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Message: Announces Fourth Quarter and Year Ended December 31, 2008 Results
| February 24, 2009 | ||
| North American Palladium Announces Fourth Quarter and Year Ended December 31, 2008 Results | ||
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TORONTO, ONTARIO--(Marketwire - Feb. 24, 2009) - North American Palladium Ltd. (TSX:PDL)(NYSE Alternext US:PAL) today announced financial results for the fourth quarter and year ended December 31, 2008. "In response to the difficult market conditions we faced in the last quarter of 2008, North American Palladium reacted quickly to preserve the health of the Company by putting our Lac des Iles mine on temporary care and maintenance" said William Biggar, President and CEO. "Accordingly, we have maintained a strong balance sheet, with $86 million in working capital and no long-term debt. The $7 million exploration program previously announced on our Offset Zone at the Lac des Iles mine is now underway and updates on the drill program will be provided as results are received. Management also continues to work on a prefeasibility study for the Offset Zone, as well as a mine restart plan with the objective of streamlining processes and lowering operating costs." FINANCIAL HIGHLIGHTS - On October 29, 2008, due to a dramatic decline in the price of the Company's main metals, palladium and platinum, the Lac des Iles mine was temporarily placed on a care and maintenance basis. Revenue after pricing adjustments for the year ended December 31, 2008 was $125.5 million, a decrease of $70.4 million (36%) from the prior year. - For the year ended December 31, 2008 the Company reported a net loss of $160.7 million or $1.94 per share compared to a net loss of $28.7 million or $0.51 per share for the year ended December 31, 2007. The results for 2008 include a $90.0 million or $1.09 per share non-cash impairment charge on the Company's investment in its Lac des Iles mine due to prevailing market conditions. Excluding the impairment charge, the net loss was $70.7 million or $0.85 per share. - Net working capital was $86.1 million at December 31, 2008, including cash and cash equivalents of $43.1 million and concentrate awaiting settlement of $43.1 million. - The Company's total debt was reduced by $31.5 million in 2008 with no long-term debt as at December 31, 2008. - Palladium production for the year ended December 31, 2008 was 212,046 ounces, a decrease of 26% compared to 286,334 ounces in the prior year, which reflects the 10 months of production in 2008 prior to the Lac des Iles mine being placed on temporary care and maintenance. - For the year ended December 31, 2008, cash cost per ounce of palladium produced,(1) net of by-product metal revenue and royalties, was US$283 compared to US$164 the previous year. The increase in cash cost per ounce is attributable to the reduction of by-product revenue due to lower commodity prices. (1) Non-GAAP measure. Reference should be made to footnote 1 at the end of this press release. Financial Results Revenue after pricing adjustments for the three months ended December 31, 2008 was $11.3 million compared to $46.5 million in the same period last year, a reduction of $35.2 million (76%) due mainly to the October 29, 2008 temporary closure of the Lac des Iles mine. Revenue after pricing adjustments for the year ended December 31, 2008 was $125.5 million, a decrease of $70.4 million (36%) compared to $195.9 million last year. Pricing adjustments for the year ended December 31, 2008 reduced revenue by $22.9 million compared to a reduction of $5.4 million last year. For the three months ended December 31, 2008, the Company reported a net loss of $112.4 million or $1.31 per share, compared to a net loss of $11.1 million or $0.19 per share in the same period last year. The results for the fourth quarter include a non-cash impairment charge of $90.0 million or $1.05 per share, to write down the Company's investment in mining interests due to prevailing market conditions. For the year ended December 31, 2008, the Company reported a net loss of $160.7 million or $1.94 per share compared to a net loss of $28.7 million or $0.51 per share for the year ended December 31, 2007. Palladium production for the three months ended December 31, 2008 of 21,373 ounces was down 70% compared to 71,595 ounces in the same period last year due mainly to the temporary closure of the Lac des Iles mine on October 29, 2008. Palladium production for the year ended December 31, 2008 was 212,046 ounces, down 26% compared to 286,334 ounces in the previous year. Palladium sales that were settled during the three months ended December 31, 2008, realized an average of US$207 per ounce, a decrease of 41% compared to US$348 per ounce in the same period last year. Palladium sales that were settled during the year ended December 31, 2008, realized an average of US$378 per ounce, an increase of 9% compared to US$346 per ounce in 2007. The spot price of palladium as at December 31, 2008 for the concentrate awaiting settlement mark-to-market was US$183, down 50% compared to the December 31, 2007 spot price of US$364. For the quarter ended December 31, 2008, cash cost(1) per ounce of palladium, net of by-product metal revenues and royalties, increased to US$464 per ounce as compared to US$221 per ounce in the corresponding period in 2007 due primarily to decreased by-product revenues as a result of lower by-product commodity prices, offset by the weakening Canadian dollar. For the year ended December 31, 2008, cash cost(1) per ounce of palladium, net of by-product metal revenues and royalties, increased to US$283 per ounce as compared to US$164 per ounce