North American Palladium (T.PDL and NASDAQ- PDLCF) operates a 2800 tonne per day open-pit mine (Lac Des Iles Mine) about 1 1/2 hours north
of Thunder Bay, Ontario. It has been in operation since November, 1993.
In fiscal 1995, they produced 77,000 oz Palladium, 5,000 oz Platinum, 5,000 oz gold, 1.2 million pounds Copper, and
1 million pound of Nickel, from a total of 750,000 tonnes of processed ore. The company posted a net loss of $2.5 million
after tax in 1995, however they had an operating income of $1.5 million.
I consider this to be a "sleeper" company, as it receives no coverage by analysts, and management does little to
actively promote it. It has only 11 million shares outstanding, giving it a present market cap of about C$45 million.
Obviously this company has had troubles attaining profitability (they have had a few profitable quarters, but the last 3 have been losses).
Several factors contributed to the losses the previous 3 quarters. Bitterly cold
weather limited the operation of the outdoor crushing circuit in the 4th quarter 1995, and 1st quarter 1996. Then low grade mineralization was
encountered in the 2nd quarter. However, I believe there is significant potential for improvement. Ore grade has gradually been improving. As well,
the company is finishing up a major capital improvement program which included a $7 million hydro power line to the mine sight. Up until now they have operated using expensive diesal generators. The new power source alone should improve the bottom line significantly. In addition, work is continuing on a new indoor crushing circuit, which should be completed by January. Many other improvements (flotation circuit upgrade, maintenance buildings, etc) have also been completed.
Previous uninspired operating results, combined with poor palladium prices, have driven PDL to historic lows. However, from an operation viewpoint this company has never looked better. Many analysts are predicted an upturn for precious metal prices. Thus I would consider this a good long term stock at the current prices (C$4.30). I am close to the company so I can provide much more information to anyone who is interested.
napalladium.ca
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