Trading Symbol TSX - PDL AMEX - PAL TORONTO, Aug. 9
/PRNewswire-FirstCall/ -- Results of Operations
--------------------- The Company realized a net loss for the three
months ended June 30, 2005 of $15,228,000 or $0.29 per share on
revenues of $23,544,000 compared to net income of $2,834,000 or
$0.06 per share on revenues of $51,712,000 for the corresponding
period a year earlier. For the six months ended June 30, 2005, the
Company realized a net loss of $22,964,000 or $0.44 per share on
revenue of $49,750,000 compared to net income of $8,955,000 or
$0.17 per share on revenue of $104,868,000 for the six months ended
June 30, 2004. In the second quarter of 2005, the Company's
palladium revenue was affected by a 37% decline in palladium
production compared to the year earlier period, together with a
continuing low palladium price. During the second quarter of 2005,
revenue was recorded on 42,399 ounces of palladium at the June 30,
2005 quoted market price of US$183 per ounce, compared to an
average realized palladium price for the first quarter of 2005 of
US$224 per ounce and a realized price of US$325 per ounce in the
second quarter of 2004, which was the floor price under the
palladium sales contract in that period. Variations from the
provisionally priced sales will be recognized as revenue
adjustments as they occur until the price is finalized. In
addition, revenue from by-product metal declined by 29% to
$13,753,000 in the second quarter of 2005 compared to $19,503,000
in the second quarter of 2004, reflecting the decreased production
of nickel, platinum, gold and copper. Despite the lower by-product
production, prices for these metals continued well above historical
levels. Partially offsetting the higher by-product prices was a
strengthening Canadian dollar which averaged US$0.80 in the second
quarter 2005, compared to US$0.74 in the second quarter 2004.
Production costs including overheads but excluding non-cash
amortization were $26,176,000 during the second quarter of 2005
compared to $27,489,000 during the second quarter of 2004, while
unit costs to produce palladium (production costs including
overhead and smelter treatment, refining and freight costs), net of
by-product metal revenues and royalties, increased to US$322 per
ounce in the second quarter of 2005 compared to US$158 per ounce in
the second quarter of 2004. The increase in unit cash costs was
caused by a 17% decline in mill throughput combined with lower ore
grades and metal recoveries, which led to a 37% decline in
palladium production and a 29% drop in revenue from by-product
metals. In addition, during the second quarter there was an
increase in the waste strip ratio and continuing pressure on
operating costs, particularly diesel fuel and ongoing mill repairs
which resulted in approximately $3.0 million of additional costs in
the quarter. During the second quarter of 2005, the mill processed
1,195,304 tonnes of ore, or an average of 13,135 tonnes per day,
with a palladium grade of 1.78 grams per tonne, producing 48,230
ounces of palladium at a recovery rate of 70.4%. This compares with
the second quarter of 2004, when the mill processed 1,445,445
tonnes of ore, or 15,884 tonnes per day, with a palladium grade of
2.22 grams per tonne, producing 75,970 ounces of palladium at a
recovery rate of 73.5%. Metal production during the second quarter
of 2005 was affected by lower recoveries and reduced average daily
mill throughput. Metal recovery was negatively affected by
fluctuating mill throughput and problems associated with treating a
lower grade of ore. Mill availability was also affected by severe
weather, which resulted in several significant power disruptions.
