The graphs on Slide 5 demonstrate very well the results we have achieved since the financial restructuring in 2015. With the support of our largest shareholder, Brookfield, we have been on a focus path to fix the infrastructure, technical and organizational issues at the site.

Over the last 3 years, production is up significantly in both tonnes per day and ounces, and our unit costs are down dramatically. Our demonstrated ability to produce at a high rate and low cost, combined with the positive outlook for the price of palladium, were key to the publishing of a new life of mine plan in October of last year, which had a 9.5-year life at over 12,000 tonnes per day. With our excellent exploration portfolio, we are confident that we can add to this plan. We will talk to both the underground expansion and the exploration in upcoming slides.

But first, I would like to turn it over to Tim Hill to present the details of our 2018 financial results. Tim?

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Timothy J. Hill, North American Palladium Ltd. - VP of Finance & CFO [4]

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Thanks, Jim. As mentioned by Jim, the company posted strong financial results again this quarter. Revenue for the quarter increased by $35.4 million or 40% over that in Q4 2017. Year-over-year, revenue increased by $124.4 million to $396.8 million. This was a result of increased palladium sales and the continued strengthening in the palladium prices.

Production cost in Q4 2018 increased to $45 per tonne from $42 per tonne in Q4 2017. The increase in this unit cost is primarily due to mining cost associated with the Sheriff open pit during Q4 2018. Year-over-year, average production cost decreased to $45 per tonne from $57 per tonne in 2017.

The year-over-year decrease is primarily a result of the significant reduction in the underground mining cost. Production cost include surface and underground mining cost, milling cost, general administration, inventory and all other costs at Lac des Iles mine site. We can expect this unit cost to increase slightly over the next couple of years, as the underground mine transitions to the 12,000-tonne per day mining rate and the surface mill feed is gradually replaced with underground ore.

Adjusted EBITDA for Q4 2018 was $64.2 million, an increase of 74% over that in Q4 2017. For the year, adjusted EBITDA was $167.8 million compared to $86.2 million in 2017.

Net income for Q4 was $77.5 million compared to $14.3 million in Q4 2017. Net income in Q4 2018 included a onetime adjustment of $43.5 million relating to the recognition of deferred tax assets derived from the company's previously unrecognized income tax losses. Excluding this onetime adjustment, net income for Q4 2018 increased by $29.5 million to $43.8 million, more than twice that in Q4 2017. For the year, net income increased by $83.1 million over that in 2017, as Jim mentioned, $119.2 million.

Palladium revenue per ounce sold averaged USD 1,101 (sic) [USD 1,111] for the year compared to USD 876 in 2017. The all-in sustaining cost per ounce produced averaged USD 690 in 2018 compared to USD 694 in the prior year. The all-in sustaining cost in 2019 is expected to increase to approximately USD 800 per ounce payable palladium due to a slight increase in sustaining capital investment and a significant increase in the underground operating development cost related to the underground mine expansion project. The operating development -- this operating development is in advance of the associated ore production which will be realized in future years.

The company invested $11.8 million in capital during Q4 2018 compared to $12.7 million for the same period of -- in 2017. Capital expenditures in 2018 totaled $66.3 million compared to $62.5 million in 2017. As previously guided, capital expenditures are forecasted to increase to $84 million in 2019 with the added investment in the underground mine expansion project. Exploration expenditures in Q4 2018 equal those in Q4 2017 at $3.1 million. For the year, exploration expenditures increased by $5.4 million, totaling $11.2 million in 2018 compared to $5.8 million in 2017. The company plans to spend $16 million in exploration in 2019.

At year-end, the company's debt was $49.1 million compared to $85.6 million as at December 31, 2017, a reduction of $35.6 million for the year. As at December 31, 2018, the company had liquidity of $122 million compared to $19.2 million at the year-end 2017.

On December 17, 2018, the company entered into a new USD 125 million revolving term credit facility replacing the existing credit facilities. The term of the new credit facility is 5 years. A portion of the proceeds of the initial drawdown under the new credit facility was used to repay the outstanding senior secured term loan of USD 35 million to Brookfield Business Partners as well as the outstanding balance from the previous revolving credit facility. The company's liquidity at year-end 2018 includes USD 80 million available under its credit facility.

