

	Three months ended June 30					Six months ended June 30
(expressed in thousands of dollars)	2014		2013			2014			2013
Revenue	$	50,497	$	33,213		$	99,233		$	80,303
Mining operating expenses
Production costs
Mining		17,111		16,745			35,868			34,392
Milling		7,170		6,320			15,177			13,253
General and administration		4,788		3,663			9,942			7,965
		29,069		26,728			60,987			55,610
Inventory and others		1,286		(1,027	)		(897	)		(968	)
		30,355		25,701			60,090			54,642
Smelting, refining and freight costs		4,130		3,406			8,313			7,208
Royalty expense		2,184		892			4,258			3,401
Depreciation and amortization		8,174		7,004			18,542			13,089
Loss on disposal of equipment		773		425			1,220			1,054
Total mining operating expenses	$	45,616	$	37,428		$	92,423		$	79,394
Income (loss) from mining operations	$	4,881	$	(4,215	)	$	6,810		$	909

The Company has included income (loss) from mining operations as an additional IFRS measure to provide the user with information on the actual results of the LDI operations.

¹  Non-IFRS measure. Please refer to Non-IFRS Measures on pages 21-23.

SECOND QUARTER REPORT 2014

7

North American Palladium Ltd.

Revenue

Revenue is affected by production and sales volumes, commodity prices, currency exchange rates, mill run timing and shipment schedules. Metal sales for LDI are recognized in revenue at provisional prices when delivered to a smelter for treatment or a designated shipping point. Final pricing is determined in accordance with LDI’s smelter agreements. In most cases, final pricing is determined two months after delivery to the smelter for gold, nickel and copper and four months after delivery for palladium and platinum. These final pricing adjustments can result in additional revenues in a rising commodity price environment and reductions to revenue in a declining commodity price environment. Similarly, a weakening in the Canadian dollar relative to the U.S. dollar would have a positive impact on revenues and a strengthening in the Canadian dollar would have a negative impact on revenues. The Company periodically enters into financial contracts for past production delivered to the smelters to mitigate the smelter agreements’ provisional pricing exposure to rising or declining palladium prices and an appreciating Canadian dollar. As at June 30, 2014, these financial contracts represent 47,500 ounces of palladium (March 31, 2014 – 39,000 palladium ounces) and mature from July 2014 through November 2014 at an average forward price of US$799 (C$870) per ounce (March 31, 2014 – US$744 (C$820) per ounce of palladium). For substantially all of the palladium delivered to the customers under the smelter agreements, the quantities and timing of settlement specified in the financial contracts match final pricing settlement periods. The palladium financial contracts are being recognized on a mark-to-market basis as an adjustment to revenue. The fair value of these contracts at June 30, 2014 was a liability of $1.4 million included in accounts payable and accrued liabilities (March 31, 2014 – $1.6 million).

Revenue for the three months ended June 30, 2014

	Palladium			Platinum			Gold			Nickel			Copper			Others			Total
Sales volume(1)		40,716			2,814			2,633			369,303			667,536			n.a.			n.a.
Realized price (US$)(1)	$	806		$	1,445		$	1,294		$	8.05		$	3.07			n.a.			n.a.
Revenue before price adjustment ($000s)	$	36,670		$	4,425		$	3,651		$	3,381		$	2,184		$	47		$	50,358
Price adjustment ($000s):
Commodities		217			294			192			354			126			6			1,189
Foreign exchange		(493	)		(234	)		(132	)		(109	)		(81	)		(1	)		(1,050	)
Revenue ($000s)	$	36,394		$	4,485		$	3,711		$	3,626		$	2,229		$	52		$	50,497

⁽¹⁾  Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper.

Revenue for the three months ended June 30, 2013

	Palladium			Platinum			Gold			Nickel			Copper			Others			Total
Sales volume(1)		32,620			2,562			2,625			393,838			732,710			n.a.			n.a.
Realized price (US$)(1)	$	719		$	1,489		$	1,444		$	6.70		$	3.29			n.a.			n.a.
Revenue before price adjustment ($000s)	$	23,793		$	3,835		$	3,756		$	2,712		$	2,409		$	76		$	36,581
Price adjustment ($000s):
Commodities		(2,226	)		(858	)		(788	)		(374	)		(157	)		(3	)		(4,406	)
Foreign exchange		504			193			164			95			81			1			1,038
Revenue ($000s)	$	22,071		$	3,170		$	3,132		$	2,433		$	2,333		$	74		$	33,213

⁽¹⁾  Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper.

SECOND QUARTER REPORT 2014

8

North American Palladium Ltd.

Revenue for the six months ended June 30, 2014

	Palladium			Platinum		Gold		Nickel			Copper			Others		Total
Sales volume(1)		80,201			5,602		5,399		737,884			1,416,322			n.a.		n.a.
Realized price (US$)(1)	$	775		$	1,432	$	1,288	$	7.36		$	3.14			n.a.		n.a.
Revenue before price adjustment ($000s)	$	68,971		$	8,787	$	7,614	$	6,173		$	4,860		$	93	$	96,498
Price adjustment ($000s):
Commodities		2,698			472		318		499			(117	)		5		3,875
Foreign exchange		(1,177	)		3		13		(16	)		35			2		(1,140	)
Revenue ($000s)	$	70,492		$	9,262	$	7,945	$	6,656		$	4,778		$	100	$	99,233

⁽²⁾  Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper.

Revenue for the six months ended June 30, 2013

	Palladium			Platinum			Gold			Nickel			Copper			Others			Total
Sales volume(1)		72,380			5,465			5,701			785,344			1,444,987			n.a.			n.a.
Realized price (US$)(1)	$	724		$	1,557		$	1,529		$	7.09		$	3.41			n.a.			n.a.
Revenue before price adjustment ($000s)	$	53,921		$	8,569		$	8,748		$	5,799		$	4,973		$	121		$	82,131
Price adjustment ($000s):
Commodities		(953	)		(620	)		(817	)		(402	)		(241	)		(3	)		(3,036	)
Foreign exchange		317			363			270			130			127			1			1,208
Revenue ($000s)	$	53,285		$	8,312		$	8,201		$	5,527		$	4,859		$	119		$	80,303

⁽²⁾  Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper.

During the first six months of 2013, the Company was sinking a shaft and completing related infrastructure while developing and transitioning to mining the Offset zone. Revenue for the three and six month periods ended June 30, 2014 increased $17.3 million and $18.9 million compared to 2013 primarily due to favourable exchange rate movements, higher realized prices for palladium and greater palladium ounces sold.

Sales of payable palladium, platinum and gold ounces increased the three months ended June 30, 2014 compared to 2013 while quantities of nickel and copper sold decreased. Realized price per unit in US$ terms increased for palladium and nickel and decreased of all other metal. Sales of payable palladium and platinum ounces increased for the six months ended June 30, 2014 compared to 2013 while quantities of gold, nickel and copper sold decreased. Realized price per unit in US$ terms increased for palladium and nickel and decreased of all other metal.

Spot Metal Prices* and Exchange Rates

For comparison purposes, the following table sets out spot metal prices and exchange rates.

	Jun-30 2014		Mar-31 2014		Dec-31 2013		Sep-30 2013		Jun-30 2013		Mar-31 2013		Dec-31 2012		Sep-30 2012
Palladium – US$/oz	$	844	$	778	$	711	$	726	$	643	$	770	$	699	$	642
Platinum – US$/oz	$	1,480	$	1,418	$	1,358	$	1,411	$	1,317	$	1,576	$	1,523	$	1,668
Gold – US$/oz	$	1,315	$	1,292	$	1,202	$	1,327	$	1,192	$	1,598	$	1,664	$	1,776
Nickel – US$/lb	$	8.49	$	7.14	$	6.34	$	6.29	$	6.20	$	7.50	$	7.75	$	8.40
Copper – US$/lb	$	3.15	$	3.01	$	3.34	$	3.31	$	3.06	$	3.44	$	3.59	$	3.75
Exchange rate (Bank of Canada) – CDN$1 = US$	US$	0.94	US$	0.90	US$	0.94	US$	0.97	US$	0.95	US$	0.98	US$	1.01	US$	1.02

* Based on the London Metal Exchange

SECOND QUARTER REPORT 2014

9

North American Palladium Ltd.

Operating Expenses from Continuing Operations

As of June 30, 2014, the Company had completed modification to the design of the underground ore handling system. Repairs to the primary surface crusher in 2014 negatively impacted production and payable metal sales and deferred the recognition of certain revenue. The June 2014 crusher repairs also resulted in a shorter mill run that impacted production and therefore also cash cost in the second quarter. June 2014 production was also impacted by modifications to the ore handling system that occurred in that month. Significantly higher propane and power costs as a result of a colder than normal winter negatively impacted the first quarter of 2014 operating costs by $2.7 million and year-to-date operating costs by $2.1 million compared to the 2014 plan.

Production costs

For the three and six months ended June 30, 2014, operating expenses were $30.4 million and $60.1 million compared to $25.7 million and $54.6 million in 2013 respectively. Mining costs for the three and six month periods ended June 30, 2014 increased by $0.4 million (2%) and $1.5 million (4%) respectively compared to the 2013 periods. In 2014, the Company was predominantly mining in the Offset zone and transporting a majority of that material up the shaft and also processing surface stockpiles. In 2013, mining was predominantly in the open pit and the Offset and Roby zones and all underground material was transported to surface using the ramp. As such, the 2014 and 2013 mining costs are not comparable despite 17% and 7% more tonnes being mined and processed in the second quarter and first six months of 2014 respectively compared to 2013.

For the three and six month periods ended June 30, 2014, milling costs increased $0.9 million (13%) and $1.9 million (15%) respectively compared to the respective periods in 2013 primarily due to: more tonnes milled; increased depressant usage; and, for the six month period, higher power costs in the first quarter of 2014 related to a colder than normal winter. General and administration costs in the three and six months ended June 30, 2014 increased $1.1 million and $2.0 million respectively compared to the same periods in 2013 primarily due to amounts charged to the Offset zone capital costs in 2013 that did not recur in 2014; increased consultant costs; and, in the first quarter of 2014, increased propane costs due to a colder than normal winter.

Inventory and other costs increased production costs by $1.3 million for the three months ended June 30, 2014 compared to a decrease of $1.0 million in 2013 for a net change of $2.3 million primarily due to inventory decreases in 2014 compared to increases in 2013. Inventory and other costs reduced production costs by $0.9 million for the six months ended June 30, 2014 compared to $1.0 million in 2013 for a net change of $0.1 million primarily due to inventory increases in 2014 compared to 2013 and $0.8 million of net insurance proceeds received in 2013 that did not recur in 2014.

Smelting, refining and freight costs

Smelting, refining and freight costs for the three and six months ended June 30, 2014 were $4.1 million and $8.3 million respectively, compared to $3.4 million and $7.2 million in the comparable 2013 periods. The increases over the prior year were primarily due to the impact of a weaker Canadian dollar and more tonnes of concentrate shipped.

Royalty expense

For the three and six month periods ended June 30, 2014, royalty expenses were $2.2 million and $4.3 million respectively compared to $0.9 million and $3.4 million in the comparable 2013 periods. The increases were primarily due to higher revenues in 2014 compared to 2013.

Depreciation and amortization

Depreciation and amortization for the three and six months ended June 30, 2014 was $8.2 million and $18.5 million, compared to $7.0 million and $13.1 million respectively in 2013. The increase over the prior year was primarily due to a significant increase in depreciable assets associated with the LDI mine expansion including the Offset zone and tailings management facilities.

SECOND QUARTER REPORT 2014

10

North American Palladium Ltd.

OTHER EXPENSES

Exploration

Exploration expenditures for the three and six month periods ended June 30, 2014 were $1.9 million and $2.7 million respectively (2013 – $2.2 million and $7.0 million respectively). The decreases were primarily due to a more limited exploration program in 2014 compared with 2013. The 2014 exploration program is somewhat behind schedule due to a slow start-up and some weather related delays. The 2014 exploration program is focused on: (i) drilling the lower part of the Offset zone below the 1,065 meter level – the known limit of proven and probable reserves; (ii) resource conversion drilling in the upper Offset zone directly north of active and planned mining stopes; and, (iii) delineation of new resources in the upper Offset southeast extension, the shallowest known level of the deposit. Although early in the program, the Company is pleased with the results received to-date for the areas tested and those results continue to be assessed. Please see the Company’s July 30, 2014 news release for additional details.

General and administration

The Company’s general and administration expenses for the three and six month periods ended June 30, 2014 were $2.6 million and $5.2 million respectively compared to $2.2 million and $5.1 million in the prior year periods. The increases were primarily due to the impact of options cancelled in the second quarter of 2013 that did not recur in 2014.

Interest and other income

Interest and other income for the three and six months periods ended June 30, 2014 were $2.7 million and $2.4 million respectively compared to $2.2 million and $1.5 million in respective 2013 periods. The increases were primarily due to decreases in fair value of convertible debenture warrants in 2014 partially offset by gains on palladium warrants in 2013 that did not recur in 2014.

Interest expense and other costs

Interest expense and other costs for the three months ended June 30, 2014 were $16.0 million, compared to $2.0 million in the prior year. The increase of $14.0 million was primarily due to a $10.5 million increase in interest expense associated with completion of the Offset zone development project and $3.9 million movement in the fair value of the convertible debentures issued in 2014. Interest expense and other costs for the six months ended June 30, 2014 were $29.0 million, compared to $3.2 million in the prior year. The increase of $25.8 million was primarily due to a $20.6 million increase in interest expense associated with completion of the Offset zone development project and $6.7 million of changes in the fair value of the convertible debentures issued in 2014. Prior to the commencement of commercial production of the shaft on January 1, 2014, the Company had capitalized interest expenses related to the senior secured term loan and the revolving operating line of credit. In 2014, interest related to these loans was expensed. During the six months ended June 30, 2014, the Company expensed approximately US$16.9 million of interest expense related to the senior secured term loan at a 19% interest rate. If the interest rate had been at the 15% level, the rate reverted to effective June 30, 2014, interest expense during the first half of the year would have been approximately US$13.2 million or US$3.7 million lower.

Financing costs

Financing costs for the three and six month periods ended June 30, 2014 were $4.3 million and $8.4 million respectively compared to $2.3 million and $2.4 million in the respective prior year periods. The increases were primarily due to financing costs in 2014 related to the convertible debentures.

Foreign exchange (gain) loss

Foreign exchange (gain) loss for the three months ended June 30, 2014 was a gain of $7.3 million and, for the six months ended June 30, 2014, a loss of $0.6 million compared to losses of $4.5 million and $5.3 million for the three and six month periods ended June 30, 2013 respectively. The gains and losses were primarily due to the impact of exchange rate movements on the US$ denominated senior secured term loan and the US$ denominated credit facility.

SECOND QUARTER REPORT 2014

11

North American Palladium Ltd.

SUMMARY OF QUARTERLY RESULTS

(expressed in thousands of Canadian dollars except per share amounts)	2014						2013												2012
	Q2			Q1			Q4			Q3			Q2			Q1			Q4			Q3
Revenue	$	50,497		$	48,736		$	39,582		$	33,348		$	33,213		$	47,090		$	42,368		$	36,193
Production costs, net of mine restoration costs		30,355			29,735			29,890			21,663			25,701			28,941			25,421			25,852
Exploration expense		1,891			768			1,360			3,874			2,192			4,840			5,962			2,603
Capital expenditures		5,569			2,888			16,728			26,885			27,805			38,068			41,810			34,088
Loss from continuing operations		(9,957	)		(26,666	)		(11,746	)		(5,324	)		(26,268	)		(5,357	)		(3,739	)		(5,908	)
Net loss		(9,957	)		(26,666	)		(11,746	)		(5,324	)		(26,268	)		(2,848	)		(54,010	)		(8,046	)
Cash provided by (used in) operations		(3,807	)		(16,749	)		4,193			2,022			(2,849	)		3,165			37,970			5,174
Cash provided by (used in) financing activities		31,601			31,765			4,289			(2,087	)		51,970			17,096			1,926			35,280
Cash used in investing activities		(5,410	)		(2,888	)		(16,723	)		(26,710	)		(27,805	)		(37,078	)		(41,831	)		(33,864	)
Net loss per share from continuing operations
– basic	$	(0.03	)	$	(0.11	)	$	(0.05	)	$	(0.03	)	$	(0.15	)	$	(0.03	)	$	(0.02	)	$	(0.04	)
– diluted	$	(0.03	)	$	(0.11	)	$	(0.05	)	$	(0.03	)	$	(0.16	)	$	(0.03	)	$	(0.02	)	$	(0.04	)
Net loss per share
– basic	$	(0.03	)	$	(0.11	)	$	(0.05	)	$	(0.03	)	$	(0.15	)	$	(0.02	)	$	(0.31	)	$	(0.05	)
– diluted	$	(0.03	)	$	(0.11	)	$	(0.05	)	$	(0.03	)	$	(0.16	)	$	(0.02	)	$	(0.31	)	$	(0.05	)
Tonnes milled		521,478			516,511			544,074			517,157			483,266			503,585			511,226			504,022
Palladium ounces sold		40,716			39,485			35,205			27,370			32,620			39,760			44,394			36,218
Realized palladium price (US$/ounce)	$	806		$	739		$	725		$	721		$	719		$	730		$	641		$	632

Trends:

• Revenue, production costs, tonnes milled and palladium ounces sold, varied over the last eight quarters as mining has transitioned from the Roby zone underground and the surface open pit to the Offset zone underground and surface stockpiles. Changes in tonnes, grades and sources of ore significantly impacted revenue realized, production costs, ore available for milling and palladium ounces produced.