Non-cash amortization expense decreased to $4,799,000 in the second
quarter of 2005 compared to $8,885,000 in the second quarter of
2004. The reduced amortization expense in the current quarter is
attributable to the decrease in palladium production, along with a
lower unit of production amortization rate as a result of the asset
impairment charge recorded in 2004, which resulted in an
approximate 40% reduction in the unit amortization rate. With the
ramp-up in activity on the Company's exploration projects,
exploration expense increased to $1,662,000 in the second quarter
of 2005 compared to $518,000 in the year-earlier period. The
Company incurred interest expense on long-term debt of $611,000 in
the second quarter of 2005 compared to $411,000 in the second
quarter of 2004. Cash Flow and Financial Position
-------------------------------- Cash used in operations (prior to
changes in non-cash working capital) was $10,200,000 for the second
quarter of 2005 compared to cash provided by operations of
$13,769,000 for the second quarter of 2004. The primary reason for
the decrease in operating cash flow was the significant decline in
revenue from metal sales. Changes in non-cash working capital
provided $12,398,000 in the second quarter compared to $6,381,000
in the second quarter of 2004. The major item affecting the
non-cash working capital was a $12,339,000 reduction in concentrate
inventory awaiting settlement. The reduction was caused by a
decrease in the physical quantity of palladium in concentrate
awaiting settlement, which declined to 83,755 ounces at June 30,
2005 compared to 114,186 ounces at December 31, 2004. After
allowing for working capital changes, cash provided by operations
was $2,198,000 in the second quarter of 2005 compared to
$20,150,000 in second quarter of 2004. Investing activity required
$7,722,000 of cash in the second quarter of 2005 compared to
$4,019,000 in the second quarter of 2004. During the quarter, the
Company advanced the underground mine development, with 174 metres
of main ramp development and completed the first stage of the
ventilation raise development. The underground mine development is
progressing towards stope production in the first quarter of next
year. During the six months ended June 30, 2005, the Company
incurred $19,170,000 on capital expenditures, of which $5,379,000
were acquired by means of capital lease. The Company's long-term
debt position was $51.6 million at June 30, 2005 compared to $50.2
million at December 31, 2004, and it had cash and cash equivalents
of $63.3 million at June 30, 2005. Production Statistics
--------------------- Second Quarter Six Months June 30 June 30
------------------------------------------------------ 2005 2004
2005 2004 ------------------------------------------------------
Palladium (oz) 48,230 75,970 100,802 167,231 Payable Palladium (oz)
43,959 69,399 91,883 152,766 Platinum (oz) 5,123 6,319 10,505
13,302 Gold (oz) 3,834 6,249 7,965 14,004 Copper (lbs) 1,432,890
2,103,948 2,994,930 4,245,703 Nickel (lbs) 643,505 1,060,318
1,421,705 2,381,519
-------------------------------------------------------------------------
Ore Tonnes Milled 1,195,304 1,445,445 2,351,626 2,794,224 Ore
Tonnes Mined 935,263 1,305,529 2,204,138 2,958,196 Waste Tonnes
Mined 2,964,600 2,848,833 6,306,033 5,074,933
-------------------------------------------------------------------------
Waste to Ore Strip Ratio 3.17:1 2.18:1 2.86:1 1.72:1
-------------------------------------------------------------------------
Exploration ----------- At Lac des Iles, the Company currently has
four surface drills actively expanding the known resource of the
Offset High Grade Zone. Two additional holes (05-006 and 05-007)
have been completed since the last reported results (see press
release dated July 11, 2005) bringing the current number of
completed holes to 4 of the planned 12 to 14 hole program. To date,
all 4 holes have intersected the target horizon at its projected
depth. It should be noted that the holes on average represent
120-140 metre step-outs from any previous drill intercept. Hole
05-006 intersected the Offset High Grade Zone at the -440 metres
above sea level, approximately 100 metres down dip and 100 metres
south of previously released drill hole 01-047 (see attached
figure). Hole 05-007 encountered the target horizon at the -330
metres above sea level 180 metres south of drill hole 01-047 and
intersected two zones of mineralization.
