| August 7, 2008 |
| North American palladium Announces Second Quarter 2008 Financial Results; Revenue Increases 17% |
TORONTO, ONTARIO--(Marketwire - Aug. 7, 2008) - North American palladium Ltd. (TSX:PDL)(TSX:PDL.WT)(AMEX:PAL)(AMEX:PAL.WS) -
This news release contains forward-looking statements. Reference should be made to the cautionary statement on forward-looking information at the end of this news release.
Highlights
- Revenue for the quarter ended June 30, 2008 of $52.2 million increased by $7.7 million or 17% compared to the same period last year. Revenue for the six months ending June 30, 2008 was $123.0 million compared to revenue of $112.9 million in 2007, an increase of 9.0%.
- Income from mining operations for the second quarter of 2008, before an insurance recovery of $13.8 million, was $4.1 million compared to a loss of $6.1 million in the same period last year. For the first six months of 2008, before an insurance recovery of $13.8 million, income from mining operations was $29.0 million, an increase of $17.3 million (147%) compared to the same period last year.
- Net income for the second quarter of 2008 was $10.4 million or $0.13 per share compared to a net loss of $9.1 million or $0.17 per share in the second quarter last year. Net income for the first six months of 2008 was $23.0 million or $0.28 per share compared to a net loss of $3.6 million or $0.07 per share in the same period last year.
- palladium production for the three months ended June 30, 2008 was 65,791 ounces, approximately on par with the 66,651 ounces produced in the same period last year.
- Cash cost per ounce of palladium produced(1), net of by-product metal revenues and royalties, was US$219 for the second quarter of 2008 compared to US$242 for the same period last year.
- palladium sales for the second quarter were recorded at US$467 per ounce compared to US$365 per ounce in the same period last year.
- Operating cash flow for the three months ended June 30, 2008 (before changes in non-cash working capital)(1) of $17.0 million increased by $4.1 million (32%) compared to the same period last year.
- The Company's total debt position at June 30, 2008 was reduced to $18.8 million compared to the debt position at December 31, 2007 of $39.1 million.
- The Company has determined that it will not deliver a positive feasibility study for the Arctic Platinum Project prior to the August 31, 2008 deadline and it has commenced discussions with Gold Fields Ltd. to review strategic options for the project.
(1) Non GAAP measure. Reference should be made to footnote 1 at the end of this press release.
TORONTO, August 7 - North American palladium Ltd. announced today financial results for the three and six month periods ended June 30, 2008.
The second quarter of 2008 generated income from mining operations, before an insurance recovery of $13.8 million, of $4.1 million compared to a loss of $6.1 million in the same period a year ago. The improvement is due to increased revenue of $7.7 million and lower operating expenses, excluding the insurance recovery, of $2.4 million. Income from mining operations for the six months ended June 30, 2008, before an insurance recovery of $13.8 million, was $29.0 million, an improvement of $17.3 million (147%) compared to the same period last year.
Net income for the second quarter of 2008 was $10.4 million or $0.13 per share compared to a net loss of $9.1 million or $0.17 per share for the corresponding period in 2007. For the six months ending June 30, 2008, net income was $23.0 million or $0.28 per share compared to a net loss of $3.6 million or $0.07 per share in the same period last year.
Revenue of $52.2 million, after pricing adjustments, for the second quarter of 2008 increased by $7.7 million or 17% reflecting higher commodity prices and a lower negative foreign exchange rate impact. Revenue for the six months ending June 30, 2008 was $123.0 million compared to revenue of $112.9 million in 2007, an increase of 9.0%.
palladium sales in the second quarter of 2008 were recorded at a price of US$467 per ounce versus a price of US$365 per ounce in the same period in 2007, an increase of 28%. As previously reported, palladium production for the second quarter of 2008 of 65,791 ounces was approximately on par with the second quarter of 2007.
For the quarter ended June 30, 2008, cash cost per ounce(1) of palladium, net of by-product metal revenues, of US$219 per ounce was lower than the US$242 per ounce in the same period last year.
Operating cash flow for the second quarter of 2008 (before changes in non-cash working capital)(1) improved by $4.1 million to $17.0 million (32%) compared to the same period last year.
Outlook
The Company has received a draft of the feasibility study for the Arctic Platinum Project ("APP"). The price of steel and diesel fuel, the strength of the euro relative to the U.S. dollar and other variables have adversely impacted the estimated capital cost of the project. The Company has determined that it will not deliver a positive feasibility study for the APP prior to the August 31, 2008 deadline and it has commenced discussions with Gold Fields Ltd. to review strategic options for the project.
