North American Palladium Delivers Strong Q1 2019 Financial Results, Eliminates Debt and Increases Dividend
Press Release
TORONTO, May 02, 2019 — North American Palladium Ltd. (“NAP” or the “Company”) (TSX:PDL)(OTC PINK:PALDF) today announced financial and operational results for the three months ended March 31, 2019.
First Quarter Highlights
- Based on 56,775 ounces of palladium sold, revenue for the quarter increased to $128.3 million compared to $86.6 million for the same period in 2018; the highest quarterly revenue in the Company’s history.
- Net income was $29.5 million or $0.50 per share, compared to $4.6 million or $0.08 per share reported for Q1 2018.
- Cash provided from operations was $75.8 million; free cash flow was $46.8 million.
- Adjusted EBITDA1 increased to $61.6 million up from $28.4 million in Q1 2018.
- The Company’s total cash balance on its credit facility of $37.0 million was eliminated during the quarter.
- The Company’s board of directors is pleased to announce an increase in the quarterly dividend from $0.03 to $0.10 per share to common shareholders of record on June 1, 2019.
“Q1 2019 was a positive quarter for North American Palladium and our Lac des Iles Mine,” stated Jim Gallagher, President and CEO. “The site continues to lead in safety with another Lost Time Injury-free quarter. Good overall production combined with strong palladium prices have enabled the Company to both retire its debt and increase its dividend. While we did experience a few mechanical challenges in the mill, overall Lac des Iles operated exceptionally during the first quarter. Additionally, I want to recognize the recent successes from our exploration team, delivering positive results on multiple fronts.”
| Operating Results | Three months ended March 31, | ||||||
| 2019 | 2018 | ||||||
| Ore mined (tonnes)2 | |||||||
| Underground Sheriff Pit |
607,918 1,995 |
569,468 127,940 |
|||||
| Surface stockpiles | 241,451 | 352,976 | |||||
| Total | 851,364 | 1,050,384 | |||||
| Mined ore grade (Pd g/t) | |||||||
| Underground Sheriff Pit |
3.2 2.4 |
3.3 1.3 |
|||||
| Surface | 0.8 | 0.9 | |||||
| Milling | |||||||
| Tonnes ore milled (dry metric tonnes) | 808,599 | 1,021,147 | |||||
| Head grade (grams palladium per tonne milled) | 2.6 | 2.3 | |||||
| Palladium recoveries (%) | 82.4 | 79.9 | |||||
| Palladium concentrate grade (g/t) | 229 | 263 | |||||
| Tonnes of concentrate produced (dry metric tonnes) | 7,634 | 7,162 | |||||
| Production cost per tonne ore milled1 | $ 63 | $ 47 | |||||
| Payable production | |||||||
| Palladium – ounces | 52,698 | 57,053 | |||||
| Other results | |||||||
| Underground cost per tonne mined1 | $ 38 | $ 39 | |||||
| AISC per ounce of palladium produced, net of by-product revenues (US$)1 | $ 919 | $ 709 | |||||
| Cash cost per ounce of palladium sold, net of by-product revenues (US$)1 | $ 663 | $ 567 | |||||
| Financial Results (expressed in millions of Canadian dollars) |
Three months ended March 31, | ||||||
| 2019 | 2018 | ||||||
| Revenue | $ | 128.3 | $ | 86.6 | |||
| Smelting, Refining, and Freight | $ | 4.0 | $ | 3.9 | |||
| Royalty Expense | $ | 5.5 | $ | 3.6 | |||
| Net Revenue | $ | 118.8 | $ | 79.1 | |||
| Operating expenses | |||||||
| Production Cost | |||||||
| Mining | $ | 29.6 | $ | 30.1 | |||
| Milling | $ | 14.4 | $ | 12.3 | |||
| General and Administration | $ | 7.3 | $ | 6.1 | |||
| Inventory and Other Cost | $ | 3.6 | $ | (0.1 | ) | ||
| Total Production Costs | $ | 54.9 | $ | 48.4 | |||
| Depreciation and Amortization | $ | 12.6 | $ | 13.0 | |||
| (Gain) loss on disposal of equipment | $ | (1.1 | ) | $ | 0.1 | ||
| Total Mining Operating Expenses | $ | 66.4 | $ | 61.5 | |||
| Income from mining operations | $ | 52.4 | $ | 17.6 | |||
| Net Income | $ | 29.5 | $ | 4.6 | |||
| Net Income per share | $ | 0.50 | $ | 0.08 | |||
| Adjusted EBITDA1 | $ | 61.6 | $ | 28.4 | |||
| Capital Investment, Including Leases | $ | 20.2 | $ | 16.8 | |||
Finance
Revenue for the quarter increased to $128.3 million compared to $86.6 million for the same period in 2018. The quarter-over-quarter increase in revenue is largely due to the increase in palladium price. Palladium revenue per ounce sold this quarter averaged US$1,507/oz, compared to US$1,001/oz in Q1 2018.