-------------------------------------------------------------------------
(metres) (grams per tonne) %
-------------------------------------------------------------------------
Inter- Palla- Plat- Hole ID From To val dium inum Gold Nickel
Copper
-------------------------------------------------------------------------
Previously Reported
-------------------------------------------------------------------------
00-205 1094.70 1134.00 39.30 5.88 0.35 0.35 0.11 0.07
-------------------------------------------------------------------------
Reported July 11, 2005
-------------------------------------------------------------------------
05-005 1107.90 1129.05 21.15 4.91 0.32 0.17 0.07 0.05
----------------------------------------------------------- incl
1115.00 1129.05 14.05 5.58 0.35 0.21 0.07 0.06
----------------------------------------------------------- and
1137.00 1140.00 3.00 6.97 0.42 0.29 0.16 0.03
-------------------------------------------------------------------------
05-008 819.00 824.00 5.00 2.75 0.26 0.18 0.45 0.29
-------------------------------------------------------------------------
Reported today
-------------------------------------------------------------------------
05-006 1056.00 1085.40 29.40 8.19 0.48 0.62 0.17 0.14 incl 1056.00
1073.00 17.00 10.58 0.58 0.53 0.13 0.08 incl 1062.00 1069.10 7.10
15.38 0.76 0.80 0.16 0.09
-------------------------------------------------------------------------
05-007 994.60 1003.80 9.20 3.36 0.38 0.21 0.13 0.12
----------------------------------------------------------- and
1050.50 1077.50 27.00 5.64 0.48 0.41 0.08 0.09
----------------------------------------------------------- incl
1053.50 1065.50 12.00 7.77 0.66 0.49 0.12 0.14
-------------------------------------------------------------------------
On July 21, 2005 the Company executed a definitive Option Joint
Venture Agreement with URSA Major Minerals Corporation "URSA"
whereby the Company can acquire a 60% interest in USRA's interest
in the Shakespeare Property (approximately 80% URSA: 20%
Falconbridge Limited). The Shakespeare Option Joint Venture
Agreement is subject to URSA's receipt of regulatory and
shareholder approval. The Company also has an agreement with URSA
to acquire a 50% interest in the adjoining 100% URSA owned Agnew
Lake Properties, located in the Sudbury area. The Shakespeare
Project hosts the Shakespeare Deposit, which contains a diluted
Probable Reserve of 7.3 million tonnes at 0.37% Ni, 0.39% Cu,
0.024% Co, 0.37 grams per tonne Pt, 0.40 grams per tonne Pd and
0.20 grams per tonne Au. A full feasibility study on an open pit
mine and a 4,000-5,000 tonnes per day "stand alone" mill is
currently in progress. A diamond drill program was completed in the
second quarter on the Company's Bird River Project, an Option Joint
Venture with Gossan Resources Limited. A total of 8 holes totaling
934 metres were completed. The holes were planned to test priority
Airborne EM Conductors delineated from the recently completed VTEM
Survey flown over the property. The exploration target on the Bird
River Project is for massive sulphide mineralization (Ni, Cu, and
PGM) associated with the lower contact zone of the Bird River Sill.
Assay results from the current program included 13.75 metres of
1.08% Ni, 0.50% Cu, 0.047% Co, 0.396 grams per tonne Pt, and 1.108
grams per tonne Pd (including 4.75 metres of 2.14% Ni and 0.44% Cu)
from drill hole BR-05-02. Elsewhere the Company recently completed
a detailed airborne survey over their Lynn Lake Properties, an
Option Joint Venture Agreement with Rare Earth Metals Corp. located
within the historic Lynn Lake Mining camp in northern Manitoba. A
field crew will be mobilized to start ground truthing selected
targets once the results from the airborne survey have been
analyzed. First pass mapping and prospecting on the Company's Tyko
and Bulldozer Lake Properties located approximately 30 kilometres
southeast of Manitouwadge, Ontario identified a new discovery
termed the "RJ Showing" from which grab samples have returned
values up to 2.5% Ni and 0.5% Cu from a mineralized ultramafic body
located 1500 metres northwest of the original Tyko Prospect. Field
work is continuing. Management's Outlook -------------------- By
the end of second quarter mill throughput and availability improved
greatly due to the efforts of the mill operations team and the new
maintenance system. During July the mill averaged more than 14,000
tonnes per day and was averaging over 15,000 tonnes per day by
month's end, which is a significant improvement from earlier this
year. Expectations are for the productivity of the mill to continue
improving through the end of the third quarter 2005 and be in shape
to maintain an average above 15,000 tonnes per day moving forward.