• Readily available material in the Roby and open pit zones were largely mined out in the first half of 2013 while the Offset zone production has been ramping up since 2012. The transition away from the Roby and open pit zones to the Offset zone entailed processing some lower grade surface stockpile material, which negatively impacted payable metal production in the second and third quarters of 2013.

• Realized quarterly average prices for palladium have ranged from US$632 to US$806 per ounce in the last eight quarters while prices for platinum, gold, copper and nickel have generally been declining over the same period. The weakening of the Canadian dollar versus the United States dollar has resulted in generally higher revenues.

• Underground mining operations have been transitioning to a shaft based ore handling system from a ramp based one in the most recent quarters. The Company is currently moving material to surface using both the ramp and the shaft and therefore costs are somewhat higher than those expected once operations utilize the ore handling system modification completed in July.

• Capital expenditures have been declining for the last five quarters as the construction activities associated with the construction of the shaft and related infrastructure to process the upper Offset zone ore are virtually complete.

SECOND QUARTER REPORT 2014

12

North American Palladium Ltd.

CASH FLOWS, FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash

	Three months ended June 30						Six months ended June 30
(expressed in thousands of dollars)	2014			2013			2014			2013
Cash provided by operations prior to changes in non-cash working capital	$	9,199		$	(3,233	)	$	18,660		$	(202	)
Changes in non-cash working capital		(13,006	)		384			(39,216	)		518
Cash provided by (used in) operations		(3,807	)		(2,849	)		(20,556	)		316
Cash provided by financing		31,601			51,970			63,366			69,066
Cash used in investing		(5,410	)		(27,805	)		(8,298	)		(64,883	)
Increase (decrease) in cash from continuing operations		22,384			21,316			34,512			4,499
Net cash provided by discontinued operations		—			—			—			20,142
Increase in cash and cash equivalents	$	22,384		$	21,316		$	34,512		$	24,641

Operating Activities

For the three months ended June 30, 2014, cash provided by operations prior to changes in non-cash working capital was $9.2 million, compared to a use of $3.2 million in the prior year. The increase of $12.4 million was primarily due to a $16.3 million reduction in net loss and $12.6 million relating to non-cash interest expense and other costs and $4.3 million of non-cash financing costs partially offset by a $10.9 million movement in non-cash unrealized foreign exchange gain and an $11.0 million non-cash loss on extinguishment of debt in 2013 that did not recur in 2014.

For the six months ended June 30, 2014, cash provided by operations prior to changes in non-cash working capital was $18.7 million, compared to a use of $0.2 million in the prior year. The increase of $18.9 million was primarily due to $26.0 million relating to non-cash interest expense and other costs, $8.3 million of non-cash financing costs and a $5.5 million non-cash increase in depreciation and amortization partially offset by an $11.0 million non-cash loss on extinguishment of debt in 2013 that did not recur in 2014.

For the three months ended June 30, 2014, changes in non-cash working capital resulted in a use of cash of $13.0 million, compared to a source of cash of $0.4 million in the prior year. The increased use of $13.4 million was primarily due to a movement of $18.2 million in accounts receivable. For the six months ended June 30, 2014, changes in non-cash working capital resulted in a use of cash of $39.2 million, compared to a source of cash of $0.5 million in the prior year. The increased use of $39.7 million was primarily due to movements of $24.2 million and $18.1 million in accounts payable and accrued liabilities and accounts receivable respectively.

Financing Activities

For the three and six month periods ended June 30, 2014, financing activities resulted in a source of cash of $31.6 million and $63.4 million respectively (2013 – $52.0 million and $69.1 million respectively) consisting primarily of $33.0 million and $61.4 million net proceeds related to the issuance of convertible debentures for the respective periods which have been largely converted into equity.

Investing Activities

For the six months ended June 30, 2014, investing activities used cash of $8.3 million (2013 - $64.9 million) primarily due to additions to mining interests of $8.5 million (2013 – $65.9 million).

SECOND QUARTER REPORT 2014

13

North American Palladium Ltd.

Liquidity and Capital Resources

	As at June 30		As at December 31
(expressed in thousands of dollars)	2014		2013
Cash balance	$	44,305	$	9,793
Net working capital	$	36,433	$	(174,211	)
Shareholders’ equity	$	253,225	$	222,496
Total debt	$	273,389	$	239,086

As at June 30, 2014, the Company had cash and cash equivalents of $44.3 million compared to $9.8 million as at December 31, 2013. The increase is due primarily to the sources and uses of cash as noted above. The funds are deposited with major Canadian chartered banks.

The Company has, subject to a borrowing base cap, a US$60.0 million credit facility that is secured by certain of the Company’s accounts receivables and inventory and may be used for working capital liquidity and general corporate purposes. In July 2014, the Company extended its US$60 million credit facility to July 3, 2015 and as at June 30, 2014, the borrowing base calculation limited the credit facility to a maximum of US$42.8 million of which US$37.1 million was utilized.

In July 2014, the Company paid US$23.4 million to its senior secured term loan lender representing US$16.2 million of accrued interest and US$7.2 million of associated pre-payment fee. Effective June 30, 2014, the Company reverted to a 15% annual interest rate on the senior secured term loan.

The Company has $10.3 million of finance leases funding equipment for operations. Please also see the contractual obligations below for additional commitments.

The Company’s liquidity may be adversely affected by operating performance, a downturn in capital market conditions impacting access to capital markets or entity specific conditions. The achievement of this is dependent on a number of variables including, but not limited to, metal prices, operational costs, capital expenditures, timely transition to mining by shaft, and meeting production targets. Adverse changes in any of these variables may require the Company to seek additional financing.

In the second quarter of 2014, the Company closed $35.0 million gross principal amount of convertible unsecured subordinated debentures (the “Tranche 2 Debentures”) of the Company at a price of $1,000 per debenture, including approximately 18.9 million warrants (the “Tranche 2 Warrants”). The conversion price of the Tranche 2 Debentures is $0.4629 per share and the exercise price of the Tranche 2 Warrants is $0.5786 per share. The Tranche 2 Debentures mature on April 11, 2019 and bear interest at an annual rate of 7.5%. Holders may convert their Tranche 2 Debentures into common shares of NAP at any time at a conversion rate of approximately 2,160 Common Shares per $1,000 principal amount of Tranche 2 Debentures. Holders converting their debentures will receive all accrued and unpaid interest, as well as interest that would have been paid if the debenture were held through to maturity (the “Tranche 2 Make Whole Amount”). At the Company’s option, interest and Tranche 2 Make-Whole Amounts can be paid in common shares. The Tranche 2 Warrants entitle the holders to purchase up to 25.0% of the number of common shares of the Company into which the principal amount of the Tranche 2 Debentures purchased by the holders are convertible at the initial fixed conversion price at any time before the second anniversary of the Tranche 2 Debenture closing date.

The Company’s senior secured term loan and credit facility contain several financial covenants which, if not met, would result in an event of default. This debt also includes certain other covenants, including limits on liens, material adverse change provisions and cross-default provisions. Certain events of default result in this debt becoming immediately due. Other events of default entitle the lender to demand repayment.

SECOND QUARTER REPORT 2014

14

North American Palladium Ltd.

Contractual Obligations

Contractual obligations are comprised as follows:

As at June 30, 2014	Payments Due by Period
($000s)	Total		1-3 Years		3-5 Years		5+ Years
Finance lease obligations	$	11,240	$	11,240	$	—	$	—
Operating leases		3,716		3,448		268		—
Purchase obligations		9,295		9,295		—		—
	$	24,251	$	23,983	$	268	$	—

In addition to the above, the Company also has asset retirement obligations at June, 2014 in the amount of $15.2 million for the LDI Mine. The Company also has contractual obligations reflected in accounts payable and has obligations related to its credit facility and long-term debt. The Company obtained letters of credit of $14.4 million as financial surety for these future outlays.

Contingencies and Commitments

Please refer to notes 15, 18 and 21 of the Company’s Financial Statements. During the second quarter of 2014, the Company, subject to court approval, settled for $2.4 million a previously disclosed potential class action lawsuit. The settlement was paid by the Company’s insurer and there was no admission of wrongdoing on the part of the Company. On July 2, 2014, the Company settled the B.R. Davidson claim for $1.0 million, payable on or before December 1, 2014.

Related Party Transactions

There were no related party transactions for the six month period ended June 30, 2014.

OUTSTANDING SHARE DATA

As of July 29, 2014, there were 384,361,377 common shares of the Company outstanding. In addition, there were options outstanding pursuant to the Amended and Restated 2013 Corporate Stock Option Plan entitling holders thereof to acquire 3,110,742 common shares of the Company at a weighted average exercise price of $1.68 per share.

At July 29, 2014, $2.0 million and $43.0 million of 2014 and 2012 convertible debentures were outstanding and were convertible into approximately 4.1 million and 14.8 million common shares respectively.

In conjunction with a $72.0 million term loan issued in 2011 and repaid in June 2013, a palladium warrant consisting of 0.35 of an ounce of palladium at a strike price of US$620 per ounce was issued with each $1,000 convertible debenture representing an aggregate of 25,200 ounces of palladium. As at July 29, 2014, 12,000 palladium warrants were outstanding representing 4,200 ounces. On the exercise of the palladium warrants, in certain circumstances the Company has the option of settling the warrants with either cash or common shares.

SECOND QUARTER REPORT 2014

15

North American Palladium Ltd.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Critical accounting policies generally include estimates that are highly uncertain and for which changes in those estimates could materially impact the Company’s financial statements. The following accounting policies are considered critical:

a. Use of estimates

The preparation of the condensed interim consolidated financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Significant estimates and assumptions relate to recoverability of mining operations and mineral exploration properties. While management believes that these estimates and assumptions are reasonable, actual results could vary significantly.

Certain assumptions are dependent upon reserves, which represent the estimated amount of ore that can be economically and legally extracted from the Company’s properties. In order to estimate reserves, assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transportation costs, commodity prices and exchange rates. Estimating the quantity and/or grade of reserves requires the size, shape and depth of ore bodies to be determined by analyzing geological data such as drilling samples. This process may require complex and difficult geological judgments to interpret the data. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data is generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the Company’s financial results and financial position in a number of ways, including the following:

• Asset carrying values including mining interests may be affected due to changes in estimated future cash flows;

• Depreciation and amortization expensed in the statement of operations may change or be impacted where such expenses are determined by the units of production basis, or where the useful economic lives of assets change;

• Decommissioning, site restoration and environmental provisions may change where changes in estimated reserves affect expectations about the timing or cost of these activities; and

• The carrying value of deferred tax assets may change due to changes in estimates of the likely recovery of the tax benefits.

b. Impairment assessments of long-lived assets

The carrying amounts of the Company’s non-financial assets, excluding inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. Impairment is assessed at the level of cash-generating units (“CGUs”). An impairment loss is recognized in the Consolidated Statements of Operations and Comprehensive Loss for any excess of carrying amount over the recoverable amount.

Impairment is determined for an individual asset unless the asset does not generate cash inflows that are independent of those generated from other assets or groups of assets, in which case, the individual assets are grouped together into CGUs for impairment purposes.

SECOND QUARTER REPORT 2014

16

North American Palladium Ltd.

The recoverable amount of an asset or cash-generating unit is the greater of its “value in use”, defined as the discounted present value of the future cash flows expected to arise from its continuing use and its ultimate disposal, and its “fair value less costs to sell”, defined as the best estimate of the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss is recognized in the Consolidated Statements of Operations and Comprehensive Loss if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount.

Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss on non-financial assets other than goodwill is reversed if there has been a change in the estimates used to determine the recoverable amount, only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recognized.

c. Depreciation and amortization of mining interests

Mining interests relating to plant and equipment, mining leases and claims, royalty interests, and other development costs are recorded at cost with depreciation and amortization provided on the unit-of-production method over the estimated remaining ounces of palladium to be produced based on the proven and probable reserves or, in the event that the Company is mining resources, an appropriate estimate of the resources mined or expected to be mined.

Mining interests relating to small vehicles and certain machinery with a determinable expected life are recorded at cost with depreciation provided on a straight-line basis over their estimated useful lives, ranging from three to seven years, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Straight-line depreciation is calculated over the depreciable amount, which is the cost of an asset, less its residual value.

Significant components of individual assets are assessed and, if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately using the unit-of-production or straight-line method as appropriate. Costs relating to land are not amortized.

Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.

Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

d. Revenue recognition

Revenue from the sale of metals in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of volume adjustments. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale.

SECOND QUARTER REPORT 2014

17

North American Palladium Ltd.

Revenue from the sale of palladium and by-product metals from the LDI Mine is provisionally recognized based on quoted market prices upon the delivery of concentrate to the smelter or designated shipping point, which is when title transfers and significant rights and obligations of ownership pass. The Company’s smelter contract provides for final prices to be determined by quoted market prices in a period subsequent to the date of concentrate delivery. Variations from the provisionally priced sales are recognized as revenue adjustments until final pricing is determined. Accounts receivable are recorded net of estimated treatment and refining costs, which are subject to final assay adjustments. Subsequent adjustments to provisional pricing amounts due to changes in metal prices and foreign exchange are disclosed separately from initial revenues in the notes to the financial statements.

e. Asset retirement obligations

In accordance with Company policies, asset retirement obligations relating to legal and constructive obligations for future site reclamation and closure of the Company’s mine sites are recognized when incurred and a liability and corresponding asset are recorded at management’s best estimate. Estimated closure and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs.

The amount of any liability recognized is estimated based on the risk-adjusted costs required to settle present obligations, discounted using a pre-tax risk-free discount rate consistent with the time period of expected cash flows. When the liability is initially recorded, a corresponding asset retirement cost is recognized as an addition to mining interests and amortized using the unit of production method.

The liability for each mine site is accreted over time and the accretion charges are recognized as a finance cost in the Consolidated Statements of Operations and Comprehensive Loss. The liability is subject to re-measurement at each reporting date based on changes in discount rates and timing or amounts of the costs to be incurred. Changes in the liability, other than accretion charges, relating to mine rehabilitation and restoration obligations, which are not the result of current production of inventory, are added to or deducted from the carrying value of the related asset retirement cost in the reporting period recognized. If the change results in a reduction of the obligation in excess of the carrying value of the related asset retirement cost, the excess balance is recognized as a recovery through profit or loss in the period.

Adoption of New Accounting Standards

The following new accounting standards have been adopted by the Company.

IAS 32 Financial Instruments: Presentation

This standard is amended to clarify requirements for offsetting of financial assets and financial liabilities. The amendment is effective for annual periods beginning on or after January 1, 2014. This amendment did not have a material impact on the condensed interim consolidated financial statements of the Company.

IAS 36 Recoverable Amounts

This standard was amended in May 2013 to change the disclosure required when an impairment loss is recognized or reversed. The amendments require the disclosure of the recoverable amount of an asset or cash generating unit at the time an impairment loss has been recognized or reversed and detailed disclosure of how the associated fair value less costs of disposal has been determined. The amendments are effective for annual periods beginning on or after January 1, 2014 with earlier adoption permitted. This amendment did not have a material impact on the condensed interim consolidated financial statements of the Company.

SECOND QUARTER REPORT 2014

18

North American Palladium Ltd.

IFRIC 21 Accounting for Levies Imposed by Governments

This interpretation provides guidance on the obligating event giving rise to a liability in connection with a levy imposed by a government, and clarifies that the obligating event is the activity that triggers the payment of the levy as identified by the legislation. The interpretation is effective for annual periods beginning on or after January 1, 2014. This amendment did not have a material impact on the condensed interim consolidated financial statements of the Company.

New standards and interpretations not yet adopted

In addition to the new standards disclosed in the Company’s annual financial statements for the year ended December 31, 2013, the following new standards and amendments to standards are not yet effective or have otherwise not yet been adopted by the Company. The Company is evaluating the impact, if any, adoption of the standards will have on the disclosures in the Company’s condensed interim consolidated financial statements:

IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortization

This pronouncement amends IAS 16 Property Plant and Equipment and IAS 38 Intangible Assets to (i) clarify that the use of a revenue-based depreciation method is not appropriate for property, plant and equipment, and (ii) provide a rebuttal presumption for intangible assets. The amendment is effective for years beginning on or after January 1, 2016. This amendment is not expected to have a material impact on the condensed interim consolidated financial statements of the Company.