The Company continues to focus on the further definition of the Offset High Grade Zone at the Lac des Iles mine which could allow the underground mine to continue operating until 2018, according to the results of a preliminary economic assessment prepared by Micon International Limited and announced by the Company on May 7, 2008. In the near term, the Company expects to receive the remaining information required to finalize mine design.
The Company has received a draft preliminary economic assessment on the Shebandowan West Project. It is currently reviewing the recommendations and conclusions and is awaiting a final preliminary economic assessment. In early June, the Company started an advanced underground exploration project at the proposed site, the purpose of which is to investigate ground conditions and provide ore for a bulk metallurgical sample program.
Further information about the 2008 second quarter results is available in the Company's financial statements and MD&A, which will be filed on its website, with Canadian provincial securities authorities (www.sedar.com) and with the U.S. Securities and Exchange Commission (www.sec.gov).
Conference Call and Webcast
The Company will host its second quarter 2008 financial results Conference Call and Webcast at 10:00 a.m. ET on Friday, August 8th 2008. The toll-free conference call dial-in number is 1-888-789-0150 and the local and overseas dial-in number is 416-695-6622. The conference call will be simultaneously webcast and archived at www.napalladium.com in the Investor Centre under Conference Calls. The webcast will also be available at www.investorcalendar.com/IC/CEPage.asp?ID equals 131901. A replay of the conference call will be available until August 29th, 2008: toll-free at 1-800-408-3053; locally and overseas at 416-695-5800, access code #3266159.
(1) Non-GAAP Measures.
This press release refers to cash cost per ounce and operating cash flow which are not recognized measures under Canadian GAAP. Such non-GAAP financial measures do not have any standardized meaning prescribed by Canadian GAAP 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 a better indication 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 Canadian GAAP. The following tables reconcile these non-GAAP measures to the most directly comparable Canadian GAAP measure:
(a) Reconciliation of Cash Cost per Ounce to Financial Statements
(thousands of dollars except per ounce amounts)
Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
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Production costs including
overhead $30,729 $ 32,438 $ 61,185 $ 65,690
Smelter treatment, refining
and freight costs 6,132 5,733 11,542 10,995
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36,861 38,171 72,727 76,685
Less by-product metal revenue (23,853) (22,638) (58,850) (59,971)
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$13,008 $ 15,533 $ 13,877 $ 16,714
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Divided by ounces of palladium 58,450 60,435 112,651 131,069
Cash cost per ounce (C$) $223 $257 $123 $128
C$ exchange rate 1.018 1.0631 1.023 1.108
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Cash cost per ounce (US$) $219 $242 $120 $115
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(b) Reconciliation of Cash Flow from Operations, Prior to Changes in
Non-Cash Working Capital (Operating Cash Flow) to Financial Statements(i)
Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------------
Operating cash flow $16,987 $ 12,865 $42,093 $ 35,902
Changes in non-cash working
capital (11,157) (9,486) (26,163) (30,390)
---------------------------------------------------------------------------
Cash provided by operating
activities $5,830 $3,379 $15,930 $5,512
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---------------------------------------------------------------------------
(i)Certain prior period amounts have been reclassified to conform to the
classification adopted in the current period.
About North American palladium
North American palladium is one of North America's largest producers of palladium. The Company's core palladium business at the Lac des Iles mine is strengthened by a significant contribution from platinum, nickel, gold and copper by-product metals. The Company is actively progressing two advanced exploration projects, the Offset High Grade Zone at its Lac des Iles mine and the Shebandowan West Project, located approximately 100 kilometers from the mine. Please visit www.napalladium.com for more information.
Forward-Looking Statements
Certain information included in this press release, including any information as to our future financial or operating performance and other statements that express management's expectations or estimates of future performance, constitute 'forward-looking statements' within the meaning of the 'safe harbor' provisions of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities laws. The words 'expect', 'believe', 'will', 'intend', 'estimate' and similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. These statements are based on certain factors and assumptions, including but not limited to, the assumption that market fundamentals will result in increased palladium demand and prices and sustained by-product metal demand and prices; the integrated operation of the Company's underground mine and the open pit mine remain viable operationally and economically; financing is available on reasonable terms; expectations for blended mill feed head grade and mill performance will proceed as expected; new mine plan scenarios will be viable operationally and economically; and plans for mill production, sustainable recoveries from the Lac des Iles mine, exploration at Lac des Iles and elsewhere will all proceed as expected.
