North American Palladium Gains 13 Percent on Lac des Iles Resource Increase

- February 25th, 2015

So far in 2015, North American Palladium has seen its share price rise substantially. Those gains continued Wednesday with the release of an update to the reserve and resource estimates for the company’s Lac des Iles project in Ontario.

North American Palladium Gains 13 Percent on Lac des Iles Resource IncreaseSo far in 2015, North American Palladium (TSX:PDL,NYSEMKT:PAL) has seen its share price rise substantially. Those gains continued Wednesday with the release of an update to the reserve and resource estimates for the company’s Lac des Iles project in Ontario.

The company reported a 16-percent increase in measured and indicated underground reserves, a 23-percent increase in near-surface resources and a whopping 101-percent increase in near-surface reserves at the property. Total reserves now stand at 20.4 million tonnes at 2.1 grams per tonne palladium, while total resources stand at 71.5 million tonnes at 2 grams per tonne palladium. That’s a combined 5.9 million ounces of contained palladium.

Shares of North American Palladium rose 13.7 percent, or five cents, on Wednesday, closing at $0.415. Trading volume was over 4.1 million for the day, much higher than the daily average of approximately 570,000 seen by the company.

“The positive change in our global mineral reserve and resource estimate for Lac des Iles reflects both our recent exploration successes and the current, favourable longer-term outlook on palladium prices, which enhances our ability to pursue expansion opportunities at our mining operations,” said North American Palladium’s CEO, Phil du Toit, in a statement.

To be sure, the company has garnered some criticism from Seeking Alpha contributor Fun Trading, who suggested last summer that the all-cash cost at Lac des Iles was “well above the actual palladium spot price.” Indeed, the author is still skeptical regarding North American Palladium’s ability to meet its production targets.

However, the company is still one of the world’s only primary palladium producers, and has also seen plenty of positive attention. For example, David White has cited increased palladium production at the mine, a bullish outlook for palladium prices and a possible disruption of supply from South Africa or Russia as factors that could help push the company’s stock higher.

For its part, the company has stated that it’s focused on expanding its operations and increasing production at Lac des Iles to reduce cash costs per ounce. In its 2015 guidance, it’s forecasting 185,000 to 205,000 ounces of palladium production with a cash cost of US$440 to $466 per ounce of palladium sold — well below current palladium prices, which are sitting around $810 per ounce.

For 2014, the company recorded 174,194 ounces of palladium production — a 29-percent increase from the previous year — with a cash cost of $513 per ounce. That increased production meant a 44-percent year-on-year increase in revenues to $220.1 million.

Going forward, North American Palladium plans to continue to study opportunities to extend the mine life at Lac des Iles, and expects to spend less than $9 million on exploration efforts, focusing mainly on converting inferred resources to the indicated category in the Lower Offset zone. Results will be used to support a potential future shaft deepening at the mine. To be sure, precious metals investors will be keeping an eye on what the company gets up to in 2015.

North American Palladium is up 167 percent, or 26 cents, so far in 2015.

 

Securities Disclosure: I, Teresa Matich, hold no direct investment in any of the companies mentioned in this article.

Related reading:

PDAC 2015 Watch List: Spotlight on the Platinum-group Metals Space

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