IFRS 15 Revenue from contracts with customers

This new standard on revenue recognition supercedes IAS 18 Revenue, IAS 11 Construction Contracts, and related interpretations. The amendment is effective for years beginning on or after January 1, 2017. Management is presently evaluating the potential impact of this new standard on the condensed interim consolidated financial statements of the Company.

IFRS 9 Financial Instruments: Classification and Measurement

In October 2010, the IASB issued IFRS 9 “Financial Instruments” which will replace IAS 39, Financial Instruments: Recognition and Measurement. The replacement standard has two measurement categories: amortized cost and fair value. All equity instruments are measured at fair value. A debt instrument is at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise, it is at fair value through profit or loss. An update to IFRS 9 includes guidance on financial liabilities and derecognition of financial instruments.

In November 2013, the IASB issued a new general hedge accounting standard, which forms part of IFRS 9 Financial Instruments (2013). The new standard includes a new general hedge accounting standard which will align hedge accounting more closely with risk management. This standard does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness, however it will provide more hedging strategies that are used for risk management to qualify for hedge accounting and introduce more judgment to assess the effectiveness of a hedging relationship. A tentative mandatory effective date of January 1, 2018 has been selected and the date is still subject to confirmation and enactment. Early adoption is permitted. The Company is presently evaluating the impact of adopting this standard.

RISKS AND UNCERTAINTIES

The risks and uncertainties are discussed within the Company’s most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities, the Company’s Short Form Base Shelf Prospectus filed on February 12, 2013, and the Company’s Prospectus Supplement filed on April 8, 2014.

SECOND QUARTER REPORT 2014

19

North American Palladium Ltd.

INTERNAL CONTROLS

Disclosure Controls and Procedures

Management is responsible for the information disclosed in this MD&A and has in place the appropriate information systems, procedures and controls to ensure that information used internally by management and disclosed externally is, in all material respects, complete and reliable.

For the six months ended June 30, 2014, the Chief Executive Officer and Chief Financial Officer certify that they have designed, or caused to be designed under their supervision, disclosure controls and procedures to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.

The disclosure controls and procedures are evaluated annually through regular internal reviews which are carried out under the supervision of, and with the participation of, the Company’s management, including the Chief Executive Officer and Chief Financial Officer.

Internal Control over Financial Reporting

For the six months ended June 30, 2014, the Chief Executive Officer and Chief Financial Officer certify that they have designed, or caused to be designed under their supervision, internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with IFRS.

There have been no changes in the Company’s internal controls over the financial reporting that occurred during the six month period ended June 30, 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Internal control over financial reporting, no matter how well designed, has inherent limitations and can only provide reasonable assurance, not absolute assurance, with respect to the preparation and fair presentation of published financial statements and management does not expect such controls will prevent or detect all misstatements due to error or fraud. The Company is continually evolving and enhancing its systems of controls and procedures.

Under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, management performs regular internal reviews and conducts an annual evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992).

OTHER INFORMATION

Additional information regarding the Company is included in the Company’s Annual Information Form and Annual Report on Form 40-F, which are filed with the SEC and the provincial securities regulatory authorities, respectively. A copy of the Company’s Annual Information Form is posted on the SEDAR website at www.sedar.com. A copy of the Annual Report or Form 40-F can be obtained from the SEC’s website at www.sec.gov.

SECOND QUARTER REPORT 2014

20

North American Palladium Ltd.

NON-IFRS MEASURES

This MD&A refers to cash cost per ounce, adjusted net income, EBITDA and adjusted EBITDA which are not recognized measures under IFRS. Such Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Management uses these measures internally. The use of these measures enables management to better assess performance trends. Management understands that a number of investors, and others who follow the Company’s performance, assess performance in this way. Management believes that these measures better reflect the Company’s performance and are better indications of its expected performance in future periods. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

2013 was a transition year for the Company as it was sinking the shaft and completing related infrastructure at the same time it was developing and transitioning to mining the Offset zone. As a result, the 2013 financial results would not be directly comparable to the prior or future years.

The following tables reconcile these non-IFRS measures to the most directly comparable IFRS measures:

Cash Cost Per Ounce of Palladium

The Company uses this measure internally to evaluate the underlying operating performance of the Company for the reporting periods presented. The Company believes that providing cash cost per ounce allows the ability to better evaluate the results of the underlying business of the Company.

Cash cost per ounce include mine site operating costs such as mining, processing, administration and royalties, but are exclusive of depreciation, amortization, reclamation, capital and exploration costs. Cash cost per ounce calculation is reduced by any by-product revenue and is then divided by ounces sold to arrive at the by-product cash cost per ounce of sales. This measure, along with revenues, is considered to be a key indicator of a Company’s ability to generate operating earnings and cash flow from its mining operations.

The Company’s primary operation relates to the extraction of palladium metal. Therefore, all other metals extracted in conjunction with the palladium metal are considered to be a by-product credit for the purposes of the cash cost calculation.

Reconciliation of Palladium Cash Cost per Ounce

	For the three months ended											For the six months ended June 30
(expressed in thousands of dollars except ounce and per ounce amounts)	June 30 2014		March 31 2014		December 31 2013		September 30 2013		June 30 2013			2014		2013
Production costs including overhead	$	30,355	$	29,735	$	31,153	$	21,663	$	25,701		$	60,090	$	54,642
Smelting, refining and freight costs		4,130		4,183		3,864		2,922		3,406			8,313		7,208
Royalty expense		2,184		2,074		1,669		1,464		892			4,258		3,401
Mine restoration costs, net of insurance recoveries		—		—		—		1,214		(268	)		—		49
Operational expenses		36,669		35,992		36,686		27,263		29,731			72,661		65,300
Less by-product metal revenue		14,103		14,639		12,425		10,703		11,142			28,741		27,018
	$	22,566	$	21,353	$	24,261	$	16,560	$	18,589		$	43,920	$	38,282
Divided by ounces of palladium sold		40,716		39,485		35,206		27,370		32,620			80,201		72,380
Cash cost per ounce (CDN$)	$	554	$	541	$	689	$	605	$	570		$	548	$	529
Average exchange rate (CDN$1 – US$)		0.92		0.91		0.90		0.96		0.99			0.91		0.99
Cash cost per ounce (US$), net of by-product credits	$	510	$	492	$	620	$	581	$	564		$	498	$	524

SECOND QUARTER REPORT 2014

21

North American Palladium Ltd.

Adjusted EBITDA

The Company believes that EBITDA and Adjusted EBITDA are valuable indicators of the Company’s ability to generate operating cash flow to fund working capital needs, service debt obligations, and fund capital expenditures.

EBITDA excludes the impact of the cost of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS.

Other companies may calculate EBITDA differently. Adjusted EBITDA is a non-IFRS financial measure, which excludes the following from loss: income and mining tax expense; interest expense and other costs, net; depreciation and amortization; exploration; loss (income) from discontinued operations; mine start-up and closure costs; asset impairment charges and insurance recoveries; one-time costs (mine restoration costs due to flood and retirement payments); and, foreign exchange loss (gain).

	For the three months ended															For the six months ended June 30
($000s)	June 30 2014			March 31 2014			December 31 2013			September 30 2013			June 30 2013			2014			2013
Loss and comprehensive loss from continuing operations for the year	$	(9,957	)	$	(26,666	)	$	(11,746	)	$	(5,324	)	$	(26,268	)	$	(36,623	)	$	(31,625	)
Income and mining tax recovery		—			—			(2,157	)		—			—			—			—
Interest and other income		(2,687	)		(21	)		(223	)		(214	)		(2,179	)		(2,400	)		(1,532	)
Interest expense and other costs		16,010			13,282			1,183			2,536			2,006			28,984			3,184
Financing costs		4,348			4,036			652			677			2,318			8,384			2,399
Loss on extinguishment of debt		—			—			—			—			11,035			—			11,035
Depreciation and amortization		8,174			10,368			6,274			6,144			7,004			18,542			13,089
EBITDA	$	15,888		$	999		$	(6,017	)	$	3,819		$	(6,084	)	$	16,887		$	(3,450	)
Exploration		1,891			768			1,360			3,874			2,192			2,659			7,032
Insurance recoveries, net of mine restoration costs and retirement payments		—			—			—			(1,214	)		268			—			(49	)
Inventory price adjustment		—			—			675			—			—			—			—
Foreign exchange loss (gain)		(7,335	)		7,976			5,351			(3,290	)		4,495			641			5,317
Adjusted EBITDA	$	10,444		$	9,743		$	1,369		$	3,189		$	871		$	20,187		$	8,850

SECOND QUARTER REPORT 2014

22

North American Palladium Ltd.

Adjusted net income

The Company uses this measure internally to evaluate the underlying operating performance of the Company for the reporting periods presented. Providing adjusted net income allows the reader the ability to better evaluate the results of the underlying business of the Company.

Adjusted net income is a Non-IFRS financial measure, which excludes the following from loss: exploration; income from discontinued operations; mine start-up costs and closure costs; asset impairment charges and insurance recoveries; mine restoration costs due to flood and retirement payments; foreign exchange loss; loss on extinguishment of debt; loss in investments held for trading; and, financing costs.

	Three months ended June 30						Six months ended June 30
($000s)	2014			2013			2014			2013
Loss and comprehensive loss for the year	$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(29,116	)
Exploration		1,891			2,192			2,659			7,032
Income from discontinued operations		—			—			—			(2,509	)
Mine restoration costs, net of (insurance recoveries) and retirement payments		—			268			—			(49	)
Foreign exchange loss		(7,335	)		4,495			641			5,317
Loss on extinguishment of debt		—			11,035			—			11,035
Financing costs		4,348			2,318			8,384			2,399
Loss on investments held for trading		373			844			373			844
Legal settlement		1,000			—			1,000			—
Adjusted net income (loss)	$	(9,680	)	$	(5,116	)	$	(23,566	)	$	(5,047	)

SECOND QUARTER REPORT 2014

23

EX-2

Exhibit 2

North American Palladium Ltd.

Condensed Interim Consolidated Balance Sheets

(expressed in thousands of Canadian dollars)

(unaudited)

	Notes		June 30 2014			December 31 2013
ASSETS
Current Assets
Cash and cash equivalents			$	44,305		$	9,793
Accounts receivable		5		55,477			38,556
Inventories		6		15,930			14,239
Other assets		7		1,727			6,968
Total Current Assets				117,439			69,556
Non-current Assets
Mining interests		8		445,594			456,239
Total Non-current Assets				445,594			456,239
Total Assets			$	563,033		$	525,795
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities		10	$	20,087		$	48,797
Credit facility		5		24,296			17,834
Current portion of obligations under finance leases		11		2,924			2,988
Current portion of long-term debt		12		32,687			173,656
Current derivative liability		12		1,012			492
Total Current Liabilities				81,006			243,767
Non-current Liabilities
Income taxes payable				125			1,286
Asset retirement obligations		9		15,195			13,638
Obligations under finance leases		11		7,386			8,744
Long-term debt		12		206,096			35,864
Total Non-current Liabilities				228,802			59,532
Shareholders’ Equity
Common share capital and purchase warrants		13		865,483			798,411
Stock options and related surplus				9,408			9,128
Equity component of convertible debentures, net of issue costs		12		6,931			6,931
Contributed surplus				8,873			8,873
Deficit				(637,470	)		(600,847	)
Total Shareholders’ Equity				253,225			222,496
Total Liabilities and Shareholders’ Equity			$	563,033		$	525,795

Commitments – Note 15

Contingencies – Note 18

Subsequent events – Note 21

See accompanying notes to the condensed interim consolidated financial statements

SECOND QUARTER REPORT 2014

1

North American Palladium Ltd.

Condensed Interim Consolidated Statements of Operations and

Comprehensive Loss

(expressed in thousands of Canadian dollars, except share and per share amounts)

(unaudited)

				Three months ended June 30						Six months ended June 30
	Notes			2014			2013			2014			2013
Revenue		16		$	50,497		$	33,213		$	99,233		$	80,303
Mining operating expenses
Production costs					30,355			25,701			60,090			54,642
Smelting, refining and freight costs					4,130			3,406			8,313			7,208
Royalty expense					2,184			892			4,258			3,401
Depreciation and amortization					8,174			7,004			18,542			13,089
Loss on disposal of equipment					773			425			1,220			1,054
Total mining operating expenses					45,616			37,428			92,423			79,394
Income (loss) from mining operations					4,881			(4,215	)		6,810			909
Other expenses
Exploration					1,891			2,192			2,659			7,032
General and administration					2,611			2,186			5,165			5,099
Interest and other income		17			(2,687	)		(2,179	)		(2,400	)		(1,532	)
Interest expense and other costs		17			16,010			2,006			28,984			3,184
Financing costs		12			4,348			2,318			8,384			2,399
Loss on extinguishment of long-term debt					—			11,035			—			11,035
Foreign exchange loss (gain)					(7,335	)		4,495			641			5,317
Total other expenses					14,838			22,053			43,433			32,534
Loss from continuing operations before taxes					(9,957	)		(26,268	)		(36,623	)		(31,625	)
Income and mining tax recovery					—			—			—			—
Loss and comprehensive loss from continuing operations for the period				$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(31,625	)
Income and comprehensive income from discontinued operations for the period		4			—			—			—			2,509
Loss and comprehensive loss for the period				$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(29,116	)
Loss per share
Basic				$	(0.03	)	$	(0.15	)	$	(0.13	)	$	(0.16	)
Diluted		13	(d)	$	(0.03	)	$	(0.16	)	$	(0.13	)	$	(0.17	)
Loss from continuing operations per share
Basic				$	(0.03	)	$	(0.15	)	$	(0.13	)	$	(0.17	)
Diluted				$	(0.03	)	$	(0.16	)	$	(0.13	)	$	(0.18	)
Income from discontinued operations per share
Basic				$	—		$	—		$	—		$	0.01
Diluted				$	—		$	—		$	—		$	0.01
Weighted average number of shares outstanding
Basic		13	(d)		349,555,798			179,520,041			291,537,189			178,491,155
Diluted		13	(d)		349,555,798			179,633,511			291,537,189			178,601,618

See accompanying notes to the condensed interim consolidated financial statements

SECOND QUARTER REPORT 2014

2

North American Palladium Ltd.

Condensed Interim Consolidated Statements of Cash Flows

(expressed in thousands of Canadian dollars)

(unaudited)

				Three months ended June 30						Six months ended June 30
	Notes			2014			2013			2014			2013
Cash provided by (used in)
Operations
Loss from continuing operations for the period				$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(31,625	)
Operating items not involving cash
Depreciation and amortization					8,174			7,004			18,542			13,089
Accretion expense (recovery)		17			(229	)		945			(439	)		1,899
Loss on extinguishment of debt					—			11,035			—			11,035
Share-based compensation and employee benefits		13	(f)		547			62			1,023			475
Unrealized foreign exchange loss (gain)					(6,952	)		3,903			586			3,903
Loss on disposal of equipment					773			—			1,220			—
Interest expense and other		17			12,550			—			26,022			—
Financing costs		12			4,293			—			8,329			—
Other					—			86			—			1,022
					9,199			(3,233	)		18,660			(202	)
Changes in non-cash working capital		19			(13,006	)		384			(39,216	)		518
					(3,807	)		(2,849	)		(20,556	)		316
Financing Activities
Issuance of common shares and warrants, net of issue costs					—			9,613			(38	)		9,613
Issuance of convertible debentures, net of issue costs		12			32,979			—			61,443			—
Credit facility		5			22			(8,808	)		6,107			14,192
Repayment of senior secured notes		12			—			(79,200	)		—			(79,200	)
Net proceeds of senior secured term loan		12			—			131,941			—			131,941
Repayment of obligations under finance leases					(890	)		(258	)		(1,686	)		(1,573	)
Interest paid					(114	)		(1,318	)		(1,565	)		(5,907	)
Other financing costs					(396	)		—			(895	)		—
					31,601			51,970			63,366			69,066
Investing Activities
Additions to mining interests, net					(5,569	)		(27,805	)		(8,457	)		(65,873	)
Proceeds on disposal of mining interests, net					159			—			159			990
					(5,410	)		(27,805	)		(8,298	)		(64,883	)
Increase in cash from continuing operations					22,384			21,316			34,512			4,499
Net cash provided by discontinued operations		4			—			—			—			20,142
Increase in cash					22,384			21,316			34,512			24,641
Cash and cash equivalents, beginning of period					21,921			23,493			9,793			20,168
Cash and cash equivalents, end of period				$	44,305		$	44,809		$	44,305		$	44,809
Cash and cash equivalents consisting of:
Cash				$	44,305		$	44,809		$	44,305		$	44,809
Short-term investments					—			—			—			—
				$	44,305		$	44,809		$	44,305		$	44,809
Foreign exchange included in cash balance				$	1,704		$	1,075		$	1,704		$	1,075

See accompanying notes to the condensed interim consolidated financial statements

SECOND QUARTER REPORT 2014

3

North American Palladium Ltd.

