North American Palladium, the established precious metals producer focused on their Vezza gold mine (74.3k ounces Au inferred as per latest NI 43-101) in the prolific Abitibi region of Quebec and the flagship Lac des Iles palladium mine (latest NI 43-101) just outside Thunder Bay, Ontario, today reported preliminary 2012 palladium production results as well as offered markets an update on the ongoing Lac des Iles mine expansion project.
The company is one of only two primary producers of palladium on earth today and has recently undertaken a concerted initiative to expand production output at their flagship Lac des Iles site, in addition to reducing overall cash cost per ounce of production, with Q4 seeing some important process milestones. Construction of the major above ground facilities associated with the expansion (headframe, hoist house building, main substation, service hoist, and an auxiliary hoist) were completed during the aforementioned interval, with only the main production hoist installation remaining (work has already begun and commissioning is anticipated before close of Q1).
Some additions to the Lac des Iles complex, which consists of the open pit (began in 1993), underground mine (via ramp, began in 2006), and a sizeable 15k tonnes/day milling facility (with expansion potential), have yet to be put in as per the new expansion, including the main skip dump and surface ore bins. This work will be done post-haste upon completion of the other surface facilities and everything so far looks to be on schedule for Q3 to start the new shaft mining activities.
In the underground, the currently underway shaft sinking activities are progressing according to schedule, with the 1,560-foot mark being recently attained. This puts the company at just shy of 60% completion for the approximately 2.7k feet slated for Phase I. The 2.4k-foot level loading pocket is all set to go in during Q1 and the ramp/stope work is also coming along nicely. The logistics have really come together for PAL to kick production up a notch at Lac des Iles and we should see some interesting new production/efficiency data later this year.
For now there is plenty to be happy about amongst PAL shareholders, with 163,980 ounces of payable palladium coming out of Lac des Iles in 2012, well over management’s guidance of 150k to 160k ounces. These kinds of volumes make PAL a vital link in the increasingly tightened global palladium supply chain, which looks to remain undersupplied well through 2016 at current projections. With major South African suppliers facing a whole variety of mounting logistical constraints (80% of global supply comes from high-risk areas) and the some 6.3M ounces produced annually worldwide barely being able to cover the rapidly growing demand from industry (led by automotive), a nice, safe production footprint for this increasingly vital metal in Canada is a real no-brainer for investors.
Current consumption levels paint a clear picture of the future, with record car sales pushing demand ever higher this year, palladium consumption will outstrip supply by some 511k ounces in 2013 (that’s how much the car industry uses up every seven weeks). It’s a good thing PAL ran some 44.3k payable ounces in just Q4 of 2012, deriving those ounces from some 271k tonnes of surface ore (grading 2.44 grams/tonne from the mill head) and 240k tons from the underground (where the grade is much higher at 4.93 g/tonne). This is an 82% recovery rate on an average 3.61 g/tonne, yields which will be made all the sweeter with the addition of the shaft mining capacity that is set to come online.
We should see 2012 financials by February on PAL and with palladium still trading almost half under the record 2001high, the price metrics for getting into the domestic palladium development space are ideal right now.
For more information on North American Palladium, visit www.NAPalladium.com
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