The weaker U.S. dollar has enabled
Net earnings topped $8.4 million (or 17 per share) on $41.6 million in the first three months of the year, compared with $6.2 million (12 per share) on $40.6 million in the corresponding period of 2002.
NAP actually recorded $8.2 million more in operating expenses and provisions for income taxes in the recent period, the former being a reflection of its use of contract crushers at the Lac des les mine near Thunder Bay, Ontario. However, the additional costs were more than offset by foreign exchange gains and fewer interest payments on long-term project debt, which is denominated in U.S. dollars.
Before working capital changes, cash flow from operations fell to $11.4 from $14 million, as most of the foreign exchange gain was not realized. After changes to non-cash working capital, cash provided by operations totalled $10 million in the recent period, whereas $1 million more was spent than was generated last year, owing mainly to a large increase in concentrate awaiting settlement.
Lac des les pumped out 58,791 oz. palladium from 1.2 million tonnes of ore, versus 53,992 oz. from a similar volume a year earlier. Higher headgrades and recovery rates account for the increase, as well as for higher volumes of byproduct platinum, gold, copper and nickel.
Total cash costs, in turn, jumped by 16% to US$277 per oz. palladium, net of byproduct credits. Here, the contracts, necessitated by the breakdown of the primary crusher last September and the stronger loonie are to blame. A new crusher has been purchased and is scheduled for startup in mid-year, following which costs should decline.
Exploration around the minesite continues, with recent drilling focused on delineating possible near-surface extensions of the main Roby zone to the southeast and southwest. Also, a magnetotelluric survey tested for a deep-seated, massive sulphide source of several precious- and base-metal-rich lenses known to exist near the surface.
Regional exploration focused on the Buck Lake, Weaver Lake, Shebandowan Lake and Chief Peter Lake properties. North American Palladium is awaiting results from several holes drilled in geophysical anomalies outlined previously at Buck Lake and Weaver Lake.
At the Shebandowan Lake and Chief Peter Lake properties, mapping, geochemical sampling and trenching are under way. The former is 80 km west of Thunder Bay and the later is 100 km southwest of the mine.
At the end of March, NAP had $52 million in working capital, with about $6 million of current assets listed as cash or equivalents. Long-term debt stood at $52 million, excluding the current portion.
For 2003, NAP hedged US$53 million of its revenue at an average rate of 1.59-to-1. It also has remaining forward sales contracts on 37,800 oz. palladium priced at US$899 per oz. and 2,000 oz. fixed at US$524 per oz.
Until mid-2005, long-term sales contracts assure the company a minimum price of US$325 per oz. on all its production.
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