Consolidated Statements of Shareholders’ Equity

(expressed in thousands of Canadian dollars, except share amounts)

(unaudited)

	Notes		Number of shares		Capital stock			Stock options			Equity component of convertible debentures		Contributed surplus		Deficit			Total shareholders’ equity
Balance, January 1, 2013		13		177,127,833	$	776,632		$	9,125		$	6,931	$	8,873	$	(554,661	)	$	246,900
Common shares issued:
Settlement of obligation relating to production targets				709,220		1,000			—			—		—		—			1,000
Settlement of NAP Quebec disposal costs		4		203,800		300			—			—		—		—			300
Private placement of flow-through shares, net of issue costs				8,668,009		9,613			—			—		—		—			9,613
Premium on issuance of flow-through shares				—		(910	)		—			—		—		—			(910	)
Warrants:
Palladium warrants exercised		12		574,738		638			—			—		—		—			638
Stock based compensation:
Stock-based compensation expense		13(b)		527,977		714			(239	)		—		—		—			475
Net loss and comprehensive loss for the period ended June 30, 2013				—		—			—			—		—		(29,116	)		(29,116	)
Balance, June 30, 2013				187,811,577	$	787,987		$	8,886		$	6,931	$	8,873	$	(583,777	)	$	228,900
January 1, 2014				197,109,924	$	798,411		$	9,128		$	6,931	$	8,873	$	(600,847	)	$	222,496
Common shares issued:
Pursuant to conversion of convertible debentures (Tranche I)		12		76,407,816		30,871			—			—		—		—			30,871
Pursuant to conversion of convertible debentures (Tranche II)		12		108,260,201		35,496			—			—		—		—			35,496
Private placement of flow-through shares, net of issue costs				—		(38	)		—			—		—		—			(38	)
Stock based compensation:
Stock-based compensation		13(b)(f)		1,228,208		743			280			—		—		—			1,023
Net loss and comprehensive loss for the period ended June 30, 2014				—		—			—			—		—		(36,623	)		(36,623	)
Balance, June 30, 2014				383,006,149		865,483			9,408			6,931		8,873		(637,470	)		253,225

See accompanying notes to the condensed interim consolidated financial statements

SECOND QUARTER REPORT 2014

4

North American Palladium Ltd.

Notes to the condensed interim consolidated financial statements

(expressed in thousands of Canadian dollars, except per share amounts and metal prices)

1. NATURE OF OPERATIONS

North American Palladium Ltd. (“NAP”) is domiciled in Canada and was incorporated on September 12, 1991 under the Canadian Business Corporations Act. The address of the Company’s registered office is 200 Bay Street, Suite 2350, Royal Bank Plaza South Tower, Toronto, Ontario, Canada, M5J 2J2. The Company’s 100%-owned subsidiary is Lac des Iles Mines Ltd. (“LDI”).

NAP operates the LDI palladium mine, located northwest of Thunder Bay, Ontario, which started producing palladium in 1993. The Company is transitioning the LDI mine from mining via ramp access to mining via shaft while utilizing bulk mining methods.

The Company also previously held 100% ownership of NAP Quebec Mines Ltd. (“NAP Quebec”) and on March 22, 2013, the Company completed the sale of NAP Quebec resulting in the disposition of all gold division assets.

The condensed interim consolidated financial statements for the Company as at June 30, 2014 and for the three and six month periods ended June 30, 2014, include the Company and its subsidiary (collectively referred to as the “Company”).

2. BASIS OF PRESENTATION

Statement of Compliance

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), applicable to the preparation of these financial statements, including IAS 34, Interim Financial Reporting.

These condensed interim consolidated financial statements should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2013, which have been prepared in accordance with IFRS as issued by the IASB.

Basis of Measurement

These condensed interim consolidated financial statements have been prepared on the historical cost basis, except for the following items in the consolidated balance sheet:

(i) Accounts receivable and related derivative instruments are measured at fair value.

(ii) Financial instruments at fair value through profit or loss are measured at fair value.

(iii) Liabilities for cash-settled share-based payment arrangements are measured at fair value.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies disclosed in the Company’s annual financial statements for the year ended December 31, 2013 have been applied consistently by all of the Company’s entities for all periods presented in these condensed interim consolidated financial statements, unless otherwise indicated.

Basis of Consolidation

These condensed interim consolidated financial statements include the accounts of NAP and its wholly-owned subsidiary.

SECOND QUARTER REPORT 2014

5

North American Palladium Ltd.

Adoption of New Accounting Standards

The following new accounting standards have been adopted by the Company.

IAS 32 Financial Instruments: Presentation

This standard is amended to clarify requirements for offsetting of financial assets and financial liabilities. The amendment is effective for annual periods beginning on or after January 1, 2014. This amendment did not have a material impact on the condensed interim consolidated financial statements.

IAS 36 Recoverable Amounts

This standard was amended in May 2013 to change the disclosure required when an impairment loss is recognized or reversed. The amendments require the disclosure of the recoverable amount of an asset or cash generating unit at the time an impairment loss has been recognized or reversed and detailed disclosure of how the associated fair value less costs of disposal has been determined. The amendments are effective for annual periods beginning on or after January 1, 2014 with earlier adoption permitted. This amendment did not have a material impact on the condensed interim consolidated financial statements of the Company.

IFRIC 21 Accounting for Levies Imposed by Governments

This interpretation provides guidance on the obligating event giving rise to a liability in connection with a levy imposed by a government, and clarifies that the obligating event is the activity that triggers the payment of the levy as identified by the legislation. The interpretation is effective for annual periods beginning on or after January 1, 2014. This amendment did not have a material impact on the condensed interim consolidated financial statements of the Company.

New standards not yet adopted

In addition to the new standards disclosed in the Company’s annual financial statements for the year ended December 31, 2013, the following new standards and amendments to standards are not yet effective as of the June 30, 2014 reporting date or have otherwise not yet been adopted by the Company. The Company is evaluating the impact, if any, adoption of the standards will have on the disclosures in the Company’s consolidated financial statements:

IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortization

This pronouncement amends IAS 16 Property Plant and Equipment and IAS 38 Intangible Assets to (i) clarify that the use of a revenue-based depreciation method is not appropriate for property, plant and equipment, and (ii) provide a rebuttal presumption for intangible assets. The amendment is effective for years beginning on or after January 1, 2016. This amendment is not expected to have a material impact on the condensed interim consolidated financial statements of the Company.

IFRS 15 Revenue from contracts with customers

This new standard on revenue recognition supercedes IAS 18 Revenue, IAS 11 Construction Contracts, and related interpretations. The amendment is effective for years beginning on or after January 1, 2017. The Company is presently evaluating the potential impact of this new standard on the condensed interim consolidated financial statements of the Company.

IFRS 9 Financial Instruments: Classification and Measurement

In October 2010, the IASB issued IFRS 9 “Financial Instruments” which will replace IAS 39, Financial Instruments: Recognition and Measurement. The replacement standard has two measurement categories: amortized cost and fair value. All equity instruments are measured at fair value. A debt instrument is at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise, it is at fair value through profit or loss. An update to IFRS 9 includes guidance on financial liabilities and derecognition of financial instruments.

SECOND QUARTER REPORT 2014

6

North American Palladium Ltd.

In November 2013, the IASB issued a new general hedge accounting standard, which forms part of IFRS 9 Financial Instruments (2013). The new standard includes a new general hedge accounting standard which will align hedge accounting more closely with risk management. This standard does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness, however it will provide more hedging strategies that are used for risk management to qualify for hedge accounting and introduce more judgment to assess the effectiveness of a hedging relationship. A tentative mandatory effective date of January 1, 2018 has been selected and the date is still subject to confirmation and enactment. Early adoption is permitted. The Company is presently evaluating the impact of adopting this standard.

4. DISCONTINUED OPERATIONS

On March 22, 2013, the Company divested of its interest in its gold division through the disposal of all of the shares of its wholly-owned subsidiary, NAP Quebec. As a result, the Company has presented the condensed interim consolidated financial statements to segregate the gold division as discontinued operations from those balances relating to the Company’s continuing operations for the period to March 22, 2013.

5. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following:

	At June 30		At December 31
	2014		2013
Accounts receivable	$	55,477	$	38,364
Unrealized gain on financial contracts1		—		192
Accounts receivable	$	55,477	$	38,556

¹  As at June 30, 2014, a total of 47,500 ounces of past palladium production delivered and sold to a smelter, was priced using forward prices for the month of final settlement at an average price of $870 per ounce of palladium (December 31, 2013 – 31,000 ounces of past palladium production at an average price of $768 per ounce). Refer to note 10.

Accounts receivable represents the value of all platinum group metals (“PGMs”), gold and certain base metals contained in LDI’s concentrate shipped for smelting and refining, using the June 30, 2014 forward metal prices and foreign exchange rates applicable for the month of final settlement, and for which significant risks and rewards have transferred to third parties.

All of the accounts receivable are due from two customers at June 30, 2014 (December 31, 2013 – two customers). A reserve for doubtful accounts has not been established, as in the opinion of management, the amount due will be fully collected. The Company is not economically dependent on its customers, refer to note 16.

First priority security on accounts receivable and inventories of concentrate, crushed and broken ore and second priority security on the fixed assets have been pledged as security against a credit facility with a Canadian chartered bank, which matures July 4, 2014 (see note 21), and which is to be used for working capital liquidity and general corporate purposes. The maximum that can be utilized under the facility is the lesser of US$60 million and an amount determined by a borrowing base calculation. The credit facility contains certain financial covenants, as defined in the agreement, including senior debt to earnings before interest, taxes, depreciation and amortization ratios, which are effective in the fourth quarter of 2014, and adjusted current ratio requirements, minimum tangible net worth requirements and capital expenditure limits which became effective June 7, 2013 which, if not met, would result in an event of default. The loan also includes certain other covenants, including material adverse change provisions and cross-default provisions with the senior secured term loan. Certain events of default result in the credit facility becoming immediately due, while other events of default entitle the lender to demand repayment. As of June 30, 2014, the Company was in compliance with the covenants.

SECOND QUARTER REPORT 2014

7

North American Palladium Ltd.

Under the credit facility, as of June 30, 2014, the Company utilized US$14.4 million ($15.4 million) for letters of credit, primarily for reclamation deposits and has drawn down US$22.7 million ($24.3 million). During the three and six months ended June 30, 2014, net US$5.5 million ($6.1 million) was drawn down.

Subsequent to June 30, 2014 the credit facility was renewed. See note 21.

6. INVENTORIES

Inventories consist of the following:

	At June 30 2014		At December 31 2013
Supplies1	$	10,496	$	10,320
Concentrate inventory1		3,814		2,157
Crushed and broken ore stockpiles1,2		1,620		1,762
Total	$	15,930	$	14,239

¹  This portion of inventories has been pledged as security on the Company’s credit facility. Refer to note 5.

²  Crushed and broken ore stockpiles represent coarse ore that has been extracted from the mine and is available for further processing.

All inventory amounts are carried at cost as at June 30, 2014.

7. OTHER ASSETS

Other assets consist of the following:

	At June 30 2014		At December 31 2013
Prepaids	$	962	$	1,488
HST receivable		191		4,420
Investments1		90		150
Other		484		910
	$	1,727	$	6,968

¹  On March 22, 2013, the Company sold its investment in NAP Quebec. A portion of the proceeds on the sale was equity-settled by the purchaser. Any gain or loss in the value of the investments is recognized in the consolidated statements of operations and comprehensive loss. The fair value of the investments at initial recognition was $1.4 million and was $0.1 million at June 30, 2014 (December 31, 2013 – $0.2 million).

8. MINING INTERESTS

Mining interests are comprised of the following:

	Plant and equipment		Underground mine development1		Equipment under finance lease		Mining leases and claims, royalty interest, and development		Total
Carrying amounts
As at December 31, 2013	$	56,181	$	377,749	$	11,559	$	10,750	$	456,239
As at June 30, 2014	$	57,969	$	365,955	$	10,657	$	11,013	$	445,594

¹  No interest was capitalized to mining interests for the three and six month periods ended June 30, 2014. For the year ended December 31, 2013, $19.6 million of interest costs on long-term debt was capitalized to mining interests.

SECOND QUARTER REPORT 2014

8

North American Palladium Ltd.

Depreciation and amortization

As a result of the finalization of the technical report for the LDI mine, which was released on March 31, 2014, the Company has revised its estimate of in-situ ounces of palladium used as the denominator for amortization of certain of its assets under the unit-of-production method. The revised estimate was based on the inclusion of proven and probable reserves and measured resources expected to be converted to reserves based on prior conversion rates. This change in estimate has been prospectively applied for all depreciation and amortization calculations for March 2014 onward.

Asset restrictions and contractual commitments

The Company’s assets are subject to certain restrictions on title and property, plant and equipment. Certain assets are pledged as security for credit agreement arrangements and senior secured lenders. See notes 5 and 12.

9. ASSET RETIREMENT OBLIGATIONS AND RECLAMATION DEPOSITS

At June 30, 2014, the changes in asset retirement and the related mine restoration deposit are as follows:

Asset retirement obligation (“ARO”), beginning of period – continuing operations	$	13,638
Change in discount rate and estimated closure costs		1,369
Accretion expense		188
Asset retirement obligation, end of period – continuing operations	$	15,195

Property	Expected timing of cash flows		Asset retirement obligation		Mine closure plan requirement		Letter of credit outstanding		Undiscounted asset retirement obligation
Continuing Operations:
LDI mine1		2023	$	15,195	$	14,224	$	14,055	$	18,564

¹  Including a letter of credit for Shebandowan West project, the total ARO-related letters of credit outstanding are $14.4 million.

The key assumptions applied for determination of the ARO obligation are as follows as at:

	At June 30 2014			At December 31 2013
Continuing Operations:
Inflation		2.00	%		2.00	%
Market risk		5.00	%		5.00	%
Discount rate		2.16	%		2.75	%

The asset retirement obligation may change materially based on future changes in operations, costs of reclamation and closure activities, and regulatory requirements.

SECOND QUARTER REPORT 2014

9

North American Palladium Ltd.

10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities are comprised of:

	At June 30 2014		At December 31 2013
Accounts payable and accrued liabilities	$	18,638	$	48,797
Unrealized loss on financial contracts1		1,449		—
Accounts payable and accrued liabilities	$	20,087	$	48,797

¹  As at June 30, 2014, a total of 47,500 ounces of past palladium production that had been delivered and sold to a smelter, was priced using forward prices for the month of final settlement at an average price of $870 per ounce (December 31, 2013 – 31,000 ounces at an average price of $768 per ounce). An unrealized loss of $1.4 million has been recorded in accounts payable and accrued liabilities at June 30, 2014 (December 31, 2013 – unrealized gain of $0.2 million was recorded in accounts receivable). Refer to notes 5 and 14.

11. LEASES

At the respective reporting dates, the Company was party to the following lease arrangements:

FINANCE LEASES (OBLIGATIONS UNDER FINANCE LEASES)

The Company leases production equipment under a number of finance lease agreements. Some leases provide the Company with the option to purchase the equipment at a beneficial price. The leased equipment secures the lease obligations. The net carrying amount of leased plant and equipment at each reporting date is summarized in Note 8 under the category of equipment under finance leases.

The following is a schedule of future minimum lease payments under finance leases together with the present value of the net minimum lease payments at each reporting date:

	June 30, 2014						December 31, 2013
	Future minimum lease payments		Interest		Present value of minimum lease payments		Future minimum lease payments		Interest		Present value of minimum lease payments
Less than one year	$	3,398	$	474	$	2,924	$	3,542	$	554	$	2,988
Between one and five years		7,842		456		7,386		9,418		674		8,744
	$	11,240	$	930	$	10,310	$	12,960	$	1,228	$	11,732
Less current portion						2,924						2,988
					$	7,386					$	8,744

OPERATING LEASES

The following schedule provides the future minimum lease payments under non-cancellable operating leases outstanding at each of the reporting dates:

	At June 30 2014		At December 31 2013
Less than one year	$	1,725	$	1,892
Between one and five years		1,991		2,545
More than five years		—		11
	$	3,716	$	4,448

SECOND QUARTER REPORT 2014

10

North American Palladium Ltd.

The total minimum lease payments recognized in expense during each of the stated three and six month end periods ending are as follows:

	Three months ended June 30				Six months ended June 30
	2014		2013		2014		2013
Minimum lease payments expensed	$	988	$	904	$	1,850	$	1,130

12. LONG-TERM DEBT

Long-term debt is comprised of the following as at each reporting date:

	At June 30 2014		At December 31 2013
Senior secured term loan	$	196,983	$	173,656
Convertible debentures (2012)		36,650		35,864
Convertible debentures (2014 – Tranche 1)		2,015		—
Convertible debentures (2014 – Tranche 2)		3,135		—
	$	238,783	$	209,520
Less current portion1		32,687		173,656
	$	206,096	$	35,864

¹  Subsequent to December 31, 2013, following receipt of waivers from the Company’s senior secured term lender for covenant violations disclosed in the Company’s financial statements for the year ended December 31, 2013, the current portion was reclassified as non-current.