As at December 31, 2018, the company had $27 million drawn on the credit facility, plus $17.8 million utilized for letters of credit. On December 24, 2018, the company closed a nonbrokered private placement of 714,257 common shares in relation to a flow-through equity offering. Gross proceeds to the company were approximately $10 million. All proceeds from the sale of the flow-through shares will be issued -- sorry, will be used to incur eligible Canadian exploration expenses under the company's greenfield exploration program.

Overall, 2018 was a good year for North American Palladium. The company is generating cash, investing in capital and exploration for the future and strengthening the balance sheet by reducing debt. Given consideration to the company's cash flow and capital allocation alternatives, including the previously mentioned underground mine expansion project and given the company's confidence and continued strong financial performance, NAP's Board of Directors has announced a quarterly dividend of $0.03 per common share to shareholders on record on March 1, 2019.

Next, Jim will discuss the underground expansion project under way at the Lac des Iles mine. Jim?

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James E. Gallagher, North American Palladium Ltd. - President & CEO [5]

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Thanks, Tim. So now I'd like to talk to our underground expansion. This past fall, we disclosed our decision to take the underground mine to 12,000 tonnes a day, which will be our full mill production at that time. As you can see from the graphs on Slide 14, our production rate is rising to 12,000 tonnes a day in the next 2.5 years.

There are some details I want to explain about the expansion project based on some of the questions I have received. This is an extremely low-cost mine expansion project, and that's primarily because as shown in the slide, we are actually expanding back up into the old part of the upper mine, which we have previously mined but left behind a large, lower-grade resource. We are now quite confident that we can mine this from underground at a high rate, at a better grade and with an overall better business case, while also capturing resources that were not included in the previous open-pit pushback plan.

In each of the next 2 years, we're going to spend approximately $80 million of capital, half of which will be designated as project capital for this expansion. A particular focus is the Roby Central Zone, which is shown in the diagram with the green development. The zone was mined out previously but at a much higher cut-off grade. Over 50% of the reserves of almost 20 million tonnes in the upper part of the mine are contained in the Roby Zone, and the vast majority of the development and infrastructure is already in place.

The blue lines in the diagram show the satellite zones that we're now able to pick up because of the shared infrastructure in the upper part of the mine. So the bottom line, this is a very low cost, very quick expansion, simply because a significant part of the development is already in place.

We have already started this project, both with our own crews and with development contractors who started at the beginning of this year. In addition to expanding our current mine, we continue to develop our exploration portfolio. A number of targets are demonstrating promise.

And with that, I'll hand it over to Dave Peck, our Vice President, Exploration. Dave?

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David C. Peck, North American Palladium Ltd. - VP of Exploration [6]

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Thanks, Jim. As Tim mentioned, exploration expenditures were $3.1 million for the fourth quarter of last year and $11.2 million in total for 2018. This is a significant increase over the money spent in 2017 of approximately $5.8 million. This increase reflects a major investment in surface exploration on the eastern part of the mine property and the addition of the Sunday Lake project to our exploration portfolio. A comprehensive update on our 2018 exploration results from Lac des Iles was provided earlier in the week in a news release.

We continue to focus our exploration efforts on finding new resources at LDI. Last year, the company completed approximately 12,000 meters in 29 underground exploration holes. The majority of these were designed to extend or convert resources in the southern part of the Offset Zone. In the fourth quarter, we focused on revising our geological models and preparing new underground drill targets for 2019. This year, we expect to complete a new exploration drift that will provide critical new drill platforms for most of our top-ranked underground exploration targets.

Next slide shows our plans for surface drilling. A total of 7,000 meters in 18 holes were completed from surface drilling in the fourth quarter, and a total of 37 surface exploration drill holes and almost 20,000 meters were completed last year. This includes about 2,000 meters at Legris Lake, approximately 5,600 meters at Sunday Lake and nearly 12,000 meters at LDI.

In the fourth quarter, surface drilling was limited to completing 2 fences of holes that will provide the first 2 complete geological cross-sections across the highly prospective eastern part of the mine property. These sections will be critical in maximizing the value of the significant amount of new geophysical data that was acquired in the last few months of 2018.

We are continuing to receive and assess results from these surveys. This year, we plan to test all of the new geophysical targets while conducting step-out drilling as a follow-up to the positive drilling results received from the Creek Zone and Baker Zone last year.