In spite of the mill's improved throughput performance its feed
will remain below 2 grams per tonne and as a result palladium
recovery will remain below 75%. The second quarter's recovery
issues continue into the third quarter and are being addressed. The
combination of low grade and low mill recovery will continue to
challenge operations ability to bring production costs in line with
the current depressed palladium price. The underground mine
development is scheduled for commercial production during the first
quarter of 2006. Ground conditions remain excellent with little or
no ground water influx. The first drive into the ore is scheduled
to begin late in the third quarter. Palladium prices again remained
flat during the second quarter and traded at an average of $190 per
ounce. While mine production is currently lagging consumption, the
market appears to be in an over supply due to the existing above
ground stocks. The combination of year over year increasing
palladium demand, along with above ground stocks being depleted,
allows management to continue to remain optimistic the palladium
price will return to more sustainable levels in 2006 and trade at a
more historical relationship to platinum. With platinum now trading
at over $900 an ounce it suggests there will be greater emphasis on
substitution for palladium.
-------------------------------------------------------------------------
The Company will host its second quarter conference call at 1 pm
EDT on Wednesday, August 10, 2005. The toll-free conference call
dial-in number is 1-800-814-4853 and the local and overseas dial-in
number is 416-640-4127. The conference call will be simultaneously
web cast and archived at http://www.napalladium.com/ in the
Investor Centre under Conference Calls. A replay of the conference
call will be available until August 24, 2005; toll-free at
1-877-289-8525, locally and overseas at 416-640-1917, passcode
21132883. North American Palladium's Lac des Iles Mine is Canada's
only primary producer of platinum group metals and is one of the
largest open pit bulk mineable palladium reserves in the world. The
Company also earns substantial revenue from by-product nickel,
platinum, gold and copper. In addition to operating Lac des Iles,
the Company's mandate is to expand its production profile through
an aggressive exploration campaign, designed to increase its
exposure to base and precious metals. Palladium use in the auto
industry continues to be an important component in controlling
exhaust emissions as mandated by more stringent hydrocarbon
emissions standards for cars, particularly in the United States,
Europe and Japan. Palladium is also used in the dental,
electronics, jewellery and chemical sectors. Forward-Looking
Statements - Certain statements included in this news release are
forward-looking statements which are made pursuant to the "safe
harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995. They include estimates and
statements that describe the Company's future plans, objectives and
goals, including words to the effect that the Company or management
expects a stated condition or result to occur. When used herein,
words such as "estimate", "expect", "believe", "intend", "budget",
"plan", "scheduled" and other similar expressions are intended to
identify forward-looking statements. In particular statements
relating to the estimated future metal prices, cash flows,
expenses, capital costs, ore production, mine life, financing,
construction and commissioning are forward-looking statements. Such
forward-looking statements involve inherent risks and uncertainties
and are subject to factors, many of which are beyond our control,
that may cause actual results or performance to differ materially
from those currently anticipated in such statements. Important
factors that could cause actual results to differ materially from
those expressed or implied by such forward-looking statements
include among others metal price volatility, changes in the US/CDN
dollar exchange rate, economic and political events affecting metal
supply and demand, fluctuations in ore grade, ore tonnes milled,
geological, technical, mining or processing problems,
recoverability of metals, future profitability and production,
availability of financing on acceptable terms and unexpected
problems during the development, construction and start-up phases
of the underground mine. For a more comprehensive review of risk
factors, please refer to the Company's most recent Annual Report
under "Management's Discussion and Analysis of Financial Results"
and Annual Information Form under "Risk Factors" on file with the
U.S. Securities and Exchange Commission and Canada provincial
securities regulatory authorities. The Company disclaims any
obligation to update or revise any forward-looking statements
whether as a result of new information, events or otherwise.
