North American Palladium overcomes mill problems

Despite an operational setback, North American Palladium (PDL-T) earned $2.9 million in the third quarter as revenue soared beyond $42.7 million.

In early September, North American was forced to shut down the primary crusher at its Lac des les palladium mine, in northern Ontario, after two vertical fractures formed in the bottom shell. The problem has since been repaired, and a charge of $2 million will be recorded in the current quarter.

The recent, 6-per-share profit compares with a loss of $6.6 million (13 per share) on $20.2 million in the corresponding period of 2001. Mark-to-market adjustments showed the largest swing, at positive $3.2 million versus negative $10.4 million.

Cash flow was up considerably as well, to $14.2 million from $627,000 million. Amortization and foreign exchange losses were the two largest non-cash items in in the recent period.

Lac des les cranked out 51,168 oz. palladium-in-concentrate at a total cash cost of US$282 per oz., net of byproduct credits, compared with 62,168 oz. at US$223 per oz. in the previous quarter and 36,891 oz. at US$306 per oz. in the comparable period a year earlier, when the plant was being advanced to commercial status.

The mill processed more than 1.2 million tonnes grading 1.83 grams palladium, thanks in part to the use of contract crushers. The average recovery rate came to 71.9% — 14% better than a year ago.

More than 1.4 million tonnes were mined from the pit at a stripping ratio of 1.83-to-1. Of that, 662,049 tonnes exceeded 1.1 grams palladium per tonne, whereas the rest ran between 0.7 gram and 1.09 grams.

North American now has more than 8.3 million tonnes of broken ore in stockpile. The stockpile averages 1.14 grams palladium.

North American realized an average of US$490 per oz. for its recent production, or US$165 more than the average spot price. This partly reflects the benefit of forward sales on 12,600 oz. at an average of US$899 per oz.

For the first nine months of this year, North American Palladium has earned $16.6 million (33 per share) on $112.7 million, compared with $2.4 million on $67.5 million in the similar period last year. Cash flow more than doubled to $38.4 million.

At Sept. 30, North American had nearly $64 million in working capital and $62 million in long-term debt. The company also owes $18 million to Kaiser-Francis Oil, its single largest and majority shareholder.