In the fourth quarter, we completed a new geophysical survey at Sunday Lake that has identified several conductive features along the base of the intrusion. We started drilling these targets in January. And then in addition to the over 10,000 meters of drilling we've laid out, we plan to complete downhole geophysical surveys before we wrap up this program in April. We reassessed and reranked all of our Greenfields exploration properties within the Lac des Iles mine area, and have designed a new series of geophysical surveys that we started in January. These surveys will be used to select drill targets for 2020.

I'll now return the call back to Jim.

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James E. Gallagher, North American Palladium Ltd. - President & CEO [7]

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Thanks, Dave. Further underscoring the company's confidence in its future are the record palladium prices that we have seen recently, and our belief that the strong prices will continue for several years to come. There are number of factors contributing to the rising price of palladium, which currently sits at almost USD 1,400 per ounce.

As most of you are aware, 80% of palladium produced ends up in catalytic converters in automotive gasoline engines. Some of the significant factors that are contributing to the growing palladium demand include the growth of hybrid vehicles. Electrification is a positive for the palladium story, and not everyone has seen it that way. Currently, the biggest part of the automobile electrification story is hybrids as opposed to pure battery electrics. Hybrids contain higher loadings of palladium due to the on-off cycle nature of the engines. Catalytic converters work best when they run hot, and that is not the operating cycle for a hybrid engine. To accommodate for this, higher palladium loadings are used.

Another significant factor is lower diesel sales due to the diesel gate scandal with Volkswagen others. Diesel engines, which have platinum-based catalytic converters are being replaced with gasoline engines at a high rate in Europe and other parts of the world, driving more palladium demand.

The growth of the SUV and the truck market, primarily in North America, is also boosting demand. Larger engines simply require larger palladium loadings. Sustained growth of automobile sales around the world is another key factor. Although auto sales did flatten out in the last quarter of last year, year-on-year, over the last decade, we've seen at least a 2% growth, driven mostly by Asian countries and particularly China. But most significantly impacting the recent rise in prices are heightened emission standards globally. A good example of this is the Real Driving Emissions standards that are being introduced in Europe and in China, and the next slide details that.

Real Driving Emissions or RDE testing will be part of mandatory car emissions measurement in the second half of 2019 in Europe and China. RDE requires vehicles to undergo outdoor driving test under various real-world conditions and will be carried out in addition to existing lab-based measurements. Higher palladium loadings are required to meet these higher emission standards and these more challenging trials. In addition, tests have shown that platinum does not perform as well as palladium under conditions such as these limiting the likelihood of a significant substitution, giving us confidence that the strong palladium demand will continue for the foreseeable future.

The other part of the story is the supply side. This is a story of flat supply picture moving forward with some risk. First, the supply is inelastic given that the vast majority, over 90% of the world's production, comes as a byproduct of other metals, primarily nickel and copper mining in Russia and platinum mining in South Africa.

Secondly, there is the risk introduced by the jurisdictions where palladium is mined. South Africa is the highest risk area where there are challenges in the industry as a whole and particularly with the current economics of the platinum mines. Thirdly, driving the price of palladium is the reduction in on-ground inventory.

Governance of the fundamental change in the palladium market is demonstrated in this slide on Page 25. The green line demonstrates palladium holdings in stockpiles and ETFs against the price in blue. As you can see, over the last decade, there has been a very strong correlation to investor interest into purchasing and holding palladium ETFs or other above-ground stocks in the price, a very good correlation. That changed early in 2017, when the above-ground holdings began to fall off dramatically and continued to decline to the current low levels as prices have continued to rise. This is really demonstrating the fundamental market deficit where supplies are extremely tight and there is very little product left available in inventory stockpiles to supplement the market. The price currently is being driven by fundamental supply-demand issues, not investor speculation.

In closing, 2018 was a very solid year for us. It is a reflection of the work that the team has done, and as they continue to do to build a strong foundation in support of our long-term vision for the company.

Looking ahead, our production guidance for payable palladium ounces for 2019 is between 220,000 to 230,000 ounces and an average all-in sustaining cost of USD 785 to USD 815 per ounce. We are very confident in our operational performance and our mine expansion plan moving forward. We are confident in the fundamentals of the palladium market, and we believe that 2019 and beyond will continue to be quite positive. A reflection of this confidence is the board's decision to begin payment of a quarterly dividend, returning some capital back to our shareholders. Thank you very much for your time today.

I'll turn it back to the operator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Derek Macpherson of Red Cloud Klondike Strike.