Senior secured term loan

On June 7, 2013, the Company closed a US$130 million senior secured term loan financing with Brookfield Capital Partners Ltd. (“Brookfield”) which bore interest at 15% per annum and is due June 7, 2017. The loan is secured by first priority security on the fixed assets and second priority security on accounts receivable and inventory. NAP has the option to accrue interest during the first two years of the loan; in which case, the interest rate on the loan and accrued interest would increase by 4%. The loan contains covenants, as defined in the agreement, including senior debt to earnings before interest, taxes, depreciation and amortization ratios, which are effective in the fourth quarter of 2014, and minimum tangible net worth requirements and capital expenditure limits which became effective June 7, 2013 which, if not met, would result in an event of default.

At closing, the Company exercised an option to defer a commitment fee of US$3.9 million for a period of up to two years. As a result, the balance of the commitment fee was added to the principal outstanding with interest on the outstanding fee compounding monthly until repaid.

In addition to the term loan and the commitment fee included in the principal, the loan agreement also included provision for the payment of an exit fee equal to 5% of term loan principal settlements at the time of repayment.

On November 29, 2013, the Company amended its senior secured term loan resulting in an additional advance of US$21.4 million of cash. The cash received consisted of an additional US$15.0 million added to the existing facility and a refund of US$6.4 million of cash interest previously paid to Brookfield.

Pursuant to the amendment, the interest rate was recalculated as if NAP had elected to accrue interest on the loan from the date of the original closing on June 7, 2013, resulting in a 4% increase of the interest rate from 15% to 19% until the Company voluntarily reverts to cash interest payments. After the Company voluntarily reverts to cash interest payments, and upon payment of interest and fees which have been deferred, the interest rate returns to 15% per annum on the principal amount outstanding. The exit fee contained in the original loan was replaced by an amendment fee and all interest accrued up to and including June 30, 2014 has been capitalized to principal along with the amendment and commitment fees. Prepayment of any principal (including capitalized interest and fees) is subject to a prepayment fee

SECOND QUARTER REPORT 2014

11

North American Palladium Ltd.

and voluntary prepayment conditions. In addition to the breaches of the financial covenants, the loan also includes certain other events of default, including material adverse changes, limits on liens, additional debt, payments and cross-default provisions. Certain events of default result in the loan becoming immediately due, together with the prepayment fee and penalty interest of 5% above the applicable rate while unpaid, and other events of default entitle the lender to demand repayment of the loan together with the prepayment fee and penalty interest.

The amendment resulted in an increase of the US$133.9 million principal of the loan at November 29, 2013 for capitalized interest of US$12.7 million, an additional loan of US$15.0 million, and amendment fee of US$8.1 million for a total revised principal of US$169.7 million. In the year ended December 31, 2013, capitalized borrowing costs, due to the change in estimated timing of cash flows, were increased by $9.0 million.

The loan is measured at amortized cost. Interest on the loan was originally recorded at an effective interest rate of 16.7%. As a result of the amendment to the term loan agreement, the amended effective interest rate was adjusted to 18.0%.

The loan amendment also included modifications to the covenants.

Effective June 30, 2014, the loan was further amended to reduce the interest rate to 15% effective July 1, 2014. As part of the amendment, a payment of US$23.4 million, consisting of US$16.2 million previously accrued interest and US$7.2 million of associated pre-payment fees, was made on July 3, 2014, and accrued and unpaid interest of US$16.2 million was capitalized to the loan. See note 21.

At June 30, 2014, the principal outstanding has been adjusted to reflect the accrual of the associated pre-payment fee. The change of interest rate reduced expected future cash flows.

Senior secured notes

During the fourth quarter of 2011, the Company issued $72.0 million of senior secured notes by way of a private placement for net proceeds of $69.6 million. The notes, which were due to mature on October 4, 2014, with a one year extension at the option of the Company, were issued in $1,000 denominations and bore interest at a rate of 9.25% per year, payable semi-annually, with 1 palladium warrant attached for each $1,000 note.

On June 7, 2013, the debt component of the senior secured notes was fully repaid using the proceeds from the senior secured term loan. The total payment amounted to $80.5 million and included settlement of the principal outstanding of $72.0 million, accrued interest of $1.3 million, and a redemption premium of $7.2 million. The repayment resulted in the recognition of a loss on extinguishment of $11.0 million.

The palladium warrants originally issued with the senior secured notes were not settled. A total of 72,000 palladium warrants were issued which entitle the holders to purchase 0.35 ounces of palladium at a purchase price of US$620 per ounce (the “Strike Price”), anytime up to October 4, 2014. If exercised, the Company will pay the warrant holder an amount equal to the average of the U.S dollar palladium afternoon fixing price per ounce on the London Platinum and Palladium Market for the ten trading days prior to the exercise date less the Strike Price, multiplied by 0.35. The Company has the option, subject to certain conditions, to pay the amount owing in common shares priced at a 7% discount to the volume weighted average price on the Toronto Stock Exchange for the five trading days prior to the date of exercise.

During June 2013, a total of 13,000 palladium warrants were exercised, resulting in a settlement payable of $0.6 million. The Company elected to apply the equity-settlement option, resulting in the issuance of 574,738 common shares. In July 2013, an additional 47,000 palladium warrants were exercised resulting in a $1.7 million cash settlement.

The derivatives relating to the outstanding palladium warrants are recorded at fair value through profit or loss at each reporting date. At June 30, 2014 and December 31, 2013, the 12,000 outstanding palladium warrants and related options were valued using a binomial model which included the following key assumptions:

SECOND QUARTER REPORT 2014

12

North American Palladium Ltd.

	June 30 2014			December 31 2013
Market price of palladium	$	844		$	711
Strike price	$	620		$	620
Volatility1		16	%		21	%
Risk free rate		1.10	%		1.13	%
Expected life (in years)		0.26			0.76

¹  Expected volatility is estimated by considering historic average palladium price volatility based on the remaining life of the warrants.

The value of the derivative liability is $1.0 million at June 30, 2014 ($0.5 million – December 31, 2013).

Convertible Debentures (2012)

On July 31, 2012, the Company completed an offering of 43,000 convertible unsecured subordinated debentures of the Company at a price of $1,000 per debenture, for total gross proceeds of $43.0 million ($40.8 million net proceeds). The debentures mature on September 30, 2017 and bear interest at a rate of 6.15% per year, payable semi-annually. At the option of the holder, the debentures may be converted into common shares of the Company at any time prior to maturity at a conversion price of $2.90 per common share.

The convertible debentures are compound financial instruments, consisting of the debt instrument and the equity conversion feature. The debt instrument was valued at amortized cost using the effective interest rate method at a discount rate of 10.5%. The excess of the proceeds of $43.0 million over the value assigned to the debt instrument was allocated as the fair value of the equity component of the convertible debentures. Transaction costs were netted against the debt instrument and equity component based on the pro-rata allocation of the fair value of each instrument at initial recognition.

Of the net proceeds of $40.8 million, $33.9 million has been allocated to long-term debt, and the remaining portion of $6.9 million has been allocated to the equity component of the convertible debentures at the time of issuance.

Convertible Debentures (2014 – Tranche 1)

On January 31, 2014 and February 10, 2014, the Company closed a public offering with the aggregate sale of $32.0 million gross principal amount of convertible unsecured subordinated debentures (the “2014 Tranche 1 Debentures”) of the Company at a price of $1,000 per Debenture, including approximately 16.8 million common share purchase warrants (the “2014 Tranche 1 Warrants”). This offering represented the first tranche of the offering. Net proceeds received were $28.5 million. The conversion price of the 2014 Tranche 1 Debentures is $0.635, and the original exercise price of the 2014 Tranche 1 Warrants was $0.762. As a result of the completion of the second tranche offering, the anti-dilution clause within the 2014 Tranche 1 Debentures agreements resulted in an adjustment of the original exercise price for the 2014 Tranche 1 Warrants to $0.5786.

The 2014 Tranche 1 Debentures will mature on January 31, 2019, unless redeemed or converted earlier, or unless extended, and will bear interest at an annual rate of 7.5% payable semi-annually in arrears on January 31 and July 31 of each year, commencing July 31, 2014. The first interest payment on the 2014 Tranche 1 Debentures will include accrued and unpaid interest for the period from and including January 31, 2014 to, but excluding, July 31, 2014. Holders may convert their 2014 Tranche 1 Debentures into common shares of the Company at any time at a conversion rate of approximately 1,575 Common Shares per $1,000 principal amount of 2014 Tranche 1 Debentures, representing 50.4 million common shares of the Company. Holders converting their debentures will receive all accrued and unpaid interest, as well as interest that would have been paid if the 2014 Tranche 1 Debentures were held through to maturity (the “Make Whole Amount”). At the Company’s option, interest and Make Whole Amounts can be paid in common shares.

Each 2014 Tranche 1 Warrant entitles the holder thereof to purchase one common share of the Company at any time before March 28, 2017.

SECOND QUARTER REPORT 2014

13

North American Palladium Ltd.

Due to the existence of multiple derivatives embedded within the contract, the Company has elected to account for the 2014 Tranche 1 Debentures and all related derivatives as one instrument at fair value through profit or loss, with future changes in fair value being recognized as derivative gains or losses through profit or loss. The 2014 Tranche 1 Warrants are also accounted for at fair value through profit or loss. As a result of this election, transaction costs of $3.5 million were expensed in the period as financing costs.

The initial fair value of the 2014 Tranche 1 debt of $28.4 million was determined based on the publicly traded market price of the 2014 Tranche 1 Debentures, while the fair value of the 2014 Tranche 1 Warrants approved on March 28, 2014 was assigned a value of $3.6 million using the Black-Scholes model.

At June 30, 2014, 2014 Tranche 1 Debentures with an initial face value of $31.7 million, including accrued interest and make-whole provisions, had been converted into 76,407,816 common shares of NAP. Debentures with an initial face value of $0.3 million were outstanding at June 30, 2014. All warrants issued were also outstanding at June 30, 2014. The fair value of the remaining debentures outstanding and the outstanding warrants as at June 30, 2014 is $0.4 million and $1.6 million, respectively, and these amount are recorded in the statement of financial position in long term debt and current portion of long term debt, respectively. The changes in fair value from the transaction date to June 30, 2014 are included in interest and other income in the statement of comprehensive loss (refer to note 17).

The following assumptions were applied for the Black-Scholes valuations of the outstanding 2014 Tranche 1 Warrants at initial recognition and the current reporting date:

	June 30, 2014			January 31, 2014
Market price common shares of NAP (PDL)	$	0.30		$	0.53
Strike price		0.58		$	0.76
Volatility1		78	%		75	%
Risk free rate		1.15	%		1.14	%
Expected life (in years)		2.75			3.00

¹  Expected volatility is estimated by considering historic average daily price volatility of the common shares of the Company based on the remaining life of the warrants.

Convertible Debentures (2014 – Tranche 2)

On April 11, 2014 and April 17, 2014, the Company closed a public offering with the aggregate sale of $35.0 million gross principal amount of convertible unsecured subordinated debentures (the “2014 Tranche 2 Debentures”) of the Company at a price of $1,000 per Debenture, including approximately 18.9 million common share purchase warrants (the “2014 Tranche 2 Warrants”). This offering represented the second tranche of the offering. Net proceeds received were $33.0 million. The conversion price of the 2014 Tranche 2 Debentures is $0.4629, and the exercise price of the 2014 Tranche 2 Warrants is $0.5786.

The 2014 Tranche 2 Debentures will mature on April 11, 2019, unless redeemed or converted earlier, or unless extended, and will bear interest at an annual rate of 7.5% payable semi-annually in arrears on March 31 and September 30 of each year, commencing September 30, 2014. The first interest payment on the 2014 Tranche 2 Debentures will include accrued and unpaid interest for the period from and including April 11, 2014 to, but excluding, September 30, 2014. Holders may convert their 2014 Tranche 2 Debentures into common shares of NAP at any time at a conversion rate of approximately 2,160 Common Shares per $1,000 principal amount of Debentures. Holders converting their debentures will receive all accrued and unpaid interest, as well as interest that would have been paid if the 2014 Tranche 2 Debentures were held through to maturity (the “Make Whole Amount”). At the Company’s option, interest and Make-Whole Amounts can be paid in common shares.

SECOND QUARTER REPORT 2014

14

North American Palladium Ltd.

Each 2014 Tranche 2 Warrant will entitle the holders thereof to purchase one common share of the Company at any time before the second anniversary of the date of issue.

Due to the existence of multiple derivatives embedded within the contract, the Company has elected to account for the 2014 Tranche 2 Debentures and all related derivatives as one instrument at fair value through profit or loss, with future changes in fair value being recognized as derivative gains or losses through profit or loss. The 2014 Tranche 2 Warrants are also accounted for at fair value through profit or loss. As a result of this election, transaction costs of $2.0 million were expensed in the period as financing costs.

The initial fair value of the 2014 Tranche 2 Debentures of $33.1 million was determined using a FinCAD pricing model, while the value of the related 2014 Tranche 2 Warrants of $1.9 million was calculated using the Black-Scholes model.

At June 30, 2014, 2014 Tranche 2 Debentures with an initial face value of $33.3 million, including accrued interest and make-whole provisions, had been converted into 108,260,201 common shares of NAP. Debentures with an initial face value of $1.7 million were outstanding at June 30, 2014. All warrants issued were also outstanding at June 30, 2014. The fair value of the remaining debentures outstanding and the outstanding warrants as at June 30, 2014 is $1.7 million and $1.4 million, respectively, and these amount are recorded in the statement of financial position in long term debt and current portion of long term debt, respectively. The changes in fair value from the transaction date to June 30, 2014 are included in interest and other income in the statement of comprehensive loss (refer to note 17).

The following assumptions were applied for the valuations of the outstanding 2014 Tranche 2 Debentures and Warrants at initial recognition and the current reporting date:

Debentures	June 30, 2014			April 11, 2014
Market price common shares of NAP (PDL)	$	0.30		$	0.34
Strike price	$	0.46		$	0.46
Risk free rate		1.53	%		1.64	%
Expected life (in years)		4.80			5.00

Warrants	June 30, 2014			April 11, 2014
Market price common shares of NAP (PDL)	$	0.30		$	0.34
Strike price	$	0.58		$	0.58
Volatility1		85	%		81	%
Risk free rate		1.10	%		1.04	%
Expected life (in years)		1.80			2.00

¹  Expected volatility is estimated by considering historic average daily price volatility of the common shares of the Company based on the remaining life of the warrants.

SECOND QUARTER REPORT 2014

15

North American Palladium Ltd.

13. SHAREHOLDERS’ EQUITY

a) Authorized and Issued Capital Stock

The authorized capital stock of the Company consists of an unlimited number of common shares.

b) Group Registered Retirement Savings Plan

The Company has a group registered retirement savings plan, in which eligible employees can participate in at their option. Union employees are entitled to an employer contribution of either: (a) $1.00 for each $1.00 contribution up to a maximum of 5% of base salary for employees who have been employed for 6-18 months (maximum $2,500 per year); or (b) $2.00 for each $1.00 contribution up to a maximum of 10% of base salary for employees who have been employed for greater than 18 months (maximum $5,000 per year). Non-union employees are entitled to an employer contribution equal to 3% of base salary plus an employer matching contribution of up to a maximum of 2% of base salary for employees who have been employed for greater than 90 days. The Company contributions are made either in cash or treasury shares of the Company on a quarterly basis. If the matching contribution is made in treasury shares, the price per share issued is the 5-day volume weighted average trading price of the common shares on the Toronto Stock Exchange (“TSX”) preceding the end of the quarter. During the three months ended June 30, 2014, the Company contributed 753,799 shares with a fair value of $0.4 million (2013 – 282,626 shares with a fair value of $0.4 million), and for the six months ended June 30, 2014, 1,228,208 shares with a fair value of $0.7 million (2013 – 527,977 shares with a fair value of $0.7 million), which was equal to the market value of the shares on the contribution date.

c) Corporate Stock Option Plan

The Company has a Corporate Stock Option Plan (the “Plan”), under which eligible directors, officers, employees and consultants of the Company may receive options to acquire common shares. The Plan is administered by the Board of Directors, which will determine after considering recommendations made by the Compensation Committee, the number of options to be issued, the exercise price (which is the 5-day volume weighted average trading price of the common shares on the TSX on the trading day prior to the grant date), expiration dates of each option, the extent to which each option is exercisable (provided that the term of an option shall not exceed 10 years from the date of grant), as well as establishing the time period when an optionee ceases to be an “Eligible Person” as set forth in the conditions of the Plan. One third of options granted vest on each of the first three anniversary dates of the date of grant.

The maximum number of common shares issuable under the Plan, and all other share-based compensation arrangements of the Company, shall not exceed 3.49% of the issued and outstanding shares of the Company. As at June 30, 2014, 1,510,742 options granted under the Plan were subject to the cap, which represents 0.39% of the issued and outstanding shares of the Company. As at December 31, 2013, 6,240,779 options were available to be granted under the Plan.