Readers are cautioned not to put undue reliance on these
forward-looking statements. North American Palladium Ltd.
Consolidated Balance Sheets (Canadian funds in thousands of
dollars) June 30 December 31 2005 2004 ------------ ------------
(unaudited) Assets Current Assets Cash and cash equivalents $
63,250 $ 65,755 Concentrate awaiting settlement, net - Note 2
38,574 68,259 Inventories 8,865 8,954 Crushed and broken ore
stockpiles - Note 3 10,067 9,256 Accounts receivable and other
assets 935 1,615 ------------ ------------ 121,691 153,839 Mining
interests, net 145,577 136,009 Mine restoration deposit - Note 4
6,573 5,973 Crushed and broken ore stockpiles - Note 3 1,089 1,379
Deferred financing costs 676 697 ------------ ------------ $
275,606 $ 297,897 ------------ ------------ Liabilities and
Shareholders' Equity Current Liabilities Accounts payable and
accrued liabilities $ 18,114 $ 20,231 Taxes payable (24) 521
Current portion of obligations under capital leases 2,198 1,481
Current portion of long-term debt - Note 5 6,903 6,815
Kaiser-Francis credit facility - Note 5 14,095 - ------------
------------ 41,286 29,048 Mine restoration obligation 7,743 7,592
Obligations under capital leases 6,738 3,182 Long-term debt - Note
5 21,708 24,851 Kaiser-Francis credit facility - Note 5 - 13,842
Future mining tax liability 1,281 1,549 ------------ ------------
78,756 80,064 Shareholders' Equity Capital stock - Note 7 324,540
322,904 Contributed surplus 918 573 Deficit (128,608) (105,644)
------------ ------------ Total shareholders' equity 196,850
217,833 ------------ ------------ $ 275,606 $ 297,897 ------------
------------ North American Palladium Ltd. Consolidated Statements
of Earnings (Loss) and Deficit (Canadian funds in thousands of
dollars, except share and per share amounts) (unaudited) Three
Months Ended Six Months Ended June 30 June 30
------------------------- ------------------------- 2005 2004 2005
2004 ------------ ------------ ------------ ------------ Revenue
from metal sales - Note 8 $ 23,544 $ 51,712 $ 49,750 $ 104,868
------------ ------------ ------------ ------------ Operating
expenses Production costs, excluding amortization and asset
retirement costs 26,176 27,489 49,409 52,487 Smelter treatment,
refining and freight costs 4,324 7,321 8,997 12,652 Amortization
4,799 8,885 9,528 18,731 Administrative 1,792 1,072 3,387 2,289
Exploration expense 1,662 518 2,505 947 Asset retirement costs 122
223 246 466 Loss on disposal of capital assets - 491 - 623
------------ ------------ ------------ ------------ Total operating
expenses 38,875 45,999 74,072 88,195 ------------ ------------
------------ ------------ Income (loss) from mining operations
(15,331) 5,713 (24,322) 16,673 ------------ ------------
------------ ------------ Other income (expenses) Interest on
long-term debt (611) (411) (1,246) (898) Foreign exchange gain
(loss) (82) (264) (146) (1,046) Interest income 439 66 928 103
Derivative income - (257) - 213 Write-off of deferred financing
costs - (788) - (788) ------------ ------------ ------------
------------ Total other income (expenses) (254) (1,654) (464)
(2,416) ------------ ------------ ------------ ------------ Income
(loss) before income taxes (15,585) 4,059 (24,786) 14,257 Income
tax expense (recovery) - Note 6 (357) 1,225 (1,822) 5,302
------------ ------------ ------------ ------------ Net income
(loss) for the period (15,228) 2,834 (22,964) 8,955 Deficit,
beginning of period (113,380) (7,413) (105,644) (13,534)
------------ ------------ ------------ ------------ Deficit, end of
period $ (128,608) $ (4,579) $ (128,608) $ (4,579) ------------
------------ ------------ ------------ Net income (loss) per share
Basic $ (0.29) $ 0.06 $ (0.44) $ 0.18 ------------ ------------
------------ ------------ Diluted $ (0.29) $ 0.06 $ (0.44) $ 0.17