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Derek Macpherson, Red Cloud Klondike Strike Inc., Research Division - VP of Mining Analysis [2]

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I guess, my question relates to the dividend policy, and obviously, it's a great sign of confidence that you guys have declared that $0.03 dividend. What do you see is the sort of dividend -- potential dividend policy going forward? Obviously, based on your feasibility study, there's pretty good free cash flow and -- pretty good free cash flow and I think a strong palladium market. Is that -- is there -- what was the sort of view going forward beyond this quarter on that?

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James E. Gallagher, North American Palladium Ltd. - President & CEO [3]

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Well, thanks for the question. I think I'll answer that, and we literally just completed the board meetings yesterday. So the dividend is really relatively modest at this point in time, and I think the board will reevaluate that as we move forward. As most of you are aware, we were nearly a bankrupt company only 3 years ago. And so I think, this is a tremendous vote of confidence by the board. Everyone is confident in these fundamentals and in the operation moving forward. So this is a modest first step. I'm not going to predict what the policy will be moving forward. But there is a commitment to see some capital return to investors. We are also interested in attracting perhaps a larger group of investors. And so that's why the decision was taken at this time. And it will be reviewed, obviously, on an ongoing basis by the board.

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Operator [4]

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Our next question comes from Daniel McConvey of Rossport Investments.

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Daniel McConvey, [5]

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A couple of questions. Firstly, Jim, maybe just give us some background on -- with the whole tailing situation in Brazil, what are your tailings plans? How you manage your tailings plans? And what your plans are over the next, say, 5-or-more years?

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James E. Gallagher, North American Palladium Ltd. - President & CEO [6]

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Thanks, Dan. And I was very prepared for that question.

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Daniel McConvey, [7]

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I thought so.

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James E. Gallagher, North American Palladium Ltd. - President & CEO [8]

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So -- very unfortunate what has happened in Brazil. And unfortunately, it has repeated itself in Brazil just recently. And the Brazil scenario and the decisions that Vale has taken since have tainted tailings management and in particular a form of tailings management called upstream raising in a very negative light. We don't currently use upstream raising. However, our plans are to use a variation of that or a hybrid version of upstream raising over the next several years. And so I want to use an example, an analogy. Few years ago, this is a true story. There were a number of building collapses in Pakistan. And one in particular got a lot of press in Canada, simply because one of the large retailers was buying clothing from what was apparently a bit of a sweat factory. But because a couple of buildings, 20-story buildings in Pakistan collapsed, the world did not stop building 20-story buildings. And the same is true and should be true for tailings and upstream raising. If you properly engineer it, properly construct it and properly maintain it, you will not have problems with your tailings dams. Our design relative to the design as we understand it that was in place is made of different material. Our base dams, which are all rock-core dams, and we will be building upstream raises on top of the existing footprint of tailings dams are solid rock-core dams. That was not the case in Brazil. Our upstream raising will be built out of a mix of rock and other material. The tailings dams in Brazil were actually built out of tailings themselves. The slope of our dams will be much, much flatter. The height will be much, much shorter. And a factor of safety as we understand it will be significantly higher. The other critical factor here is that the failures that happened in Brazil, both of them and the Mount Polley disaster in British Columbia could not have happened to the same extent if there wasn't significant amounts of water being held in their tailings dams. You cannot possibly get that several kilometer downstream impact without that water. Our tailings design today and in the future are designed to be self-drained and not containing any significant amounts of water, and that's fundamental to the design. Even in long-term closure, they're designed to be sloped and again self-draining so that without any real maintenance they will not hold water. So it's just fundamentally different. And I just want to repeat, in the world of engineering, engineer it right, construct it right, manage it appropriately, then you should not have any problems. And that's certainly what we're doing. And key to that over the last several years and after the Mount Polley and then the Samarco disaster in 2015, in Brazil, I took the decision to introduce an Independent Tailings Review Board. This is 3 fully independent technical experts from around the world, actually including 1 South African individual, who oversee our design engineer and have brought an extra level of caution, expertise and guidance to what we do. So we're quite confident moving forward that we will not have problems, and I sleep better at night because of all of that. So thanks for asking that question, Dan.

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Daniel McConvey, [9]

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Jim, in terms of your production costs, they're going up in the '19 and '20. And I guess, when I look at your technical report, you're heavy in CapEx the next 2 years, this year and next year. Should we see those all-in sustaining costs come down in 2021?

