EX-3 4 d766942dex3.htm EX-3 EX-3

Exhibit 3

 

LOGO

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.

 

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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.

 

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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.

 

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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.

 

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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.

 

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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.

 

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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   
  

 

 

    

 

 

  

 

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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   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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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   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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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).

 

LOGO

 

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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

 

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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

 

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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