in the previous year. The increase is attributable to the reduction of by-product revenue as a result of lower by-product commodity prices. For the three months ended December 31, 2008, the loss from mining operations was $104.6 million, a decline of $103.6 million compared to last year's loss of $1.0 million. For the year ended December 31, 2008, the loss from mining operations was $127.8 million compared to income from mining operations of $0.5 million last year. Cash used in operations for the quarter ended December 31, 2008 was $16.6 million compared to cash provided by operations of $10.5 million in the same period last year. The quarter ended December 31, 2008 includes cash severance and other costs in connection with the temporary mine closure of $6.3 million. For the year ended December 31, 2008, cash provided by operations was $6.9 million compared to $25.5 million last year. The Company's total debt position (short and long-term) decreased to $7.6 million at December 31, 2008 compared to $39.1 million at December 31, 2007. Net working capital as at December 31, 2008 was $86.1 million compared to $128.4 million as at December 31, 2007. In addition to cash and cash equivalents as at December 31, 2008 of $43.1 million, the Company had concentrate awaiting settlement of $43.1 million. Outlook The price of the Company's two main metals changed dramatically over a very short period of time. As recently as June 2008, palladium and platinum traded at US$475 per ounce and US$2,103 per ounce respectively. As of February 23, 2009, the spot price of palladium was US$204 per ounce and platinum was US$1,074 per ounce. The temporary closing of the Lac des Iles mine will reduce expenses and maintain the Company's strong cash position. In addition to the cash on hand, management expects to realize significant cash flow over the next few months as payment is received for metal sales made prior to the closure. Going forward, management intends to focus on strategic initiatives, including: - Completing the $7.0 million drilling and exploration programs at Lac des Iles to further delineate and upgrade resources in the Offset Zone and to conduct grassroots exploration on the property adjacent to the mine; - Completing a prefeasibility study on the Offset Zone. This project has the potential to extend the life of the Lac des Iles mine significantly; - Developing a plan for the restart of the mine as a higher grade, lower tonnage, underground-only operation with a focus on streamlining processes and lowering operating costs, and - Leveraging the Company's strong balance sheet to pursue potential acquisitions and joint venture opportunities that may emerge in these difficult and volatile markets. The strategic direction of the Company is to build upon its significant palladium and platinum precious metal resources at Lac des Iles by acquiring gold resources and/or operations with the objective of building a mid-tier precious metals company with multiple revenue sources. Offset Zone Development The results of a preliminary economic assessment released in May 2008 estimated that the entire Offset Zone could be mined for up to ten years yielding annual production of 250,000 ounces of palladium, 16,000 ounces of platinum, 17,000 ounces of gold, 2 million pounds of nickel, and 4 million pounds of copper when operating at 6,000 tonnes per day (see May 7, 2008 press release). In January 2009, the Company announced the result of a NI 43-101 resource estimate for the Offset Zone prepared by Scott Wilson RPA that upgraded the indicated resource from 3.2 million tonnes to 12.3 million tonnes, an increase of 280%. This upgrade reflects the positive results from a $1.7 million drill program conducted in 2007 (see January 20, 2009 press release). A detailed prefeasibility report is underway with the objectives of converting indicated resources to probable reserves, and assessing the optimal mining and milling configuration and economics of developing the Offset Zone. The report is expected to be completed by the end of the second quarter 2009. Conference Call and Webcast The Company will host its year end conference call at 10:00 a.m. ET on Wednesday, February 25, 2009. The toll-free conference call dial-in number in North America 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 and at www.investorcalendar.com/IC/CEPage.a... . A replay of the conference call will be available until March 18, 2009 toll-free at 1-800-408-3053, locally and overseas at 416-695-5800, access code #3281999. (1) Non-GAAP Measure This press release refers to cash cost per ounce which is not a recognized measure under Canadian GAAP. This non-GAAP financial measure does not have any standardized meaning prescribed by Canadian GAAP and is therefore unlikely to be comparable to a similar measure presented by other issuers. Management uses this measure internally. The use of this measure 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 this measure better reflects the Company's performance for the current period and is 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 table reconciles this non-GAAP measure to the most directly comparable Canadian GAAP measure: Reconciliation of Cash Cost per Ounce to Financial Statements
Three Months Twelve Months
Ended Ended
(thousands of dollars except per Dec 31 Dec 31
ounce amounts) 2008 2007 2008 2007
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Production costs $22,358 $30,386 $115,037 $124,921
Less mine shutdown costs (7,877) - (7,877) -
Smelter treatment, refining
and freight costs 1,255 5,939 19,325 22,444
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15,736 36,325 126,485 147,365
Less by-product metal revenue (3,818) (22,701) (69,203) (104,126)