The Company cautions the reader that such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of North American palladium to be materially different from the Company's estimated future results, performance or achievements expressed or implied by those forward-looking statements and that the forward-looking statements are not guarantees of future performance. These risks, uncertainties and other factors include, but are not limited to: metal price volatility; economic and political events affecting metal supply and demand; changes in the regulatory environment; fluctuations in ore grade or ore tonnes milled; geological, technical, mining or processing problems; future production; changes in the life-of-mine plan or the ultimate pit design; availability and increasing costs associated with mining inputs and labour; the speculative nature of exploration and development, including the risks of diminishing quantities or grades of mineral reserves; adverse changes in our credit rating; and the risks involved in the exploration, development and mining business. These factors are discussed in greater detail in the Company's most recent Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise. Readers are cautioned not to put undue reliance on these forward-looking statements.
North American palladium Ltd.
Consolidated Balance Sheets
(expressed in thousands of Canadian dollars)
June 30 December 31
2008 2007
---------------------------------------------------------------------------
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $72,548 $74,606
Concentrate awaiting settlement, net 98,257 79,087
Taxes recoverable 1,279 62
Inventories 12,780 17,873
Crushed and broken ore stockpiles 9,834 8,072
Other assets 17,460 2,563
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212,158 182,263
Mining interests, net 120,038 114,464
Mine restoration deposit 8,622 8,272
Crushed and broken ore stockpiles 389 375
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$341,207 $305,374
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $21,104 $20,757
Future mining tax liability 229 168
Current portion of obligations under capital
leases 1,677 1,672
Current portion of convertible notes payable 9,017 25,710
Current portion of long-term debt 6,036 5,918
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38,063 54,225
Mine restoration obligation 9,055 8,878
Obligations under capital leases 1,056 1,824
Long-term debt 1,000 3,957
Future mining tax liability 2,696 539
---------------------------------------------------------------------------
51,870 69,423
Shareholders' Equity
Common share capital and purchase warrants 474,616 443,986
Stock options 1,850 1,673
Equity component of convertible notes payable,
net of issue costs 1,942 6,044
Contributed surplus 10,394 6,292
Deficit (199,465) (222,044)
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Total shareholders' equity 289,337 235,951
---------------------------------------------------------------------------
$341,207 $305,374
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Certain prior period amounts have been reclassified to conform to the
presentation adopted in 2008. These financial statements should be read in
conjunction with the notes and management's discussion and analysis,
available online at www.sedar.com and www.sec.gov.and are on the Company's
website at www.napalladium.com.
Consolidated Statements of Operations,
Comprehensive Income and Deficit
(expressed in thousands of Canadian dollars, except share
and per share amounts) (unaudited)
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------------
Revenue - before
pricing adjustments $52,403 $53,451 $103,455 $113,755
Pricing adjustments:
Commodities 581 (2,421) 15,759 6,720
Foreign exchange (743) (6,535) 3,815 (7,541)
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Revenue - after
pricing adjustments 52,241 44,495 123,029 112,934
---------------------------------------------------------------------------
Operating expenses
Production costs,
excluding amortization
and asset retirement
costs 30,729 32,438 61,185 65,690
Smelter treatment,
refining and freight
costs 6,132 5,733 11,542 10,995
Amortization 10,752 11,923 19,914 23,831
Insurance recovery (13,800) - (13,800) -
Loss on disposal of
equipment 363 - 1,058 -
Asset retirement costs 157 498 308 677
---------------------------------------------------------------------------
Total operating expenses 34,333 50,592 80,207 101,193
---------------------------------------------------------------------------
Income (loss) from mining
operations 17,908 (6,097) 42,822 11,741
---------------------------------------------------------------------------
Other expenses
General and administration 1,649 2,321 2,006 4,017
Exploration 7,115 798 14,169 4,026
Interest and other
financing costs 1,275 4,660 2,904 11,143
Foreign exchange gain (1,137) (4,355) (223) (4,981)
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Total other expenses 8,902 3,424 18,856 14,205
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Income (loss) before taxes 9,006 (9,521) 23,966 (2,464)
Income and mining tax
expense (recovery) (1,381) (455) 984 1,095
---------------------------------------------------------------------------
Net income (loss) and
comprehensive income
(loss) for the period 10,387 (9,066) 22,982 (3,559)
Deficit, beginning of
period, as previously
reported (209,852) (187,857) (222,044) (193,364)
Adoption of new
accounting standards
for inventory - - (403) -
---------------------------------------------------------------------------
Deficit, end of period $ (199,465) $ (196,923) $ (199,465) $ (196,923)
---------------------------------------------------------------------------
Net income (loss)
per share
Basic $0.13 $(0.17) $0.28 $(0.07)
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Diluted $0.13 $(0.17) $0.28 $(0.07)
---------------------------------------------------------------------------
Weighted average number of
shares outstanding
Basic 82,100,127 54,410,210 80,927,966 53,749,822
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Weighted average number of
shares outstanding
Diluted 82,992,583 54,410,210 83,067,864 53,749,822
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Certain prior period amounts have been reclassified to conform to the
presentation adopted in 2008. These financial statements should be read in
conjunction with the notes and management's discussion and analysis,
available online at www.sedar.com and www.sec.gov.and are on the Company's
website at www.napalladium.com.
Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)
(unaudited)
Three months ended Six months ended
June 30 June 30
2008 2007 2008 2007
---------------------------------------------------------------------------
Cash provided by (used in)
Operations
Net income (loss) for the
period $ 10,387 $ (9,066) $ 22,982 $ (3,559)
Operating items not
involving cash
Accretion expense
relating to convertible
notes payable 1,054 3,250 2,885 7,512
Amortization 10,544 11,923 20,633 23,831
Amortization of deferred
financing costs 59 219 163 441
Interest on convertible
notes settled in shares 341 1,007 597 1,581
Accrued interest on mine
restoration deposit (11) (110) (84) (110)
Unrealized foreign exchange
loss (gain) (4,920) 3,478 (8,080) 3,409
Asset retirement costs 157 498 308 677
Future income tax expense
(recovery) (1,561) 1,050 804 1,095
Stock based compensation
and employee benefits 574 616 827 1,025
Loss on disposal of
equipment 363 - 1,058 -
---------------------------------------------------------------------------
16,987 12,865 42,093 35,902
Changes in non-cash
working capital (11,157) (9,486) (26,163) (30,390)
---------------------------------------------------------------------------
5,830 3,379 15,930 5,512
---------------------------------------------------------------------------
Financing Activities
Advances under purchase
facility - 4,453 - 8,868
Issuance of common shares
and warrants, net of
issue costs (29) - 10,475 5,703
Repayment of long-term debt (1,518) (1,562) (3,036) (9,042)
Repayment of obligations
under capital leases (431) (539) (853) (1,082)
Mine restoration deposit - - (266) -
---------------------------------------------------------------------------
(1,978) 2,352 6,320 4,447
---------------------------------------------------------------------------
Investing Activities
Additions to mining
interests (13,496) (4,148) (24,525) (8,607)
Proceeds on disposal of
mining interests 217 - 217 -
---------------------------------------------------------------------------
(13,279) (4,148) (24,308) (8,607)
---------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents (9,427) 1,583 (2,058) 1,352
Cash and cash equivalents,
beginning of period 81,975 2,922 74,606 3,153
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Cash and cash equivalents,
end of period $ 72,548 $4,505 $ 72,548 4,505
---------------------------------------------------------------------------
Cash and cash equivalents
consists of:
Cash $2,467 $4,505 $2,467 $4,505
Short term investments 70,081 - 70,081 -
---------------------------------------------------------------------------
$ 72,548 $4,505 $ 72,548 $4,505
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Certain prior period amounts have been reclassified to conform to the
presentation adopted in 2008. These financial statements should be read in
conjunction with the notes and management's discussion and analysis,
available online at www.sedar.com and www.sec.gov.and are on the Company's
website at www.napalladium.com.