The following summary sets out the activity in outstanding common share purchase options:

	June 30, 2014					December 31, 2013
	Options			Weighted Average Exercise Price		Options			Weighted Average Exercise Price
Outstanding, beginning of period		3,359,221		$	1.91		4,207,249		$	3.68
Granted		145,000		$	0.30		2,473,387		$	1.07
Cancelled/forfeited		(358,479	)	$	2.51		(3,286,665	)	$	3.53
Expired		(35,000	)	$	8.40		(34,750	)	$	3.86
Outstanding, end of period		3,110,742		$	1.68		3,359,221		$	1.91
Options exercisable at end of period		1,017,502		$	2.99		822,508		$	4.05

SECOND QUARTER REPORT 2014

16

North American Palladium Ltd.

The following table summarizes information about the Company’s stock options outstanding at June 30, 2014:

Exercise price range	Average remaining contractual life (years)		Options Outstanding at June 30, 2014		Options Exercisable at June 30, 2014
$0.30-2.50		5.81		2,383,243		333,334
$2.51-3.00		2.59		130,000		86,669
$3.01-6.00		3.47		454,999		454,999
$6.01-8.87		1.78		142,500		142,500
		5.15		3,110,742		1,017,502

The fair value of options granted during the six months ended June 30, 2014 and the year ended December 31, 2013 have been estimated at the date of grant using the Black Scholes option pricing model with the following weighted average assumptions:

	June 30 2014			December 31 2013
Awards granted		145,000			2,473,387
Weighted average fair value of awards	$	0.15		$	0.55
Pre-vest forfeiture rate		29	%		25	%
Grant price	$	0.30		$	1.07
Market price	$	0.28		$	1.07
Volatility1		75	%		64	%
Risk free rate		1.43	%		1.51	%
Dividend yield		0	%		0	%
Expected life (in years)		4.2			4.3

¹  Expected volatility is estimated by considering historic average share price volatility based on the average expected life of the options.

(d) Reconciliation of the diluted number of shares outstanding:

	Three months ended June 30						Six months ended June 30
	2014			2013			2014			2013
Net loss available to common shareholders	$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(29,116	)
Effect of dilutive securities		—			(2,146	)		—			(1,197	)
Adjusted net loss available to common shareholders	$	(9,957	)	$	(28,414	)	$	(36,623	)	$	(30,313	)
Weighted average number of shares outstanding		349,555,798			179,520,041			291,537,189			178,491,155
Effect of dilutive securities		—			113,470			—			110,463
Weighted average diluted number of shares outstanding		349,555,798			179,633,511			291,537,189			178,601,618
Diluted net loss per share	$	(0.03	)	$	(0.16	)	$	(0.13	)	$	(0.17	)

For the three and six month periods ended June 30, 2014, the dilutive effects of the palladium warrants, convertible debentures, warrants and stock options have not been included in the determination of diluted loss per share because to do so would be anti-dilutive.

SECOND QUARTER REPORT 2014

17

North American Palladium Ltd.

(e) Other Stock-Based Compensation – Restricted Share Unit Plan

The Company has a Restricted Share Unit (“RSU”) Plan under which eligible directors, officers and key employees of the Company are entitled to receive awards of RSUs. Each RSU is equivalent in value to the fair market value of a common share of the Company on the date of the award and a corresponding liability is established on the balance sheet. The RSU Plan is administered by the Board of Directors, which will determine after considering recommendations made by the Compensation Committee, the number and timing of RSUs to be awarded and their vesting periods, not to exceed three years. The value of each award is charged to compensation expense over the period of vesting. At each reporting date, the compensation expense and liability are adjusted to reflect the changes in market value of the liability based on the fair values of RSU’s for each vesting period determined using the Black-Scholes model.

As at June 30, 2014, 704,198 (December 31, 2013 – 708,609) restricted share units had been granted and were outstanding at an aggregate value of $0.2 million (December 31, 2013 – $0.5 million).

(f) Summary of Share-based compensation and employee benefits

The following table details the components of share-based compensation expense relating to continuing operations:

	Three months ended June 30						Six months ended June 30
	2014			2013			2014			2013
Registered retirement savings plan	$	415		$	410		$	743		$	676
Common share stock options		132			(352	)		280			(205	)
Restricted share units		(177	)		(64	)		(166	)		161
	$	370		$	(6	)	$	857		$	632

The maximum number of common shares issuable under all other share-based compensation arrangements of the Company shall not exceed 3.49% of the Company’s issued and outstanding shares. As at June 30, 2014, the number of shares issued or issuable pursuant to awards made under all share-based compensation plans of the Company, which were subject to the maximum, represents 0.58% of the Company’s total issued and outstanding common shares.

14. FINANCIAL INSTRUMENTS

Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’s liquidity may be adversely affected by operating performance, a downturn in capital market conditions impacting access to capital markets, or entity-specific conditions. The Company manages liquidity risk by maintaining adequate cash and cash equivalent balances, by having adequate available credit facilities, by preparing and monitoring detailed budgets and cash flow forecasts for mining, exploration and corporate activities, and by monitoring developments in the capital markets. Forecasting takes into account the Company’s debt financing, covenant compliance and the maturity profile of financial assets and liabilities and purchase obligations.

The table below analyzes the Company’s financial liabilities which will be settled into relevant maturity groupings based on the remaining balances at June 30, 2014 to the contractual maturity date.

	Total		In less than 1 year		Between 1 year and 5 years		More than 5 years
Accounts payable and accrued liabilities	$	20,087	$	20,087	$	—	$	—
Credit facility		24,296		24,296		—		—
Obligations under finance leases		10,310		2,924		7,386		—
Current derivative liability		1,012		1,012		—		—
Long-term debt		238,783		32,687		206,096		—

SECOND QUARTER REPORT 2014

18

North American Palladium Ltd.

The Company also has asset retirement obligations in the amount of $15.2 million that would become payable at the time of the closures of its LDI mine. As the Company issued letters of credit of $14.1 million related to these obligations, $1.1 million additional funding is required prior to or upon closure of these properties. Refer to note 9 for additional disclosure regarding these amounts. The majority of the asset retirement costs are expected to be incurred within one year of mine closure.

Refer also to note 15 and 21.

Fair Values

The Company’s financial assets and liabilities consist of cash and cash equivalents, accounts receivable, sales taxes receivable (included in other assets), accounts payable and accrued liabilities, credit facility, current derivative liabilities, obligations under finance leases and long-term debt.

Cash and cash equivalents and accounts receivable are stated at fair value. The carrying value of other assets and trade accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term maturity of these financial instruments.

Derivatives

The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.

Fair values reflect the credit risk of the instrument and include adjustments to take into account the credit risk of the Company entity and counterparty when appropriate.

The Company enters into financial contracts to mitigate the smelter agreements’ provisional pricing exposure to rising or declining palladium prices and an appreciating Canadian dollar for past production already sold. For substantially all of the palladium delivered to customers under smelter agreements, the quantities and timing of settlement specified in the financial contracts matches final pricing settlement periods. The palladium financial contracts are being recognized on a mark-to-market basis as an adjustment to revenue.

The derivative liability relating to the palladium warrants issued in connection with the 2011 senior secured note issuance are measured at fair value using a binomial model.

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements.

The fair values of the non-derivative financial liabilities as of June 30, 2014 are the senior secured term loan ($209.9 million), 2012 convertible debentures ($43.0 million) and finance leases ($10.3 million).

SECOND QUARTER REPORT 2014

19

North American Palladium Ltd.

Fair Value Hierarchy

The table below details the assets and liabilities measured at fair value at June 30, 2014:

	Notes		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Aggregate Fair Value
Financial assets
Cash and cash equivalents			$	44,305		$	—		$	—	$	44,305
Investments		7		90								90
Accounts receivable		5					55,477					55,477
Financial liabilities
Fair value of financial contracts*		10					(1,449	)				(1,449	)
Fair value of current derivative liability		12					(1,012	)				(1,012	)
Fair value of convertible debentures		12		(391	)		(4,759	)				(5,150	)
Net carrying value			$	44,004		$	48,257		$	—	$	92,261

* As detailed in note 10, the liability relating to the mark-to-market on financial contracts is included in the carrying value of accounts payable on the balance sheet at June 30, 2014.

15. COMMITMENTS

(a) Sheridan Platinum Group of Companies (“SPG”) Commitment

The Company is required to pay a 5% net smelter royalty to SPG from mining operations at the Lac des Iles mine. This obligation is recorded as royalty expense.

(b) Operating Leases and Other Purchase Obligations

As at June 30, 2014, the Company had outstanding operating lease commitments and other purchase obligations of $3.7 million and $10.4 million, respectively (December 31, 2013 – $4.4 million and $1.0 million, respectively) the majority of which had maturities of less than five years (see note 11).

(c) Letters of Credit

As at June 30, 2014 and December 31, 2013, the Company had outstanding letters of credit of $15.4 million, consisting of $14.4 million for various mine closure deposits and $1.0 million for a regulated energy supplier.

SECOND QUARTER REPORT 2014

20

North American Palladium Ltd.

16. REVENUE FROM METAL SALES

	Total			Palladium			Platinum			Gold			Nickel			Copper			Other Metals
2014
Three months ended June 30
Revenue – before pricing adjustments	$	50,358		$	36,670		$	4,425		$	3,651		$	3,381		$	2,184		$	47
Pricing adjustments:
Commodities		1,189			217			294			192			354			126			6
Foreign exchange		(1,050	)		(493	)		(234	)		(132	)		(109	)		(81	)		(1	)
Revenue – after pricing adjustments	$	50,497		$	36,394		$	4,485		$	3,711		$	3,626		$	2,229		$	52
2013
Three months ended June 30
Revenue – before pricing adjustments	$	36,581		$	23,793		$	3,835		$	3,756		$	2,712		$	2,409		$	76
Pricing adjustments:
Commodities		(4,406	)		(2,226	)		(858	)		(788	)		(374	)		(157	)		(3	)
Foreign exchange		1,038			504			193			164			95			81			1
Revenue – after pricing adjustments	$	33,213		$	22,071		$	3,170		$	3,132		$	2,433		$	2,333		$	74

	Total			Palladium			Platinum			Gold			Nickel			Copper			Other Metals
2014
Six months ended June 30
Revenue – before pricing adjustments	$	96,498		$	68,971		$	8,787		$	7,614		$	6,173		$	4,860		$	93
Pricing adjustments:
Commodities		3,875			2,698			472			318			499			(117	)		5
Foreign exchange		(1,140	)		(1,177	)		3			13			(16	)		35			2
Revenue – after pricing adjustments	$	99,233		$	70,492		$	9,262		$	7,945		$	6,656		$	4,778		$	100
2013
Six months ended June 30
Revenue – before pricing adjustments	$	82,131		$	53,921		$	8,569		$	8,748		$	5,799		$	4,973		$	121
Pricing adjustments:
Commodities		(3,036	)		(953	)		(620	)		(817	)		(402	)		(241	)		(3	)
Foreign exchange		1,208			317			363			270			130			127			1
Revenue – after pricing adjustments	$	80,303		$	53,285		$	8,312		$	8,201		$	5,527		$	4,859		$	119

During 2014, the Company delivered all of its concentrate to two customers under the terms of the respective agreements (2013 – two customers).

Although the Company sells its bulk concentrate to a limited number of customers, it is not economically dependent upon any one customer as there are other markets throughout the world for the Company’s concentrate.

SECOND QUARTER REPORT 2014

21

North American Palladium Ltd.

17. INTEREST EXPENSE & OTHER COSTS AND OTHER INCOME

	Three months ended June 30						Six months ended June 30
	2014			2013			2014			2013
Interest expense and other costs
Interest on finance leases	$	143		$	187		$	293		$	371
Asset retirement obligation accretion		94			65			188			127
Accretion expense (recovery) on long-term debt		(323	)		880			(627	)		1,772
Loss on investments		373			844			373			844
Interest expense		10,520			30			20,562			70
Increase in fair value of 2014 Tranche 1 and 2 convertible debentures, net		3,942			—			6,674			—
Realized and unrealized loss on palladium warrants		261			—			521			—
Legal settlement (note 21)		1,000			—			1,000			—
	$	16,010		$	2,006		$	28,984		$	3,184
Interest and other income
Decrease in fair value of 2014 Tranche 1 and 2 warrants, net	$	(2,659	)		—		$	(2,351	)		—
Realized and unrealized gain on palladium warrants		—			(2,147	)		—			(1,197	)
Gain on renouncement of flow-through expenditures		—			—			—			(276	)
Interest income		(28	)		(32	)		(49	)		(59	)
	$	(2,687	)	$	(2,179	)	$	(2,400	)	$	(1,532	)
	$	13,323		$	(173	)	$	26,584		$	1,652

18. CONTINGENCIES

On June 24, 2014, the Company entered into a settlement agreement, subject to court approval, related to the previously disclosed potential class action lawsuit. On June 26, 2014, the $2.4 million settlement was paid into escrow by the Company’s insurer.

Subsequent to June 30, 2014, the Company entered into an agreement to settle the B.R. Davidson litigation. See note 21.

There were no other significant changes in contingencies in the three and six month periods ended June 30, 2014. The contingencies are described in note 21 of the Company’s audited consolidated financial statements for the year ended December 31, 2013.

SECOND QUARTER REPORT 2014

22

North American Palladium Ltd.

19. OTHER DISCLOSURES

Statement of Cash flows

The net changes in non-cash working capital balances related to operations are as follows:

	Three months ended June 30						Six months ended June 30
	2014			2013			2014			2013
Cash provided by (used in):
Accounts receivable	$	(6,740	)	$	11,428		$	(16,921	)	$	7,320
Inventories		1,398			1,715			(875	)		563
Other assets		2,012			334			4,868			831
Accounts payable and accrued liabilities		(9,676	)		(10,946	)		(25,127	)		(6,999	)
Taxes payable		—			—			(1,161	)		—
Other financial liabilities		—			(2,147	)		—			(1,197	)
	$	(13,006	)	$	384		$	(39,216	)	$	518

20. SEGMENT INFORMATION

Following the sale of its discontinued gold operations on March 22, 2013 (see note 4), the Company has one reportable segment. The Company’s revenue by significant product type is disclosed in Note 16.

21. SUBSEQUENT EVENTS

B.R. Davidson claim

On July 2, 2014, the Company entered into an agreement to settle the third party action and all other claims in respect of the previously disclosed litigation involving B.R. Davidson Mining & Development Ltd. Under the terms of the settlement the Company will pay $1.0 million on or before December 1, 2014. Provision for this settlement was made in the three months ended June 30, 2014, and is recorded in interest expense and other costs.

Senior secured term loan

On July 3, 2014, the Company made a payment of US$23.4 million on its senior secured term loan, representing US$16.2 million of accrued interest and US$7.2 million of the associated pre-payment fee. Per a letter agreement with the lender, in consideration of the US$23.4 million payment and the capitalization of the remaining accrued and unpaid interest of US$16.2 million, the Company will revert to quarterly cash payments at a 15% interest rate with the first such cash interest payment on September 30, 2014. All other terms and conditions of the senior secured term loan remain unchanged.

Credit facility

On July 4, 2014, the Company renewed its credit facility, on the same terms and terms and conditions as the previous facility, to July 3, 2015.

SECOND QUARTER REPORT 2014

23

EX-3

Exhibit 3

NEWS RELEASE

North American Palladium Announces Second Quarter 2014 Results

and Provides Update on Exploration

All figures are in Canadian dollars except where noted.

Toronto, Ontario, July 30, 2014 – North American Palladium Ltd. (“NAP” or the “Company”) (TSX: PDL) (NYSE MKT: PAL) today announced the operating, development, exploration and financial results for the second quarter ended June 30, 2014 (“Q2”).

Q2, 2014 Results Summary

• Upgrades to the ore handling system were completed at the end of June and results to date in July demonstrate that more Offset Zone ore can be hoisted up the shaft as per plan. These upgrades are expected to improve the cost of operations.

• Sold 40,716 ounces of payable palladium at a cash cost per ounce⁽¹⁾ of US$510; excluding approximately 4,200 ounces of payable palladium in inventory.

• Realized palladium selling price of US$806 per ounce, giving a palladium operating margin of US$296 per ounce, or US$11.6 million. Palladium prices remain strong, with the July 29, 2014 price at US$884 per ounce.

• Revenue of $50.5 million which includes $14.1 million of by-product revenue;

• Adjusted EBITDA⁽¹⁾ of $10.4 million for the quarter and $20.2 million for the first six months of 2014.

• Underground ore mined at LDI was 263,904 tonnes at an average grade of 4.9 g/t palladium.

• Processed 243,041 tonnes of low grade surface stockpile at LDI at an average grade of 1.0 g/t palladium;

• Underground production during the quarter averaged 2,900 tonnes per day and was impacted by equipment availability and big muck in stopes, but remains on track to achieve 5,000 tonnes per day by year end.

• LDI mill processed 521,478 tonnes of ore at an average palladium head grade of 3.1 g/t palladium and a recovery rate of 83.6%. Mill recoveries for the first six months of 2014 are 84.1% and remain ahead of guidance.