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$11,918 $13,624 $ 57,282 $ 43,239
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Divided by ounces of palladium 20,996 62,446 189,968 251,531
Cash cost per ounce (CDN$) $ 568 $ 218 $ 302 $ 172
Exchange rate (CDN$1 equals US$) 0.817 1.012 0.939 0.952
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Cash cost per ounce (US$) $ 464 $ 221 $ 283 $ 164
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About North American Palladium North American Palladium is a precious metals company that owns one of North America's largest palladium mines, historically producing approximately 4% of global palladium supply. The Company's palladium production at its Lac des Iles mine is strengthened by a significant contribution from platinum, gold, nickel and copper by-product metals. The Lac des Iles mine was placed on temporary care and maintenance in October 2008 due to low metal prices. The Company benefits from operating in a politically stable jurisdiction with developed infrastructure and a history of innovation and excellence in mining. Please visit www.napalladium.com for more information. Cautionary Statement on Forward-Looking Information 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 Company's mine remains viable operationally and economically; financing is available on reasonable terms; expectations for 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, metal 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; disruptions to credit and equity markets; 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; 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 December 31
2008 2007
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ASSETS
Current Assets
Cash and cash equivalents $ 43,068 $ 74,606
Concentrate awaiting settlement, net 43,051 79,087
Taxes recoverable 638 62
Inventories 16,590 26,320
Other assets 3,193 2,563
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106,540 182,638
Mining interests, net 31,640 114,464
Mine restoration deposit 8,724 8,272
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$146,904 $305,374
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $13,996 $20,757
Future mining tax liability - 168
Current portion of obligations under capital leases 1,992 1,672
Convertible notes payable - 25,710
Current portion of long-term debt 4,430 5,918
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20,418 54,225
Mine restoration obligation 8,455 8,878
Obligations under capital leases 1,130 1,824
Long-term debt - 3,957
Future mining tax liability - 539
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30,003 69,423
Shareholders' Equity
Common share capital and purchase warrants 485,386 443,986
Stock options 2,305 1,673
Equity component of convertible notes
payable, net of issue costs - 6,044
Contributed surplus 12,336 6,292
Deficit (383,126) (222,044)
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Total shareholders' equity 116,901 235,951
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$146,904 $305,374
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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 on the Company's
website at www.napalladium.com.
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
2008 2007 2008 2007
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Revenue - before pricing
adjustments $9,642 $44,938 $148,428 $201,367
Pricing Adjustments:
Commodities (7,189) 1,799 (38,633) 8,756
Foreign exchange 8,889 (231) 15,696 (14,191)
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Revenue - after pricing
adjustments 11,342 46,506 125,491 195,932
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Operating expenses
Production costs 22,358 30,386 115,037 124,921
Inventory pricing adjustment (1,599) 144 3,875 144
Smelter treatment, refining
and freight costs 1,255 5,939 19,325 22,444
Amortization 3,154 10,876 36,026 46,908
Asset impairment charge 90,000 - 90,000 -
Insurance recovery - - (13,800) -
Loss on disposal of
equipment 893 - 2,466 -
Asset retirement costs (142) 160 321 1,010
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Total operating expenses 115,919 47,505 253,250 195,427
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Income (loss) from mining
operations (104,577) (999) (127,759) 505
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Other expenses
General and administration 1,829 2,061 7,666 7,773
Exploration 4,670 5,179 23,070 12,138
Interest and other
financing costs 463 3,162 3,443 18,633
Foreign exchange loss (gain) 1,438 (271) 971 (8,422)
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Total other expenses 8,400 10,131 35,150 30,122
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Loss before taxes (112,977) (11,130) (162,909) (29,617)
Income and mining
tax recovery (558) (42) (2,230) (937)
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Net loss and comprehensive
loss for the period (112,419) (11,088) (160,679) (28,680)
Deficit, beginning of
period, as previously
reported (270,707) (210,956) (222,044) (193,364)
Adoption of new accounting
standards for inventory - - (403) -
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Deficit, end of period $(383,126) $(222,044) $(383,126) $(222,044)
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Net loss per share
Basic and diluted $(1.31) $(0.19) $(1.94) $(0.51)
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Weighted average number of
shares outstanding
Basic and diluted 85,628,711 60,250,864 82,839,706 55,792,203
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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 on the Company's
website at www.napalladium.com.