Consolidated Statements of Shareholders' Equity
(expressed in thousands of Canadian dollars, except share amounts)
(unaudited)
Number of Capital Stock
shares stock options Warrants
---------------------------------------------------------------------------
Balance, December 31, 2007 75,770,570 $ 430,793 $ 1,673 $ 13,193
Transitional adjustment on
adoption of inventory standard - - - -
Common shares issued:
For principal repayments on
convertible notes payable 4,006,114 20,359 - -
For interest payments on
convertible notes payable 129,643 597 - -
Pursuant to unit offering, net
of issue costs 2,800,000 9,575 - -
Tax effect of flow-through
shares - (1,452) - -
Warrants Issued:
Pursuant to unit offering, net
of issue costs - - - 899
Warrants exercised 100 1 - -
Stock-based compensation/RRSP
expense 130,831 651 177 -
Net income and comprehensive
income for the six months
ended June 30, 2008 - - - -
---------------------------------------------------------------------------
Balance, June 30, 2008 82,837,258 $ 460,524 $ 1,850 $ 14,092
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Equity
component of
convertible Total
notes Contributed shareholders'
payable surplus Deficit equity
---------------------------------------------------------------------------
Balance, December 31, 2007 $6,044 $6,292 $ (222,044) $235,951
Transitional adjustment
on adoption of inventory
standard - - (403) (403)
Common shares issued:
For principal repayments
on convertible notes
payable (4,102) 4,102 - 20,359
For interest payments
on convertible notes
payable - - - 597
Pursuant to unit offering,
net of issue costs - - - 9,575
Tax effect of
flow-through shares - - - (1,452)
Warrants Issued:
Pursuant to unit
offering, net
of issue costs - - - 899
Warrants exercised - - - 1
Stock-based
compensation/RRSP
expense - - - 828
Net income and
comprehensive
income for the six
months ended June 30, 2008 - - 22,982 22,982
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Balance, June 30, 2008 $1,942 $10,394 $ (199,465) $289,337
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Certain prior period amounts have been reclassified to conform to the
presentation adopted in 2008. These financial statements should be read in
conjunction with the notes and management's discussion and analysis,
available online at www.sedar.com and www.sec.gov.and are on the Company's
website at www.napalladium.com.
Consolidated Statements of Shareholders' Equity
(expressed in thousands of Canadian dollars, except share amounts)
Number of Capital Stock
shares stock options Warrants
---------------------------------------------------------------------------
Balance, January 1, 2007 52,947,693 $ 331,705 $ 1,269 $8,038
Common shares issued:
For principal repayments on
convertible notes payable 983,376 9,976 - -
For interest payments on
convertible notes payable 183,397 1,581 - -
Private placement of flow-
through shares (net) 550,000 5,686 - -
Stock options exercised 5,000 17 - -
Fair value of stock options
exercised - 10 (10) -
Stock-based compensation/RRSP
expense 70,867 610 259 -
Net loss and comprehensive loss
for the six months ended
June 30, 2007 - - - -
---------------------------------------------------------------------------
Balance, June 30, 2007 54,740,333 349,585 1,518 8,038
Common shares issued:
For principal repayments on
convertible notes payable 2,137,621 16,204 - -
For interest payments on
convertible notes payable 158,131 1,063 - -
Tax effect of flow-through
shares - (1,114) - -
Pursuant to unit offering,
net of issue costs 18,666,667 64,461 - -
Warrants issued:
Pursuant to unit offering, net
of issue costs - - - 5,155
Stock-based compensation/RRSP
expense 67,818 594 155 -
Net loss and comprehensive loss
for the six months ended
December 31, 2007 - - - -
---------------------------------------------------------------------------
Balance, December 31, 2007 75,770,570 $ 430,793 $ 1,673 $ 13,193
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Equity
component of Total
convertible Contributed shareholders'
notes payable surplus Deficit equity
---------------------------------------------------------------------------
Balance, January 1, 2007 $12,336 $ - $ (193,364) $159,984
Common shares issued:
For principal
repayments on
convertible notes
payable (2,199) 2,199 - 9,976
For interest payments
on convertible notes
payable - - - 1,581
Private placement of
flow through shares (net) - - - 5,686
Stock options exercised - - - 17
Fair value of stock
options exercised - - - -
Stock-based
compensation/RRSP
expense - - - 869
Net loss and
comprehensive loss
for the six months
ended June 30, 2007 - - (3,559) (3,559)
---------------------------------------------------------------------------
Balance, June 30, 2007 10,137 2,199 (196,923) 174,554
Common shares issued:
For principal
repayments on convertible
notes payable (4,093) 4,093 - 16,204
For interest
payments on convertible
notes payable - - - 1,063
Tax effect of
flow-through shares - - - (1,114)
Pursuant to unit
offering, net
of issue costs - - - 64,461
Warrants issued:
Pursuant to unit
offering, net
of issue costs - - - 5,155
Stock-based
compensation/RRSP
expense - - - 749
Net loss and
comprehensive loss
for the six months
ended December 31, 2007 - - (25,121) (25,121)
---------------------------------------------------------------------------
Balance, December 31, 2007 $ 6,044 $ 6,292 $ (222,044) $ 235,951
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Certain prior period amounts have been reclassified to conform to the
presentation adopted in 2008. These financial statements should be read in
conjunction with the notes and management's discussion and analysis,
available online at www.sedar.com and www.sec.gov.and are on the Company's
website at www.napalladium.com.
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