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March 19, 2008
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North American Palladium Announces Fourth Quarter and Year-End 2007 Financial
Results
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TORONTO, ONTARIO--(Marketwire - March 19, 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 of 2007
- Revenue for the year increased by $36.7 million to $195.9 million, up 23% versus 2006.
- Operating cash flow for the year (before changes in non-cash working capital(1) improved by $36.9 million to $46.8 million compared to operating cash flow of $9.9 million in 2006.
- The net loss for the year ended December 31, 2007 was $28.7 million or $0.51 per share compared to a net loss of $34.1 million or $0.65 per share in 2006. The net loss for the year includes a net negative impact of $19.0 million (2006 - net negative impact $3.7 million) due to foreign exchange gains and losses.
- Palladium production increased by 21% to 286,334 ounces for the year ending December 31, 2007 versus production of 237,338 ounces the previous year.
- Palladium represented 47% of the year's total revenues while platinum and nickel contributed 16% and 22% respectively.
- Total by-product revenues for the year increased by 25% to $104.1 million versus $83.6 million in 2006.
- Cash cost per ounce of palladium produced(1), net of by-product metal revenues and royalties, was US$164 in 2007 compared to US$201 last year.
- North American Palladium completed an equity offering that resulted in total gross proceeds to the Company of approximately US$86 million,
which will be used to advance its three platinum group metals (PGM) and nickel-copper projects.
(1) Non-GAAP measure. Reference should be made to footnote 1 at the end of this Press Release.
North American Palladium Ltd. announced today financial results for the fourth quarter and year ended December 31, 2007.
Revenue, after pricing adjustments, in the fourth quarter of 2007 was $46.5 million, lower than the fourth quarter of 2006 by $4.3 million due mainly to the negative foreign exchange impact from the continued strengthening of the Canadian dollar versus the US dollar. For the year ended December 31, 2007, revenue after pricing adjustments was $195.9 million, an increase of $36.7 million or 23%, compared to revenue of $159.2 million last year.
Palladium production for the quarter ended December 31, 2007 of 71,595 ounces was down slightly (2%) compared to 73,242 ounces the previous year and reflects increased scheduled maintenance downtime in the fourth quarter of 2007. Palladium production for the year ended December 31, 2007 increased to 286,334 ounces, up 21% compared to the previous year.
Palladium sales in the fourth quarter of 2007 were recorded at an average price of US$364 per ounce versus an average price of US$322 in the same period in 2006. For the year ended December 31, 2007 palladium sales were recorded at an average price of US$356 per ounce, up 12%, compared to US$319 in 2006.
For the quarter ended December 31, 2007, cash cost per ounce(1) of palladium, net of by-product metal revenues, was US$223 per ounce versus US$108 in the same period last year and reflects primarily the negative impact of the strengthening Canadian dollar on by-product metal revenue. For the year ended December 31, 2007 the cash cost per ounce(1) of palladium produced declined to US$164 per ounce compared with US$201 per ounce in 2006, reflecting the increase in production together with continued strength in by-product metal prices, partially offset by the strengthening Canadian dollar.
The Company recognized a loss from mining operations of $8.2 million in the fourth quarter of 2007 compared to income of $0.5 million in the same period last year. The loss is due to lower revenue of $4.3 million, which includes a negative foreign exchange impact of $7.2 million, and increased operating costs due primarily to increased production costs ($1.0 million), smelting, refining and freight costs ($1.5 million) and amortization charges ($0.9 million). The loss from mining operations for the year ended December 31, 2007 was $19.4 million, an increase of $1.3 million (7%), compared to the loss of $18.1 million last year.
The net loss for the quarter ended December 31, 2007 was $11.1 million or $0.19 per share compared to a loss of $7.4 million or $0.14 per share in the same period last year. For the year ended December 31, 2007, the Company decreased its net loss to $28.7 million ($0.51 per share) from the 2006 loss of $34.1 million ($0.65 per share) despite a negative foreign exchange impact of $19.0 million (2006 negative impact of $3.7 million) due to strengthening of the Canadian dollar versus the US dollar.
