North American Palladium Backtracks On $50M Debt Issue

North American Palladium (PDL-T, PAL-X) thought twice about issuing convertible notes, and decided it wasn’t such a good idea after all.

The company says it decided the final terms proposed by Casimir Capital were simply too onerous, and with $60 million still in the kitty and no long-term debt, it feels it is financially strong enough to go without the additional funds.

“In addition to our strong balance sheet, we expect positive cash flow from the anticipated restart of the Sleeping Giant mine in the fourth quarter of this year,” William Biggar, president and chief executive of North American Palladium said in a statement.

“Although we have the ability to raise additional funds to support our growth initiatives, we will be disciplined and only execute on terms that are attractive to our company.”

There was no mention, however, of the negative reaction the market took to the terms.

When it initially announced the financing on Aug. 17, North American Palladium saw its share price fall 8% from $3.32 to $3.04.

Investors applauded the reversal, sending the company’s shares 14% or 40¢ higher to $3.27 on 325,000 shares traded.

The financing was to have raised the US$50 million by issuing 7% convertible notes.

Casimir Capital was also to have an overallotment option to place an additional US$15 million of notes.

The notes would have matured in four years and had a conversion price of US$3.50 per common share.

The notes were callable if its shares traded at an average price of US$5.25 for 15 straight days.

North American initially said the funds would be used to finance exploration and development of its Lac des les palladium mine and Sleeping Giant gold mine.

For Lac des les, the money was to go towards a restart at the mine that produced platinum group metals for 15 years but was put on care and maintenance in October last year, when metal prices collapsed.

The mine, which is situated 85 km northwest of Thunder Bay, was producing 270,000 oz. palladium, 20,000 oz. platinum and 20,000 oz. gold per year at the time of the temporary shutdown.

In late June, the company an- nounced it had made a new discovery at the project that could add to the mine life and significantly affect its economics.

Intercepts from the new zone were highlighted by 4 metres grading 5.1 grams palladium per tonne, 4 metres at 3.88 grams palladium, and 5 metres of 4.46 grams palladium.

Beyond Lac des les, the company’s past-producing Sleeping Giant gold mine in the Abitibi region of Quebec churned out more than 1 million oz. of gold from 1988- 2008 at an average grade of 11.44 grams gold per tonne.

The company expects gold production to resume in the fourth quarter of 2009 at an annual rate of 50,000 oz. The project has proven and probable reserves of 235,000 tonnes grading 9.31 grams gold for roughly 70,000 oz.