Total production costs for the first quarter of 2019, before inventory and other cost adjustments, were $51.3 million or $63 per tonne milled, compared to $48.5 million or $47 per tonne milled, in Q1 2018. This increase in unit cost is attributable to lower mill tonnage and associated maintenance costs.
Cash flow from operations increased by $62.3 million to $75.8 million in Q1 2019, compared to the same period in 2018. As a result, adjusted EBITDA increased to $61.6 million in Q1 2019 from $28.4 million in Q1 2018 and net income increased to $29.5 million from $4.6 million in Q1 2018.
Capital expenditures in Q1 2019 totalled $20.2 million compared to $16.8 million in Q1 2018 as per the planned underground mine expansion. Major expenditures during the quarter included underground development, mobile equipment and tailings management.
With the elimination of debt, at the end of Q1 2019 the Company had total liquidity of $165.5 million, consisting of $29.1 million of cash and cash equivalents and $136.4 million or US$102.1, million under the Company’s credit facility. The Company’s outstanding debt of $10.9 million is solely related to equipment leases.
All-in sustaining costs (AISC1) increased in the quarter to US$919 per ounce of payable palladium produced compared to US$709 per ounce in Q1 2018. The increase resulted from lower ounces produced, increased sustaining capital based on the mine expansion, increased operating expenses, increased royalty expenses due to higher palladium metal prices and lower by-product revenue.
Operations
Overall positive results were reported by the Company’s operations. The underground mine expansion continued in Q1 2019, with increased development rates and infrastructure upgrades to support the production target of 12,000 tonnes per day by 2021.
Underground production increased to 6,755 tonnes per day in Q1 2019 from 6,327 tonnes per day from Q1 2018 while underground costs per tonne decreased slightly to $38 in Q1 2019 compared to a $39 cost per tonne for the same period in 2018.
Mill recovery increased this quarter to 82.4% from 79.9% in Q1 2018. The Company produced a total of 52,698 payable ounces of palladium, a decrease from the 57,053 payable ounces produced in Q1 2018. This lower mill throughput was below expectations at 8,984 tonnes per day against the target of 12,000 tonnes per day. Mechanical issues and significant increases in fines from the underground ore are the two primary causes for this underperformance. The mill experienced two conveyor belt failures and rebuilds of both the primary and secondary crushers during the quarter, which resulted in lower tonnes milled and higher costs.
Organizational changes have been implemented to address these issues with a renewed focus on preventative maintenance. In addition, the Company is currently evaluating design changes in the conveying and grinding circuit to mitigate the challenge of increased fines and to support future throughput increases.
Exploration
Exploration expenditures for the quarter were $6.6 million, compared to $3.8 million in Q1 2018, and included more than 20,000 metres of diamond drilling at Sunday Lake, LDI underground and LDI surface operations.
Underground and surface drilling at LDI has yielded positive results that the Company will further communicate in the coming weeks.
At Sunday Lake, a new discovery was made (reported on April 29, 2019) within the “Big Red” Target; drill hole SL-19-026 returned a drill intersection of 41.2 m at 5.51 g/t PGM (Pt+Pd+Au) including a high-grade section of 15.8 m at 9.11 g/t PGM and 0.88% Cu. These results are beginning to outline the extent of mineralization at the base of the Sunday Lake Intrusion, further positioning Sunday Lake as a significant “blue sky” opportunity for the Company.
Based on the large number of resource gain opportunities at LDI, the Company has increased its 2019 diamond drilling budget by $5.7M to cover both underground exploration and definition drilling.
A comprehensive update on 2018 exploration results at LDI was provided in a press release on February 11, 2019 that can be found here.
Outlook
The Company reiterated its previous 2019 production guidance of 220,000 to 235,000 ounces of payable palladium at an AISC1 of US$785 to US$815 per payable ounce of palladium produced.
Dividend
After giving consideration to production and price forecasts and capital requirements over the medium term, the Company is confident it will continue to generate a cash surplus and meet its business requirements. Therefore, the Company’s board of directors has increased its quarterly dividend to $0.10 from $0.03 per share to common shareholders of record on June 1, 2019.
Shareholder Information
The complete consolidated financial statements of the Company for the quarter ending March 31, 2019 and the related management’s discussion and analysis can be found on NAP’s website at www.nap.com, and on SEDAR at www.sedar.com.
The Company invites you to join its webcast and conference call on Friday, May 3, 2019 at 8:00 a.m. E.T.
Conference Call Details:
| Date: | Friday, May 3, 2019 | |
| Time: | 8:00 a.m. ET | |
| Dial-In: | North America: 1-800-319-4610 | International: 1-604-638-5340 | |
| Recording: | Available within 24 hours following the call at www.nap.com. | |
| Webcast: | http://services.choruscall.ca/links/nap20190503.html | |
| Replay: | International Toll: 1-604-674-8052 | North America Toll Free: 1-855-669-9658 | |
| Replay Passcode: | 2885 (available until June 15, 2019) |
For further information, please contact:
North American Palladium Investor Relations at 416-360-7374 or ir@nap.com
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