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James E. Gallagher, North American Palladium Ltd. - President & CEO [10]

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That's correct, Dan. And I don't know, if Tim can remember the numbers out of the study better than I do at this point. Tim, do you want to comment on that?

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Timothy J. Hill, North American Palladium Ltd. - VP of Finance & CFO [11]

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Yes. I believe, I'm going by memory, Dan, because I haven't got it in front of me. But yes, it does go up over the next 2 years as we increase our over-the-ground operating development for the mine expansion here. I believe it comes down to USD 700 or thereabouts per ounce going forward -- '21 going forward, if I'm not mistaken.

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Daniel McConvey, [12]

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Okay. Last question. In terms -- you have a lot of tax losses. Is there anything that's going to kick in, in the next -- based on your plan next 2 or 3 years in terms of taxes or provincial royalties that are going to...?

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Timothy J. Hill, North American Palladium Ltd. - VP of Finance & CFO [13]

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Currently, we do -- we are subject to Ontario mining tax. So we really don't pay a royalty. We do have this tax -- this deferred tax asset that we recognize on our balance sheet, $43.5 million. So that will offset taxes over the next year -- maybe 18 to 24 months. After that time, we'll be fully taxable going forward.

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Daniel McConvey, [14]

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So you have used all your federal tax losses by that time?

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Timothy J. Hill, North American Palladium Ltd. - VP of Finance & CFO [15]

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That's correct. That's correct.

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James E. Gallagher, North American Palladium Ltd. - President & CEO [16]

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And Dan, that's really it depends on the price, but if the price stays where it currently is, we'll burn through those tax losses quickly, but that's actually a pretty good thing.

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Timothy J. Hill, North American Palladium Ltd. - VP of Finance & CFO [17]

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Yes, it is.

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Operator [18]

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Our next question comes from John Bender of Matthew Bender & Company Holdings Ltd.

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John Bender, [19]

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The free float is 8%. I was curious what steps are you taking to make the shares marketable to institutional investors? And what are the intentions of Brookfield Asset Management? They are a private equity firm. They indicated that they intend to exit at some point. I'd be just curious to know, is there a significant overhang that we might be expecting? Or, in fact, are you considering -- or Brookfield considering increasing the free float possibly gradually to make the shares more marketable, the 2 institutional investors?

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James E. Gallagher, North American Palladium Ltd. - President & CEO [20]

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Right. Thanks, John. Very good question. So the simple answer is yes. Brookfield's intention from the day that they made their first investment would be when they see an appropriate return that they would start, obviously, capitalizing on their investment and start selling down their position. So that really has never changed. I think -- if you are following the company, last year, we actually did have a declared process, where Brookfield was looking to sell a proportion or even all of the company. And I have a quick summary. We had lots of activity. We never had the right offer come forward. And part of the fundamental for that was not everybody was buying completely into where the palladium market was likely going to end up. So we officially canceled our process formerly at the end of last year. However, you're absolutely right. Brookfield and we recognize that to get more trading and more activity and more interest in the stock, we need much more float. So that is being evaluated. It's constantly been evaluated, and Brookfield will consider an opportunity to put more shares back into the market and sell off a portion perhaps through the course of this year. So it is something that is potential, and it is potentially likely. There is no formal process under way right now. But certainly, we are going to be engaging investors. We'll be at the BMO Conference. We are engaging investors in Toronto, and we'll be doing otherwise. And we'll be gauging the public's interest perhaps in acquiring some of Brookfield's position.

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John Bender, [21]

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And have you had interest from research houses who might consider following on North American Palladium?

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James E. Gallagher, North American Palladium Ltd. - President & CEO [22]

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We have had some. And without declaring who, we may get some coverage in the near future. But the biggest holdback to that, of course, is the small float. And most analysts are reluctant because, as you would be aware, it's hard to recommend a stock where actually a fair -- fairly small amount of buying could dramatically impact the price. And that's a reality when we have a small float of less than 8%, quite frankly, in our stock. So I think, we need to get more float in order to get better analyst coverage. So something the board, Brookfield and management is very aware. We're definitely with the heightened interest that has come, I would say, with the fact that palladium hit and then surpass the price of gold, I think, it will be a different climate for us this year.

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Operator [23]

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This concludes both the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

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James E. Gallagher, North American Palladium Ltd. - President & CEO [24]

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Thank you.

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Timothy J. Hill, North American Palladium Ltd. - VP of Finance & CFO [25]

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Thank you, everyone.