The contract was secured as a condition of a US$90-million loan that was used to fund a US$208-million expansion program at the company’s wholly owned Lac des les mine, near Thunder Bay, Ont. It provides a floor price of US$325 per oz. on 100% of production, and a cap of US$550 per oz. on half of production, until mid-2005. However, owing to strong prices for palladium, the company expects to repay the loan before the 2005 due date.
In addition to this sales contract, North American Palladium has sold forward 122,900 oz. of palladium through 2003 at an average price of US$927 per oz.
Last year, Lac des les produced 95,116 oz. palladium, 6,074 oz. platinum and 6,035 oz. gold, plus copper and nickel, at cash costs averaging US$142 per oz. palladium. More than 85% of the mine’s revenue comes from palladium, which is mainly used in the manufacture of autocatalysts to reduce smog-generating emissions.
Recent exploration has boosted reserves to 96.2 million tonnes grading 1.55 grams palladium, 0.17 gram platinum and 0.12 gram gold per tonne, plus 0.06% copper and 0.05% nickel. This represents a 17% increase over reserves at the end of 1999, reflecting an expansion of the pit outline to 1,100 metres in length, 850 metres in width and 400 metres in depth.
North American Palladium says existing reserves will allow for at least 17 years of production at the expanded daily milling rate of 15,000 tonnes in the new plant constructed on site. The previous mill handled 2,400 tonnes per day.
Exploration is ongoing, with 65,000 metres of drilling planned for this year. Most of the holes will be directed at the Roby zone, which remains open at depth and to the east and west. Drilling will also test the high-grade Shear zone, or the core of the deposit, to determine its potential for underground bulk-mining.
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