------------ ------------ ------------ ------------ Weighted
average number of shares outstanding Basic 51,997,215 51,254,953
51,870,012 51,114,948 ------------ ------------ ------------
------------ Diluted 51,997,215 51,496,798 51,870,012 51,311,421
------------ ------------ ------------ ------------ North American
Palladium Ltd. Consolidated Statements of Cash Flows (Canadian
funds in thousands of dollars) (unaudited) Three Months Ended Six
Months Ended June 30 June 30 -------------------------
------------------------- 2005 2004 2005 2004 ------------
------------ ------------ ------------ Cash provided by (used in)
Operations Net income (loss) for the period $ (15,228) $ 2,834 $
(22,964) $ 8,955 Operating items not involving cash Future income
tax expense (recovery) (522) 464 (2,207) 3,261 Amortization 4,799
8,885 9,528 18,731 Unrealized foreign exchange loss (gain) 462
(217) 653 549 Asset retirement costs 122 223 246 466 Stock based
compensation 167 44 345 90 Loss on disposal of capital assets - 491
- 623 Write-off of deferred financing costs - 788 - 788 Derivative
income - 257 - (213) ------------ ------------ ------------
------------ (10,200) 13,769 (14,399) 33,250 Changes in non-cash
working capital - Note 9 12,398 6,381 27,271 (822) ------------
------------ ------------ ------------ 2,198 20,150 12,872 32,428
------------ ------------ ------------ ------------ Financing
Activities Repayment of long-term debt (1,731) (5,775) (3,455)
(15,001) Issuance of common shares 2,908 2,374 3,575 4,677 Mine
restoration deposit (300) (300) (600) (600) Repayment of
obligations under capital leases (649) (673) (1,106) (876)
------------ ------------ ------------ ------------ 228 (4,374)
(1,586) (11,800) ------------ ------------ ------------
------------ Investing Activities Additions to mining interests
(7,722) (5,144) (13,791) (8,894) Restricted cash equivalents - 704
- 697 Proceeds on disposal of capital assets - 421 - 451
------------ ------------ ------------ ------------ (7,722) (4,019)
(13,791) (7,746) ------------ ------------ ------------
------------ Increase (decrease) in cash and cash equivalents
(5,296) 11,757 (2,505) 12,882 Cash and cash equivalents, beginning
of period 68,546 13,075 65,755 11,950 ------------ ------------
------------ ------------ Cash and cash equivalents, end of period
$ 63,250 $ 24,832 $ 63,250 $ 24,832 ------------ ------------
------------ ------------ North American Palladium Ltd. Notes to
the June 30, 2005 Consolidated Financial Statements (in thousands
of Canadian dollars except per share and per ounce amounts)
(Unaudited) 1. Basis of Presentation These unaudited consolidated
financial statements have been prepared using disclosure standards
appropriate for interim financial statements and do not contain all
the explanatory notes, descriptions of accounting policies or other
disclosures required by Canadian generally accepted accounting
principles for annual financial statements. Such notes,
descriptions of accounting policies and other disclosures are
included in the Company's audited annual consolidated financial
statements included in the Company's annual report to shareholders
for the year ended December 31, 2004. Accordingly, these
consolidated financial statements should be read in conjunction
with the audited annual consolidated financial statements for 2004.
2. Concentrate Awaiting Settlement The gross value of concentrate
awaiting settlement represents the value of platinum group metals
and base metals from production shipped to and received by the
third-party smelters between December 2004 and June 2005, which are
in-process at the balance sheet date. At June 30, 2005, concentrate
awaiting settlement included 83,755 ounces of palladium (December
31, 2004 - 114,186). Concentrate awaiting settlement was entirely
from two domestic customers at June 30, 2005 and December 31, 2004.