North American Palladium Ltd.
Consolidated Statements of Cash Flows
(expressed in thousands of Canadian dollars)
Three months ended Year ended
December 31 December 31
2008 2007 2008 2007
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Cash provided by (used in)
Operations
Net loss for the period $(112,419) $(11,088) $(160,679) $(28,680)
Operating items not
involving cash
Accretion expense relating
to convertible notes payable 87 2,291 3,372 12,947
Amortization 3,154 10,876 34,046 46,908
Amortization of deferred
financing costs 9 135 193 751
Asset impairment charge 90,000 - 90,000 -
Interest on convertible
notes settled in shares 50 636 732 2,644
Accrued interest on mine
restoration deposit (6) (121) (135) (231)
Unrealized foreign exchange
loss (gain) (7,241) 3,711 (13,635) 10,799
Unrealized commodity price
adjustment 9,057 (1,324) 43,028 (3,964)
Asset retirement costs (142) 160 321 1,010
Future income tax recovery - (42) (2,121) (937)
Stock based compensation and
employee benefits 568 320 1,945 1,637
Loss on disposal of
equipment 893 - 2,466 -
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(15,990) 5,554 (467) 42,884
Changes in non-cash working
capital (573) 4,967 7,317 (17,408)
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(16,563) 10,521 6,850 25,476
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Financing Activities
Advances (settlements) under
purchase facility - (3,990) - -
Issuance of common shares
and warrants, net of
issue costs - 69,615 10,475 75,318
Repayment of long-term debt (1,716) (1,478) (6,291) (12,016)
Repayment of obligations
under capital leases (544) (417) (1,866) (1,979)
Mine restoration deposit - - (317) -
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(2,260) 63,730 2,001 61,323
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Investing Activities
Additions to mining
interests (4,544) (3,799) (40,691) (15,346)
Proceeds on disposal of
mining interests 8 - 302 -
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(4,536) (3,799) (40,389) (15,346)
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Increase (decrease) in cash
and cash equivalents (23,359) 70,452 (31,538) 71,453
Cash and cash equivalents,
beginning of period 66,427 4,154 74,606 3,153
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Cash and cash equivalents,
end of period $43,068 $74,606 $43,068 $74,606
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Cash and cash equivalents
consisting of:
Cash $2,532 $4,444 $2,532 $4,444
Short-term investments 40,536 70,162 40,536 70,162
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$43,068 $74,606 $43,068 $74,606
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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 on the Company's
website at www.napalladium.com.
Consolidated Statement of Shareholders' Equity
(expressed in thousands of Canadian dollars, except share amounts)
Number Capital Shares Stock
of shares stock issuable options Warrants
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Balance, December 31,
2007 75,770,570 $430,793 $- $1,673 $13,193
Transitional adjustment
on adoption of
inventory standard - - - - -
Common shares
issued/issuable
For principal
repayments on
convertible notes
payable 6,111,869 28,270 2,062 - -
For interest payments
on convertible
notes payable 165,185 714 18 - -
Tax effect of flow-
through shares - (1,452) - - -
Pursuant to unit
offering, net of
issue costs 2,800,000 9,575 - - -
Warrants Issued:
Pursuant to unit
offering, net of
issue costs - - - 899
Warrants exercised 100 1 - - -
Stock-based
compensation expense 311,251 1,313 - 632 -
Net loss for the year
ended December 31,
2008 - - - - -
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Balance, December 31,
2008 85,158,975 $469,214 $2,080 $2,305 $14,092
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Equity
component
of
convertible Total
notes Contributed shareholders'
payable surplus Deficit equity
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Balance, December 31,
2007 $6,044 $6,292 $(222,044) $235,951
Transitional adjustment
on adoption of
inventory standard - - (403) (403)
Common shares
issued/issuable
For principal
repayments on
convertible notes
payable (6,044) 6,044 - 30,332
For interest payments
on convertible
notes payable - - - 732
Tax effect of flow-
through shares - - - (1,452)
Pursuant to unit
offering, net of
issue costs - - - 9,575
Warrants Issued:
Pursuant to unit
offering, net of
issue costs - - - 899
Warrants exercised - - - 1
Stock-based
compensation expense - - - 1,945
Net loss for the year
ended December 31,
2008 - - (160,679) (160,679)
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Balance, December 31,
2008 $- $12,336 $(383,126) $116,901
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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 on the Company's
website at www.napalladium.com.
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