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Gold/Mining/Energy : North American Palladium(AMEX:PAL)- PGM Producer -- Ignore unavailable to you. Want to Upgrade?

To: koan who wrote (614)	6/14/2000 2:16:00 PM
From: Elizabeth Andrews	Respond to of 976

They have a hedging plan in place. They have an end user supply contract with an unnamed Japanese car manufacturer, which is subject to suitable financing for the expansion. They haven't said whether the subject has been removed yet. That deal involves a deal for the car company to buy 100% of the production for five years at a floor price of US $325 per ounce. The contract also has a ceiling price of US $550 per ounce on 50% of the production. Presumably the car company has to buy the other 50% at market. So if the deal goes through then PDL would not be able to sell forward any future production. What we don't know is if this agreement covers current production or production from the new mine and mill when commissioned. The new mine is expected to be running in Q2-2001. In the meantime if the production is un-hedged they only have about 70,000 oz to play with between now and then. That could generate about US $30 million cash, however.

To: koan who wrote (614)	6/14/2000 2:42:00 PM
From: russet	Read Replies (2) \| Respond to of 976

<<In fact, given these prices wouldn't it make sense to just borrow the PD and sell enough forward to finance the new mill and then pay the PD back with the new production. That way you completely avoid further dilution. This seems so obvious I would guess that is what they plan to do with these new prices - or am I missing something? >> It might be difficult to find someone with some PGM's that is willing to lend it to PDL so they can sell it on the spot market. Car manufacturers, and other users of the metal are contracting directly with the PGM miners and refiners for all of their future production, and some manufacturers are stockpiling so free PGM metals are scarce. Russia was thought to have large amounts stockpiled, but as we all know, it appears they do not, or at least don't want to sell it now. It's a good plan, but unlike Gold, there are few institutions with large stockpiles of PGM's (like the Central Bank reserves of Gold and Silver) to allow it to work. The PGM markets run like some of us wish the gold markets could.