Revaluations of the net realizable value of concentrate awaiting
settlement are included in revenue at each reporting period and are
adjusted for the effects of hedging instruments, sales contracts
and foreign exchange. 3. Crushed and Broken Ore Stockpiles Crushed
and broken ore stockpiles are valued at the lower of average
production cost and estimated net realizable value. The amount of
stockpiled ore that is not expected to be processed within one year
is shown as a long-term asset. 4. Mine Restoration Deposit As part
of the expansion project, the Company established a revised mine
closure plan for the eventual clean-up and restoration of the mine
site with the Ontario Ministry of Northern Development and Mines
(the "Ministry"), which requires a total amount of $7,802 to be
accumulated in a Trust Fund controlled by the Ministry. At June 30,
2005, the Company had $6,573 on deposit with the Ministry and has
agreed to make monthly deposits of $100. 5. Long-Term Debt The
Company's long-term debt, is comprised of a senior credit facility
with a leading equipment finance company and the Kaiser- Francis
credit facility. At June 30, 2005, the outstanding long-term debt,
including current and long-term portions was $42,706 compared to
$45,508 at December 31, 2004. The interest rate under both
facilities is LIBOR plus 250 basis points, or 5.64% at June 30,
2005. The senior credit facility is repayable in equal quarterly
installments over a five-year period with a final maturity of
November 24, 2009 and the Kaiser-Francis facility matures on June
30, 2006. 6. Income Taxes The provision for income and mining taxes
differs from the amount that would have resulted by applying the
combined Canadian Federal and Ontario statutory income tax rates of
approximately 38.3%. Six Months Ended June 30 2005 2004
------------------------- Income tax provision using statutory
income tax rates $ (9,493) $ 5,489 Increase (decrease) in taxes
resulting from: Losses not tax benefited 7,093 - Resource allowance
934 (1,459) Non-taxable portion of capital gains (losses) (3) (899)
Federal large corporations tax 183 430 Ontario mining taxes (575)
1,468 Other 39 273 ------------------------- Income tax expense
(recovery) $ (1,822) $ 5,302 ------------------------- 7. Capital
Stock June 30, 2005 June 30, 2004 Shares Amount Shares Amount
------------------------------------------------ Common shares
issued, beginning of period 51,709,075 $ 322,904 50,895,338 $
313,489 Common shares issued: Pursuant to stock options exercised
81,427 536 394,223 4,215 To group registered retirement savings
plan participants 56,274 536 39,037 462 Private Placement 213,000
2,503 - - Tax effect of flow- through shares - (1,939) - -
------------------------------------------------ Common shares
issued, end of period 52,059,776 $ 324,540 51,328,598 $ 318,166
------------------------------------------------ At June 30, 2005,
the Company had 701,437 stock options outstanding at a
weighted-average exercise price of $10.25, expiring at various
dates from July 27, 2005 to November 1, 2012. No stock options were
granted in the first six months of 2005. The Company recognized a
stock based compensation expense of $167 for the three months ended
June 30, 2005 and $345 for the six months ended June 30, 2005
(three months ended June 30, 2004 - $44; six months ended June 30,
2004 - $90). The Company finances a portion of its exploration
activities through the issue of flow through shares. Under the
terms of these share issues, the tax attributes of the related
expenditures are renounced to subscribers. At the time the Company
renounces the tax attributes of the expenditures to the
subscribers, share capital is reduced and future tax liabilities
are increased by the estimated income tax benefits renounced. 8.