Operating cash flow for the year (before changes in non-cash working capital(1) improved by $36.9 million to $46.8 million compared to operating cash flow of $9.9 million in 2006.
(1) Non-GAAP measure. Reference should be made to footnote 1 at the end of this Press Release.
Mr. Jim Excell, President and Chief Executive Officer said, "The consistent and improved production results are gratifying and supports our drive toward strengthening the Company's financial position. Having raised US$86 million in a recent financing, we are well-positioned to aggressively advance the Shebandowan West and the Offset High Grade Zone projects in Ontario, as well as the Arctic Platinum Project in Finland, towards production decisions." Mr. Excell added, "Since December 31, 2007 we have seen a significant increase in PGM prices, highlighting increased demand and growing supply concerns in South Africa. If the prevailing metal prices are sustained, it can have a very positive impact on the Company's 2008 financial performance."
Outlook
Palladium production is expected to increase by approximately 5% for the year ended December 31, 2008 with an estimated total production of approximately 300,000 ounces. The proportion of by-product metals produced is, in aggregate, expected to increase in tandem with palladium production.
A key strategy moving forward will be to continue the pursuit of opportunities to acquire good quality PGM-Ni-Cu projects. The Company's ambitious exploration program will continue in 2008, with an important component being the completion of a feasibility study for the Arctic Platinum Project in Finland. In addition, a preliminary economic assessment of the Offset High Grade Zone at Lac des Iles is nearing completion and the Company anticipates releasing the results during the second quarter of 2008. A preliminary economic assessment of the Shebandowan West Project is also anticipated in the second quarter of 2008 which evaluates a ramp-accessed underground mine scenario. Discussions are currently underway with Vale-Inco about the next steps for the Shebandowan joint venture.
Further information about the 2007 year-end results are 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 fourth quarter and year-end 2007 Conference Call and Webcast at 3:00 pm ET on Thursday March 20, 2008. The toll-free conference call dial-in number is 1-866- 226-1799 and the local and overseas dial-in number is 416-641-6125. 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.vcall.com/IC/CEPage.asp?ID=126220. A replay of the conference call will be available until April 3, 2008: toll-free at 1-800-408-3053; locally and overseas at 416-695-5800, access code #3253315.
(1) Non-GAAP Measures
This management discussion and analysis 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 for the current period 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)
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Three months ended Twelve months ended
December 31 December 31
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2007 2006 2007 2006
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Production costs including
overhead $ 30,530 $ 29,553 $ 125,065 $ 112,458
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Smelter treatment, refining and
freight costs 5,939 4,488 22,444 15,438
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36,469 34,041 147,509 127,896
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Less by-product metal revenue 22,701 26,572 104,126 83,556
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13,768 7,469 43,383 44,340
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Divided by ounces of palladium 62,446 59,333 251,531 193,067
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Cash cost per ounce (C$) 220 126 172 230
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C$ exchange rate 0.988 1.165 1.050 1.141
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Cash cost per ounce (US$) $ 223 $ 108 $ 164 $ 201
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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)
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Three months ended Twelve months ended
December 31 December 31
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2007 2006 2007 2006
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Operating cash flow $ 6,858 $ 8,421 $ 46,828 $ 9,912
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Changes in non-cash working
capital 3,663 (13,995) (21,352) (43,701)
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Cash provided by operating
activities $ 10,521 $ (5,574) $ 25,476 $ (33,789)
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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 its three advanced exploration projects: the Offset High Grade Zone at its Lac des Iles mine, the Shebandowan West Project, located approximately 100 kilometers from the mine, and the Arctic Platinum Project in Finland. 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)
December 31
2007 2006
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Assets
Current Assets
Cash $ 74,606 $ 3,153
Concentrate awaiting settlement, net 79,087 82,050
Taxes recoverable 62 145
Inventories 17,873 14,164
Current portion of crushed and broken ore
stockpiles 8,072 7,134
Other assets 2,563 2,602
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182,263 109,248
Mining interests, net 114,464 146,617
Mine restoration deposit 8,272 8,041
Crushed and broken ore stockpiles 375 289
Deferred financing costs - 962
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$ 305,374 $ 265,157
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable and accrued liabilities $ 20,757 $ 21,526
Future mining tax liability 168 149
Current portion of obligations under capital
leases 1,672 2,104
Current portion of convertible notes payable 25,710 22,148
Current portion of long-term debt 5,918 6,662
Kaiser-Francis credit facility - 5,827
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54,225 58,416
Mine restoration obligation 8,878 8,211
Obligations under capital leases 1,824 4,111
Convertible notes payable - 23,062
Long-term debt 3,957 10,992
Future mining tax liability 539 381
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69,423 105,173
Shareholders' Equity
Common share capital and common share purchase
warrants 443,986 339,743
Stock options 1,673 1,269
Equity component of convertible notes payable, net
of issue costs 6,044 12,336
Contributed surplus 6,292 -
Deficit (222,044) (193,364)
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Total shareholders' equity 235,951 159,984
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$ 305,374 $ 265,157
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These financial statements should be read in conjunction with the notes and
management's discussion and analysis, available on online at www.sedar.com,
www.sec.gov and on the Company's website.