• During the quarter the company announced an additional $6 million in funding for exploration at depth to support potential future mine expansion.

• Exploration drilling in the lower Offset Zone intersected a 74.0 meter interval with an average grade of 4.76 g/t palladium.

• Exploration drilling in the upper Offset Zone intersected 20.2 meters with an average grade of 7.18 g/t palladium (north Offset) and 37.0 meters with an average grade of 3.72 g/t palladium.

• Subsequent to quarter end, the Company announced the reduction of its senior secured term loan interest rate and the extension of its credit facility to July 3, 2015.

www.nap.com

“Our turn-around efforts at LDI achieved a significant milestone during the second quarter with the completion of the underground ore handling system upgrades, and increased utilization of the shaft for both ore hoisting and transportation of workers into the mine. These are critical elements in our efforts to improve underground ore production and ultimately increase payable palladium production,” said Phil du Toit, President and Chief Executive Officer. “Subsequent to the quarter end we announced a payment to Brookfield and a resumption of quarterly cash payments at the 15% interest level on our senior secured loan. The confidence we have in the ramp up and future cash flow generation capabilities of LDI allowed us to take this important step, which we expect will materially reduce our interest costs over the term of the loan.”

“Overall, we remain pleased with the operational progress we are making at LDI and are also encouraged by the continued promising results of our exploration program. Establishing a track record of consistent operations and extending the mine life at LDI are two ongoing objectives that we remain keenly focused on,” added Mr. du Toit. “The completion of the ore handling upgrades are now allowing us to hoist a majority of the Offset Zone ore, removing a production constraint,” said Jim Gallagher, Chief Operating Officer. “We have also begun partial replacements and upgrading of both the surface and underground mobile equipment fleets and continue to modify the mine design to supply better quality broken ore in more draw points. All of these items are leading to more consistent and reliable production which puts us on track to achieve our target of 5,000 tonnes per day by the end of this year.“During the quarter the Company experienced a main bearing failure at its surface crusher and appropriate repairs were made to the surface crusher to help ensure reliable production going forward.

Lac des Iles Operations

Q2 2014 Production

In the second quarter of 2014, the Company’s LDI mine produced 39,223 ounces of payable palladium at a total cash cost of US$510 per ounce⁽¹⁾. The cash cost is below our full year guidance of US$550. More payable palladium ounces sold and a favorable movement of the Canadian dollar were partially offset by increased production costs.

Payable palladium production in the second quarter was in line with management’s full year guidance for 2014 as the mine continued to balance production volumes between surface and underground ore sources during the transition period. During the second quarter, 506,945 tonnes of ore were mined at LDI, of which 263,904 tonnes came from underground sources (with an average palladium grade of 4.9 grams per tonne), and 243,041 tonnes came from surface stockpiles (with an average palladium grade of 1.0 grams per tonne). During the second quarter, the LDI mill processed 521,478 tonnes of ore at a combined average palladium mill head grade of 3.1 grams per tonne, at an 83.6% palladium recovery rate, and at a total cost of $56 per tonne milled.

The Company is encouraged by the operating results in the first six months of 2014, which have generally met or exceeded its expectations. During the first six months of 2014, upgrades to the ore handling system were completed, transportation of men and material via the shaft commenced and mill recoveries remained high; however; production has been impacted by repairs to the primary surface crusher, oversized muck and other equipment availability. The fatality at the mine site which was previously reported on July 11 2014 has impacted production for the first few weeks of July and is expected to result in lower production in the third quarter of 2014. Production is returning to normal and remediation steps are being implemented.

www.nap.com 2

The following table includes quarterly results for the first two quarters of 2014 and the last two quarters of 2013 and demonstrates some of the key trends in the business.

QUARTERLY TRENDS

	For the three months ended
	June 30 2014			March 31 2014			December 31 2013			September 30 2013
Palladium production – payable oz		39,223			42,641			30,979			30,097
US$ cash cost per palladium oz sold		US$510			US$492 (US$422	(1))		US$620			US$581
Underground mining – tonnes		263,904			275,845			231,346			208,097
Underground mining – tonnes per day		2,900			3,065			2,515			2,262
Milling – palladium head grade (g/t)		3.1			3.3			2.9			2.5
Milling – palladium recovery		83.6	%		84.5	%		81.5	%		80.7	%
Adjusted EBITDA ($000s)	$	10,444			$9,743			$1,369			$3,189

⁽¹⁾ After adjusting for the impact of approximately $2.7 million of power and propane costs associated with an unusually cold winter.

Exploration

On May 1, 2014, the Company announced a $6 million expansion to its 2014 LDI exploration budget. The revised $10 million program is principally focused on conversion and extension drilling on the lower part of the Offset Zone below the 1,065 meter mine level – the current lower limit of known proven and probable resources. Specific objectives of the lower Offset Zone drilling program are:

• Define additional, inferred resources in the hangingwall and footwall zones to a depth of 1,600 meters;

• Convert some of the existing inferred resources between depths of 1,100 to 1,300 meters to indicated category; and,

• Determine the northern and southern limits and the strike, dip and plunge of the hangingwall and footwall zones below the 1,065 meter level.

Other objectives of the 2014 exploration program include resource conversion drilling in the upper Offset Zone directly to the north of current active and planned mining stopes;and delineation of new resources at the shallowest known level of the deposit in an area known as the upper Offset southeast extension.

The 2014 Offset Zone exploration program includes a total of 40,000 meters of drilling utilizing both surface and underground diamond drill rigs. Currently there are three surface exploration drills operating at LDI. Two of the surface drills are testing the down-plunge extension of the thickest part of the Offset Zone deposit (central Offset target). The third rig is testing the upper Offset southeast extension target, following up on an intersection in hole 13-717 of 37 meters having an average grade of 5.23 g/t Pd (see the company’s December 13, 2013 press release). Surface drilling is expected to continue until October 2014.

Year-to-date exploration drilling statistics are:

• 7,681 meters drilled in fourteen holes on all targets

• 4,040 meters drilled in six holes on lower Offset Zone targets

• 3,641 meters drilled in eight holes on upper Offset Zone targets

As of June 30, 2014, four holes were in progress.

www.nap.com 3

Highlights

Highlights for the second quarter 2014 drilling program are provided in the table below. The best result was obtained from hole 14-901 that pierced the central Offset target at a vertical depth of approximately 1,150 meters below surface and intersected an 83 meter interval with an average grade of 4.34 g/t palladium. To view supplemental information including a figure illustrating the relative position of the drill hole pierce points and a complete listing of anomalous drilling results for all holes completed in the second quarter of 2014 scroll to the end of this news release.

Selected drilling highlights for the second quarter of 2014 Offset Zone exploration program. The interval assays reported were selected using a 2.5 g/t Pd cut-off grade. Average grades reported are weighted by individual sample core lengths. Interval assays represent measured core lengths. True widths are estimated to represent between 60 to 70% of the reported core lengths for the upper north, lower central and lower north Offset Zone targets. The strike and dip of the upper southeast extension target are not well enough constrained to support an accurate estimate of true widths.

TARGET	HOLE #	FROM (m)	TO (m)	LENGTH (m)	Pd (g/t)	Pt (g/t)	Au (g/t)
Upper Southeast	14-771	500.00	550.00	50.00	3.04	0.23	0.19
"	including	500.00	537.00	37.00	3.72	0.28	0.23
"	14-772	444.00	472.00	28.00	2.56	0.20	0.21
"	including	459.00	472.00	13.00	3.58	0.28	0.28
Upper North	14-802	477.76	498.00	20.24	7.18	0.49	0.76
"	including	479.00	493.95	14.95	9.32	0.62	1.02
"	14-804	358.00	383.00	25.00	2.72	0.25	0.14
"	including	375.90	383.00	7.10	5.58	0.46	0.23
"	14-805	329.00	351.00	22.00	3.40	0.24	0.27
"	including	331.00	345.00	14.00	4.76	0.31	0.20
Lower Central	14-901	610.00	693.00	83.00	4.34	0.32	0.50
"	including	610.00	684.00	74.00	4.76	0.35	0.52
Lower North	14-973	1867.00	1877.00	10.00	2.72	0.24	0.14
"	and	1885.00	1893.00	8.00	3.04	0.39	0.11
"	and	1906.43	1919.30	12.87	2.22	0.38	0.07

Management Analysis of Q2 Drilling Results

Although early in the program, the Company is pleased with the results received to date for the four target areas tested. The central Offset target is now believed to represent an area of structural thickening and, possibly, a structural embayment in which disseminated sulfides were concentrated in both the hangingwall and footwall zones. Regardless of its provenance, this part of the deposit typically contains much thicker and continuous palladium, nickel and copper mineralization than is present along strike to the north or south. The embayment concept has been effectively used for exploration in several magmatic sulfide mining camps including the Sudbury mining district. Available information from the central Offset target suggests that this area of thickening has a north-south strike, dips steeply to the east, plunges to the south at approximately 60 degrees, has an average strike length of approximately 300 meters, and displays an average composite thickness (i.e., the combined footwall and hangingwall zone thickness having an average grade exceeding a 2.5 g/t Pd cut-off grade) varying between 20 and 80 meters. Limited drilling on the lower-central Offset target completed in the second quarter of 2014 confirms that the zone extends to at least 1,150 meters depth. One historical hole (08-001) suggests that the embayment feature extends to at least 1,400 meters depth. Despite its southerly plunge the available drilling information suggests the central Offset Zone will not impinge on the shaft pillar if a future deepening of the existing mine shaft occurs.

www.nap.com 4

The drilling results reported are for the upper-north Offset Zone and the upper Offset southeast extension target and are still being assessed. In the case of the upper-north target, the Company remains optimistic that the new drilling results will support conversion of inferred and indicated resources to indicated and measured resources, ideally translating into new mining stopes being added to the mine plan. Initial analysis of the results from the upper Offset southeast extension target suggests that good potential exists to add palladium resources in this, the shallowest part of the Offset Zone deposit (approximately 400 meters depth).

Exploration Plans for the Remainder of 2014

An additional 30,000 meters of underground and surface drilling are expected to be completed before the end of the year. In August, two underground drill rigs will be positioned in the south end of the 655 meter level exploration drift and will begin systematic conversion drilling on the central Offset target below the 1,065 meter level. Surface drilling will continue to target deeper levels on the projected extension of the south-plunging central Offset target. An update on exploration results will be included as part of the Company’s third quarter results release.

Technical Information and Qualified Persons

The assay analyses performed during NAP’s exploration drilling programs are subject to a rigorous, formal quality assurance and quality control (QA/QC) program, details of which can are provided in the most recent Technical Report (March 2014 – see link on NAP’s website). Diamond drill core from exploration drilling is logged and sampled on site with samples transported by the Company to ALS Global’s sample preparation facilities in Thunder Bay. The sample pulps prepared in Thunder Bay are shipped by ALS Global to their Vancouver analytical laboratories, which constitute an independent accredited commercial laboratory for PGE assay and base metal analysis.

The exploration results section of this new release was prepared by Dave Peck, P.Geo., the Company’s Head of Exploration and a Qualified Person as defined by National Instrument 43-101. The Company’s exploration team designed and executed the drilling program under the direction of Robert D. Stewart, P.Geo., Exploration Department Chief Geoscientist, an employee of NAP and a Qualified Person as defined by National Instrument 43-101, who has reviewed and approved the exploration sections of this news release.

Financial Results⁽²⁾

Revenue for the second quarter was $50.5 million compared to $33.2 million in the second quarter of 2013. The increase in revenue was primarily due to favourable exchange rate movements, higher realized prices for palladium and greater palladium ounces sold. During the second quarter, the Company realized a palladium selling price of US$806 per ounce.

Net loss for the quarter was $10.0 million or $0.03 per share compared to a net loss of $26.3 million or $0.15 per share in the same quarter last year. The decrease in the net loss is primarily due to the impact of higher revenues, increased foreign exchange gains partially offset by increased production costs and increased interest expense and other costs.

www.nap.com 5

EBITDA⁽¹⁾ was $15.9 million for the second quarter, compared to negative $6.1 million in the same quarter last year. Adjusted EBITDA⁽¹⁾ (which excludes interest expenses and other costs, depreciation and amortization, exploration, foreign exchange gains and losses and mine restoration costs net of insurance recoveries) was $10.4 million in the second quarter of 2014, compared to $0.9 million in the second quarter of last year.

During the second quarter, the Company closed the second $35.0 million tranche related to its previously announced convertible unsecured subordinated debenture financing. As at June 30, 2014, the Company had cash and cash equivalents of $44.3 million compared to $9.8 million as at December 31, 2013. As at June 30, 2014, the Company’s credit facility availability was limited by the borrowing base to US$42.8 million of which US$37.1 million was utilized.

On July 7, 2014, the Company announced that it had paid US$23.4 million to its senior secured term loan lender representing US$16.2 million of accrued interest and US$7.2 million of associated pre-payment fee. Effective June 30, 2014, the Company reverted to a 15% annual interest rate on the senior secured term loan and the Company’s cash balance, after reflecting the payment, was approximately $19 million.

Q2 2014 Conference Call & Webcast Details

Date:	Wednesday, July 30, 2014
Time:	8:30 a.m. ET
Webcast:	www.nap.com
Live Call:	1-866-229-4144 or 1-416-216-4169 (PIN: 8347411, followed by # sign)
Replay:	1-888-843-7419 or 1-630-652-3042 (PIN: 8347411, followed by # sign)

The conference call replay will be available for 90 days after the live event. An archived audio webcast of the call will also be posted to NAP’s website.

About North American Palladium

NAP is an established precious metals producer that has been operating its Lac des Iles mine (“LDI”) located in Ontario, Canada since 1993. LDI is one of only two primary producers of palladium in the world, offering investors exposure to palladium. The Company’s shares trade on the NYSE MKT under the symbol PAL and on the TSX under the symbol PDL.

For further information please contact:

John Vincic

Investor Relations

Telephone: 416-360-7374

Email: jvincic@nap.com

(1) Non-IFRS measure. Please refer to Non-IFRS Measures in the MD&A.

(2) NAP’s unaudited condensed interim consolidated financial statements for the second quarter ended June 30, 2014 are available in the Appendix of this news release. These financial statements should be read in conjunction with the notes and management’s discussion and analysis available at www.nap.com, www.sedar.com and www.sec.gov.

www.nap.com 6

Cautionary Statement on Forward Looking Information

Certain information contained in this news release constitutes ‘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. All statements other than statements of historical fact are forward-looking statements. The words ‘will’, ‘expect’, ‘would’, ‘could’, ‘estimate’ and similar expressions identify forward-looking statements. Forward-looking statements in this news release include, without limitation: information pertaining to the Company’s strategy, plans or future financial or operating performance, such as the ramp-up at the Company’s LDI mine, timelines, production plans, projected expenditures, operating cost estimates, proposed mining methods, expected mining rates and other statements that express management’s expectations or estimates of future performance. The Company cautions the reader that such forward-looking statements involve known and unknown risk factors that may cause the actual results to be materially different from those expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to: the risk that the Company may not be able to obtain sufficient financing to fund its current needs including for operating expenditures and for capital expenditures required to continue the LDI mine expansion at depth, the risk that the Company will not be able to meet its financial obligations as they become due, the possibility that metal prices and foreign exchange rates may fluctuate, inherent risks associated with development, exploration, mining and processing including risks to tailings capacity, ground conditions, environmental hazards, uncertainty of mineral reserves and resources, the possibility that the LDI mine may not perform as planned, changes in legislation, regulations or political and economic developments in Canada and abroad, risks related to employee relations and the availability of skilled labour, litigation, and the risks associated with obtaining necessary licenses and permits. For more details on these and other risk factors see the Company’s most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities.

Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions contained in this news release, which may prove to be incorrect, include, but are not limited to: that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business, that metal prices and exchange rates between the Canadian and United States dollar will be consistent with the Company’s expectations, that there will be no material delays affecting operations or the timing of ongoing development projects, including the LDI mine ramp-up, that prices for key mining and construction supplies, including labour costs, will remain consistent with the Company’s expectations and that the Company’s current estimates of mineral reserves and resources are accurate. The forward-looking statements are not guarantees of future performance. 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.

www.nap.com 7

Condensed Interim Consolidated Balance Sheets

(expressed in thousands of Canadian dollars)

(unaudited)

	June 30 2014			December 31 2013
ASSETS
Current Assets
Cash and cash equivalents	$	44,305		$	9,793
Accounts receivable		55,477			38,556
Inventories		15,930			14,239
Other assets		1,727			6,968
Total Current Assets		117,439			69,556
Non-current Assets
Mining interests		445,594			456,239
Total Non-current Assets		445,594			456,239
Total Assets	$	563,033		$	525,795
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued liabilities	$	20,087		$	48,797
Credit facility		24,296			17,834
Current portion of obligations under finance leases		2,924			2,988
Current portion of long-term debt		32,687			173,656
Current derivative liability		1,012			492
Total Current Liabilities		81,006			243,767
Non-current Liabilities
Income taxes payable		125			1,286
Asset retirement obligations		15,195			13,638
Obligations under finance leases		7,386			8,744
Long-term debt		206,096			35,864
Total Non-current Liabilities		228,802			59,532
Shareholders’ Equity
Common share capital and purchase warrants		865,483			798,411
Stock options and related surplus		9,408			9,128
Equity component of convertible debentures, net of issue costs		6,931			6,931
Contributed surplus		8,873			8,873
Deficit		(637,470	)		(600,847	)
Total Shareholders’ Equity		253,225			222,496
Total Liabilities and Shareholders’ Equity	$	563,033		$	525,795

www.nap.com 8

Condensed Interim Consolidated Statements of Operations and

Comprehensive Loss

(expressed in thousands of Canadian dollars, except share and per share amounts)

(unaudited)

	Three months ended June 30						Six months ended June 30
	2014			2013			2014			2013
Revenue	$	50,497		$	33,213		$	99,233		$	80,303
Mining operating expenses
Production costs		30,355			25,701			60,090			54,642
Smelting, refining and freight costs		4,130			3,406			8,313			7,208
Royalty expense		2,184			892			4,258			3,401
Depreciation and amortization		8,174			7,004			18,542			13,089
Loss on disposal of equipment		773			425			1,220			1,054
Total mining operating expenses		45,616			37,428			92,423			79,394
Income (loss) from mining operations		4,881			(4,215	)		6,810			909
Other expenses
Exploration		1,891			2,192			2,659			7,032
General and administration		2,611			2,186			5,165			5,099
Interest and other income		(2,687	)		(2,179	)		(2,400	)		(1,532	)
Interest expense and other costs		16,010			2,006			28,984			3,184
Financing costs		4,348			2,318			8,384			2,399
Loss on extinguishment of long-term debt		—			11,035			—			11,035
Foreign exchange loss (gain)		(7,335	)		4,495			641			5,317
Total other expenses		14,838			22,053			43,433			32,534
Loss from continuing operations before taxes		(9,957	)		(26,268	)		(36,623	)		(31,625	)
Income and mining tax recovery					—			—			—
Loss and comprehensive loss from continuing operations for the period	$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(31,625	)
Income and comprehensive income from discontinued operations for the period		—			—			—			2,509
Loss and comprehensive loss for the period	$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(29,116	)
Loss per share
Basic	$	(0.03	)	$	(0.15	)	$	(0.13	)	$	(0.16	)
Diluted	$	(0.03	)	$	(0.16	)	$	(0.13	)	$	(0.17	)
Loss from continuing operations per share
Basic	$	(0.03	)	$	(0.15	)	$	(0.13	)	$	(0.17	)
Diluted	$	(0.03	)	$	(0.16	)	$	(0.13	)	$	(0.18	)
Income from discontinued operations per share
Basic	$	—		$	—		$	—		$	0.01
Diluted	$	—		$	—		$	—		$	0.01
Weighted average number of shares outstanding
Basic		349,555,798			179,520,041			291,537,189			178,491,155
Diluted		349,555,798			179,633,511			291,537,189			178,601,618

www.nap.com 9

Condensed Interim Consolidated Statements of Cash Flows

(expressed in thousands of Canadian dollars)

(unaudited)

	Three months ended June 30						Six months ended June 30
	2014			2013			2014			2013
Cash provided by (used in)
Operations
Loss from continuing operations for the period	$	(9,957	)	$	(26,268	)	$	(36,623	)	$	(31,625	)
Operating items not involving cash
Depreciation and amortization		8,174			7,004			18,542			13,089
Accretion expense (recovery)		(229	)		945			(439	)		1,899
Loss on extinguishment of debt		—			11,035			—			11,035
Share-based compensation and employee benefits		547			62			1,023			475
Unrealized foreign exchange loss (gain)		(6,952	)		3,903			586			3,903
Loss on disposal of equipment		773			—			1,220			—
Interest expense and other		12,550			—			26,022			—
Financing costs		4,293			—			8,329			—
Other		—			86			—			1,022
		9,199			(3,233	)		18,660			(202	)
Changes in non-cash working capital		(13,006	)		384			(39,216	)		518
		(3,807	)		(2,849	)		(20,556	)		316
Financing Activities
Issuance of common shares and warrants, net of issue costs		—			9,613			(38	)		9,613
Issuance of convertible debentures, net of issue costs		32,979			—			61,443			—
Credit facility		22			(8,808	)		6,107			14,192
Repayment of senior secured notes		—			(79,200	)		—			(79,200	)
Net proceeds of senior secured term loan		—			131,941			—			131,941
Repayment of obligations under finance leases		(890	)		(258	)		(1,686	)		(1,573	)
Interest paid		(114	)		(1,318	)		(1,565	)		(5,907	)
Other financing costs		(396	)		—			(895	)		—
		31,601			51,970			63,366			69,066
Investing Activities
Additions to mining interests, net		(5,569	)		(27,805	)		(8,457	)		(65,873	)
Proceeds on disposal of mining interests, net		159			—			159			990
		(5,410	)		(27,805	)		(8,298	)		(64,883	)
Increase in cash from continuing operations		22,384			21,316			34,512			4,499
Net cash provided by discontinued operations		—			—			—			20,142
Increase in cash		22,384			21,316			34,512			24,641
Cash and cash equivalents, beginning of period		21,921			23,493			9,793			20,168
Cash and cash equivalents, end of period	$	44,305		$	44,809		$	44,305		$	44,809
Cash and cash equivalents consisting of:
Cash	$	44,305		$	44,809		$	44,305		$	44,809
Short-term investments		—			—			—			—
	$	44,305		$	44,809		$	44,305		$	44,809
Foreign exchange included in cash balance	$	1,704		$	1,075		$	1,704		$	1,075

www.nap.com 10

North American Palladium 2014 Q2 Results News Release – Supplemental Information

Longitudinal projection, looking west, of the Offset Zone deposit based on a 1 g/t Pd grade shell. The projection shows the approximate location of pierce points into the hangingwall zone. The current Offset Zone resource block model treats the deposit as five contiguous but discrete grade domains as defined in the legend. Note that the lower Offset Zone remains open at depth in all directions and the upper Offset Zone remains partly open above the current limit of the 1 g/t Pd grade shell in the vicinity of the southeast extension (holes 14-771 and 14-772).

www.nap.com 11

Elevated and anomalous Pd assays from the Q2 2014 Offset Zone drilling program. The assay intervals reported were selected using 1 g/t Pd and 2.5 g/t Pd cut-off grades. Average grades reported are weighted by individual sample core lengths. Assay intervals represent measured core lengths. True widths are estimated to represent between 60 and 70% of the reported core lengths for the upper north, lower central and lower north Offset Zone targets. The strike and dip of the upper southeast extension target are not well enough constrained to support an accurate estimate of true widths at this time.

TARGET	HOLE #	FROM (m)	TO (m)	LENGTH (m)	Pd (g/t)	Pt (g/t)	Au (g/t)	Ni %	Cu %
Upper Southeast	14-771	436.00	437.00	1.00	1.27	0.15	0.09	0.09	0.09
“	and	452.00	453.00	1.00	1.17	0.10	0.11	0.08	0.08
“	and	491.00	492.00	1.00	1.65	0.18	0.09	0.07	0.08
“	and	500.00	550.00	50.00	3.04	0.23	0.19	0.09	0.06
“	including	500.00	537.00	37.00	3.72	0.28	0.23	0.09	0.07
“	including	547.00	550.00	3.00	2.63	0.21	0.13	0.07	0.05
“	and	557.00	558.29	1.29	1.57	0.15	0.07	0.05	0.05
“	and	560.88	564.00	3.12	1.20	0.17	0.08	0.06	0.05
“	and	569.00	570.00	1.00	1.47	0.13	0.08	0.05	0.05
“	14-772	93.00	95.00	2.00	3.41	0.38	0.17	0.12	0.12
“	and	102.00	103.00	1.00	1.01	0.11	0.05	0.05	0.04
“	and	120.40	127.14	6.74	1.65	0.17	0.05	0.10	0.06
“	including	121.17	121.87	0.70	2.57	0.30	0.15	0.08	0.08
“	including	125.00	125.86	0.86	3.59	0.06	0.04	0.08	0.04
“	and	138.00	144.28	6.28	1.94	0.21	0.18	0.08	0.09
“	and	174.00	175.00	1.00	1.11	0.11	0.07	0.05	0.04
“	and	199.00	206.00	7.00	1.13	0.12	0.09	0.07	0.05
“	and	233.00	234.00	1.00	1.05	0.12	0.14	0.08	0.07
“	and	237.00	238.00	1.00	1.25	0.13	0.12	0.06	0.04
“	and	367.00	369.94	2.94	1.74	0.19	0.11	0.07	0.06
“	including	367.00	368.11	1.11	3.75	0.39	0.22	0.11	0.12
“	and	433.00	435.00	2.00	1.75	0.15	0.17	0.07	0.06
“	and	443.00	474.00	31.00	2.41	0.19	0.20	0.07	0.05
“	including	444.00	472.00	28.00	2.56	0.20	0.21	0.07	0.06
“	including	459.00	472.00	13.00	3.58	0.28	0.28	0.07	0.06
“	and	482.00	489.00	7.00	1.05	0.11	0.09	0.06	0.03
Upper North	14-801	364.04	454.92	90.88	1.26	0.16	0.09	0.06	0.03
“	including	365.00	371.84	6.84	2.86	0.19	0.12	0.07	0.05
“	and	384.00	391.00	7.00	2.52	0.19	0.05	0.05	0.01
“	and	402.03	407.61	5.58	3.58	0.43	0.36	0.11	0.07
“	and	419.00	420.00	1.00	2.85	0.47	0.24	0.13	0.13
“	and	428.12	428.80	0.68	4.84	0.67	0.04	0.16	0.02
“	and	445.00	449.34	4.34	2.05	0.30	0.19	0.07	0.05

www.nap.com 12

page 2 or 3

TARGET	HOLE #	FROM (m)	TO (m)	LENGTH (m)	Pd (g/t)	Pt (g/t)	Au (g/t)	Ni %	Cu %
Upper North	14-802	477.76	498.00	20.24	7.18	0.49	0.76	0.07	0.03
(continued)	including	479.00	493.95	14.95	9.32	0.62	1.02	0.08	0.04
“	and	518.00	521.00	3.00	1.60	0.18	0.03	0.04	0.00
“	including	520.00	521.00	1.00	2.70	0.35	0.06	0.03	0.00
“	and	545.00	548.00	3.00	0.79	0.11	0.01	0.03	0.00
“	and	556.00	558.00	2.00	0.99	0.15	0.03	0.04	0.01
“	14-804	358.00	383.00	25.00	2.72	0.25	0.14	0.06	0.06
“	including	358.00	361.90	3.90	2.89	0.28	0.11	0.08	0.07
“	including	370.00	374.30	4.30	3.18	0.26	0.13	0.06	0.05
“	including	375.90	383.00	7.10	5.58	0.46	0.23	0.09	0.08
“	and	407.00	408.00	1.00	2.69	0.20	0.03	0.05	0.00
“	and	412.00	413.00	1.00	1.13	0.12	0.07	0.03	0.00
“	and	415.00	417.00	2.00	1.08	0.09	0.03	0.03	0.01
“	and	435.00	437.00	2.00	1.28	0.19	0.16	0.08	0.06
“	and	449.00	451.70	2.70	1.69	0.29	0.16	0.08	0.04
“	14-805	329.00	351.00	22.00	3.40	0.24	0.27	0.08	0.05
“	including	331.00	345.00	14.00	4.76	0.31	0.20	0.08	0.05
“	and	365.00	379.00	14.00	1.08	0.10	0.02	0.04	0.00
“	including	367.00	368.00	1.00	3.16	0.34	0.08	0.05	0.01
“	including	377.00	378.00	1.00	3.39	0.19	0.04	0.06	0.01
“	and	383.00	384.00	1.00	2.23	0.37	0.03	0.09	0.00
“	and	390.00	391.00	1.00	1.67	0.19	0.02	0.05	0.02
Lower Central	14-901	229.00	233.00	4.00	1.15	0.18	0.25	0.15	0.28
“	and	341.00	341.69	0.69	1.07	0.13	0.05	0.10	0.02
“	and	348.00	350.00	2.00	1.35	0.14	0.24	0.18	0.19
“	and	362.00	363.00	1.00	0.81	0.08	0.07	0.10	0.06
“	and	374.00	375.00	1.00	1.40	0.17	0.18	0.13	0.16
“	and	376.00	377.00	1.00	1.10	0.08	0.01	0.06	0.02
“	and	413.00	417.00	4.00	1.06	0.13	0.16	0.19	0.26
“	and	449.00	451.00	2.00	1.16	0.17	0.16	0.12	0.15
“	and	457.00	461.00	4.00	1.00	0.14	0.25	0.47	0.59
“	and	474.00	475.00	1.00	1.01	0.07	0.13	0.83	1.00
“	and	592.00	593.00	1.00	3.63	0.40	0.14	0.05	0.01
“	and	601.00	603.00	2.00	1.40	0.19	0.05	0.08	0.05
“	and	610.00	693.00	83.00	4.34	0.32	0.50	0.16	0.14
“	including	610.00	684.00	74.00	4.76	0.35	0.52	0.17	0.14
“	and	697.00	709.65	12.65	1.12	0.11	0.10	0.06	0.04
“	and	733.00	735.00	2.00	2.64	0.36	0.20	0.14	0.12

www.nap.com 13

page 3 of 3

TARGET	HOLE #	FROM (m)	TO (m)	LENGTH (m)	Pd (g/t)	Pt (g/t)	Au (g/t)	Ni %	Cu %
Lower Central	14-901	742.00	772.00	30.00	1.21	0.17	0.12	0.06	0.04
(continued)	including	759.00	763.00	4.00	2.89	0.25	0.03	0.11	0.05
“	and	782.00	784.00	2.00	1.09	0.14	0.12	0.12	0.12
“	and	815.00	821.00	6.00	1.75	0.13	0.16	0.09	0.10
“	and	817.00	818.00	1.00	2.73	0.17	0.37	0.15	0.15
“	and	875.00	877.00	2.00	1.02	0.07	0.10	0.10	0.11
Lower North	14-973	306.00	307.00	1.00	1.49	0.09	0.02	0.03	0.00
“	and	316.00	317.00	1.00	1.29	0.12	0.01	0.03	0.00
“	and	374.74	375.40	0.66	1.08	0.23	0.27	0.06	0.31
“	and	952.00	956.80	4.80	1.27	0.17	0.22	0.14	0.15
“	and	959.54	962.00	2.46	1.29	0.17	0.14	0.12	0.12
“	and	1070.17	1080.21	10.04	2.37	0.22	0.09	0.05	0.04
“	including	1071.36	1076.00	4.64	3.44	0.31	0.11	0.06	0.05
“	and	1235.00	1243.00	8.00	0.98	0.11	0.02	0.04	0.01
“	and	1248.81	1250.00	1.19	2.99	0.45	0.03	0.03	0.02
“	and	1262.00	1263.29	1.29	1.37	0.13	0.12	0.08	0.06
“	and	1373.00	1376.00	3.00	1.89	0.26	0.18	0.08	0.06
“	and	1423.04	1423.64	0.60	1.54	0.15	0.10	0.31	0.32
“	and	1442.16	1443.00	0.84	2.15	0.95	0.02	0.02	0.01
“	and	1464.00	1465.00	1.00	1.63	0.21	0.15	0.43	0.31
“	and	1835.00	1838.00	3.00	2.79	0.34	0.16	0.08	0.12
“	and	1852.00	1952.10	100.10	1.37	0.19	0.06	0.05	0.03
“	including	1855.00	1858.00	3.00	3.17	0.29	0.07	0.09	0.10
“	including	1855.00	1861.00	6.00	2.67	0.25	0.07	0.08	0.09
“	including	1859.00	1861.00	2.00	2.88	0.28	0.09	0.08	0.11
“	including	1867.00	1877.00	10.00	2.72	0.24	0.14	0.06	0.06
“	including	1885.00	1893.00	8.00	3.04	0.39	0.11	0.10	0.05
“	and	1906.43	1919.30	12.87	2.22	0.38	0.07	0.06	0.04
“	including	1906.43	1908.00	1.57	2.51	0.48	0.05	0.06	0.01
“	including	1909.55	1919.30	9.75	2.49	0.42	0.08	0.06	0.04
“	and	1964.00	1966.00	2.00	1.52	0.28	0.02	0.05	0.01
“	and	1971.11	1972.00	0.89	1.74	0.23	0.05	0.03	0.01
“	and	1976.00	1980.00	4.00	1.15	0.21	0.03	0.03	0.01
“	and	1983.00	1984.00	1.00	1.01	0.17	0.04	0.03	0.01
“	and	1991.28	1996.00	4.72	1.66	0.29	0.03	0.04	0.02
“	including	1994.00	1995.00	1.00	3.30	0.46	0.08	0.06	0.03

www.nap.com 14