Revenue from Metal Sales Three Months Ended Six Months Ended June
30 June 30 --------------------------------------------------- 2005
2004 2005 2004 ---------------------------------------------------
Palladium (a) $ 9,432 $ 31,423 $ 21,302 $ 63,146 Adjustments for
mark-to-market 359 786 685 3,098 Nickel 4,637 7,029 9,523 13,258
Platinum 4,775 6,227 9,601 11,761 Gold 1,873 2,398 3,691 5,704
Copper 2,162 3,104 4,148 6,016 Other metals 306 745 800 1,885
--------------------------------------------------- $ 23,544 $
51,712 $ 49,750 $ 104,868
--------------------------------------------------- (a) The Company
had a Palladium Sales Contract with a major automobile
manufacturer, which provided for a floor price of US$325 per ounce
on 100% of palladium production delivered by June 30, 2005. During
the six months ended June 30, 2004, revenue was recognized at the
floor price of US$325 per ounce for all of the palladium. During
the six months ended June 30, 2005, revenue on 6,403 ounces of
palladium production was recognized at the floor price of US$325
per ounce while revenue for the balance of palladium production,
which will be available for physical delivery after June 30, 2005,
was recognized at the June 30, 2005 quoted market price of US$183
per ounce. 9. Changes in Non-Cash Working Capital Three Months
Ended Six Months Ended June 30 June 30
--------------------------------------------------- 2005 2004 2005
2004 --------------------------------------------------- Cash
provided by (used in): Concentrate awaiting settlement $ 12,339 $
3,478 $ 29,685 $ (2,512) Inventories and stockpiles 290 1,366 (432)
1,283 Accounts receivable and other assets 304 (452) 680 (168)
Accounts payable and accrued liabilities (106) 2,094 (2,117) (520)
Taxes payable (429) (105) (545) 1,095
--------------------------------------------------- $ 12,398 $
6,381 $ 27,271 $ (822)
--------------------------------------------------- During the six
months ended June 30, 2005, mining interests were acquired at an
aggregate cost of $19,170 (six months ended June 30, 2004 -
$10,692) of which $5,379 (six months ended June 30, 2004 - $1,798)
were acquired by means of capital lease. 10. Commitments The
Company enters into forward contracts from time to time to hedge
the effects of changes in the prices of metals it produces and
foreign exchange on the Company's revenues. Gains and losses
realized on derivative financial instruments used to mitigate metal
price risk are recognized in revenue from metal sales when the
hedge transaction occurs. (a) Platinum Forward Contracts At June
30, 2005, the Company had forward sales contracts for 13,039 ounces
of platinum at an average price of US$860 per ounce maturing at
various dates through June 2006. The fair value of these forward
sales contracts was below their carrying value by $346 as at June
30, 2005. (b) Nickel Swap Contracts At June 30, 2005, the Company
had swap contracts for 2,380,000 lbs. of nickel at an average fixed
price of US$6.68 per lb. maturing at various dates through June
2006. The fair value of these swap contracts was above their
carrying value by $857 at June 30, 2005. (c) Copper Swap Contracts
At June 30, 2005, the Company had swap contracts for 1,322,000 lbs.
of copper at an average fixed price of US$1.26 per lb. maturing at
various dates through March 2006. The fair value of these swap
contracts was below their carrying value by $195 as at June 30,
2005. (d) Gold Forward Contracts At June 30, 2005, the Company had
forward sales contracts for 9,000 ounces of gold at an average
price of US$439 per ounce maturing at various dates through June
2006. The fair value of these forward sales contracts was below
their carrying value by $34 as at June 30, 2005. 11. Comparative
Period Figures Certain prior period amounts have been reclassified
to conform to the classification adopted in the current period.
Please click here to view diagram:
http://files.newswire.ca/273/palladium.pdf DATASOURCE: North
American Palladium Ltd. CONTACT: Andre Douchane - President &
CEO, Tel: (416) 360-2656, email: ; George D. Faught - Vice
President Finance & CFO, Tel: (416) 360-2650, email: ; Douglas
H. Bache - Treasurer, Tel: (416) 360-2651, email:
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