North American Palladium Ltd.
Consolidated Statements of Operations, Comprehensive Loss and Deficit
(expressed in thousands of Canadian dollars, except share
and per share amounts)
Three months ended Year ended
December 31 December 31
2007 2006 2007 2006
------------ ------------ ------------ -------------
Revenue - before
pricing adjustments $ 44,938 $ 46,061 $ 201,367 $ 145,819
Pricing adjustments
commodities 1,799 1,229 8,756 11,674
Pricing adjustments
foreign exchange (231) 3,468 (14,191) 1,707
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Revenue - after
pricing adjustments 46,506 50,758 195,932 159,200
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Operating expenses
Production costs,
excluding amortization
and asset retirement
costs 30,530 29,553 125,065 112,458
Smelter treatment,
refining and freight
costs 5,939 4,488 22,444 15,438
Amortization 10,876 9,964 46,908 30,103
Administrative 2,061 1,509 7,773 6,734
Exploration 5,179 4,572 12,138 11,831
Loss on disposal of
equipment - - - 194
Asset retirement
costs 160 165 1,010 554
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Total operating
expenses 54,745 50,251 215,338 177,312
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Loss from mining
operations (8,239) 507 (19,406) (18,112)
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Other income
(expenses)
Interest and other
financing costs (3,162) (5,601) (18,633) (15,647)
Foreign exchange
gain (loss) 271 (2,359) 8,422 (1,759)
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Total other income
(expenses) (2,891) (7,960) (10,211) (17,406)
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Loss before income
taxes (11,130) (7,453) (29,617) (35,518)
Income tax recovery (42) (57) (937) (1,409)
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Net loss and
comprehensive
loss for the period (11,088) (7,396) (28,680) (34,109)
Deficit, beginning
of period (210,956) (185,968) (193,364) (159,255)
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Deficit, end of
period $ (222,044) $ (193,364) $ (222,044) $ (193,364)
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Loss per share
Basic $ (0.19) $ (0.14) $ (0.51) $ (0.65)
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Diluted $ (0.19) $ (0.14) $ (0.51) $ (0.65)
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Weighted average
number of
shares outstanding
Basic 60,250,864 52,902,051 55,792,203 52,562,939
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Diluted 60,250,864 52,902,051 55,792,203 52,562,939
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These financial statements should be read in conjunction with the notes and
management's discussion and analysis, available on online at www.sedar.com,
www.sec.gov and on the Company's website.
North American Palladium Ltd.
Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)
Three Months ended Year ended
December 31 December 31
2007 2006 2007 2006
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Cash provided by (used in)
Operations
Loss for the period $ (11,088) $ (7,396) $ (28,680) $ (34,109)
Operating items not
involving cash
Accretion expense relating
to convertible notes
payable 2,291 3,938 12,947 10,090
Amortization 10,876 9,964 46,908 30,103
Amortization of deferred
financing costs 135 208 751 1,090
Interest on convertible
notes settled in shares 636 1,032 2,644 1,974
Accrued interest on mine
restoration deposit (121) (110) (231) (194)
Unrealized foreign exchange
loss (gain) 3,691 (263) 10,779 (822)
Asset retirement costs 160 165 1,010 554
Future income tax recovery (42) 530 (937) (739)
Stock based compensation and
employee benefits 320 353 1,637 1,771
Loss on disposal of
equipment - - - 194
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6,858 8,421 46,828 9,912
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Changes in non-cash working
capital 3,663 (13,995) (21,352) (43,701)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
10,521 (5,574) 25,476 (33,789)
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----------- ----------- ----------- -----------
Financing Activities
Advances (settlements) under
purchase facility (3,990) - - -
Issuance of common shares 69,615 2 75,318 3,955
Repayment of long-term debt (1,478) (1,660) (12,016) (6,566)
Repayment of obligations
under capital leases (417) (548) (1,979) (2,278)
Mine restoration deposit - - - (600)
Issuance of convertible
notes - - - 41,037
Increase in long term debt
and credit facility - 5,800 - 8,111
Deferred financing costs - - - (2,364)
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63,730 3,594 61,323 41,295
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Investing Activities
Additions to mining
interests (3,799) (4,228) (15,346) (19,384)
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----------- ----------- ----------- -----------
(3,799) (4,228) (15,346) (19,384)
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Increase (decrease) in cash
and cash equivalents 70,452 (6,208) 71,453 (11,878)
Cash and cash equivalents,
beginning of period 4,154 9,361 3,153 15,031
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Cash and cash equivalents,
end of period $ 74,606 $ 3,153 $ 74,606 $ 3,153
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Cash and cash equivalents
consisting of:
Cash $ 4,444 $ 3,153 $ 4,444 $ 3,153
Short-term investments 70,162 - 70,162 -
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$ 74,606 $ 3,153 $ 74,606 $ 3,153
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These financial statements should be read in conjunction with the notes and
management's discussion and analysis, available on online at www.sedar.com,
www.sec.gov and on the Company's website.
North American Palladium Ltd.
Consolidated Statements of Shareholders' Equity
(expressed in thousands of Canadian dollars, except share amounts)
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Number of Capital Stock
shares stock options Warrant
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Balance, December 31, 2006 52,947,693 $ 331,705 $ 1,269 $ 8,038
Common shares issued:
For principal repayments on
convertible notes payable 3,120,997 26,180 - -
For interest payments on
convertible notes payable 341,528 2,644 - -
Private placement of flow-
through shares (net) 550,000 5,686 - -
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 options exercised 5,000 17 - -
Fair value of stock options
exercised - 10 (10) -
Stock-based compensation expense 138,685 1,204 414 -
Net loss for the year ended
December 31, 2007 - - - -
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Balance, December 31, 2007 75,770,570 $ 430,793 $ 1,673 $ 13,193
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Equity
component of Total
convertible Contributed shareholder's
notes payable surplus Deficit equity
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Balance, December
31, 2006 $ 12,336 $ - $ (193,364) $ 159,984
Common shares
issued:
For principal
repayments on
convertible notes
payable (6,292) 6,292 - 26,180
For interest
payments on
convertible notes
payable - - - 2,644
Private placement
of flow
through shares
(net) - - - 5,686
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 options
exercised - - - 17
Fair value of
stock options
exercised - - - -
Stock-based
compensation
expense - - - 1,618
Net loss for the
year ended
December 31, 2007 - - (28,680) (28,680)
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Balance, December
31, 2007 $ 6,044 $ 6,292 $ (222,044) $ 235,951
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These financial statements should be read in conjunction with the notes and
management's discussion and analysis, available on online at www.sedar.com,
www.sec.gov and on the Company's website.
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CONTACT INFORMATION:
North American Palladium Ltd.
Fraser Sinclair
Vice President, Finance and Chief Financial Officer
(416) 360-7971 Ext. 222
Email: fsinclair@napalladium.com
or
North American Palladium Ltd.
Linda Armstrong
Director, Investor Relations
(416) 360-7971 Ext. 226
Email: larmstrong@napalladium.com
Website: www.napalladium.com
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INDUSTRY: Manufacturing and Production - Mining and Metals
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