North American Palladium The Only Pure Play Palladium Producer TSX:PDL | OTC:PALDF 2018 Investor Presentation
Disclaimers and Forward-Looking Information All dollar amounts shown are in Canadian dollars unless otherwise stated Certain information contained in this presentation constitutes most recent Management’s Discussion and Analysis report and LDI mine, that metal prices and exchange rates between the 'forward-looking statements' or 'forward-looking information within Annual Information Form on file with Canadian securities Canadian and United States dollar will be consistent with the the meaning of applicable Canadian securities laws. All statements regulatory authorities on SEDAR at www.sedar.com under the Company’s expectations, that there will be no significant other than statements of historical fact are forward-looking heading “Risk Factors”. disruptions affecting operations, and that prices for key mining and statements. The words ‘target’, ‘plan’, ‘should’, ‘could’, ‘estimate’, construction supplies, including labour, will remain consistent with This presentation also contains references to estimates of mineral ‘guidance’, and similar expressions identify forward-looking the Company’s expectations. The forward-looking statements are resources and mineral reserves. The estimation of mineral resources statements. Forward-looking statements in this presentation not guarantees of future performance. The Company disclaims any is inherently uncertain and involves subjective judgments about include, without limitation: information pertaining to North obligation to update or revise any forward-looking statements, many relevant factors. Mineral resources that are not mineral American Palladium Ltd. (the “Company”)’s strategy, plans or whether as a result of new information, events or otherwise, except reserves do not have demonstrated economic viability. The future financial or operating performance, such as statements with as expressly required by law. Readers are cautioned not to put accuracy of any such estimates is a function of the quantity and respect to, long term fundamentals for the business, operating undue reliance on these forward-looking statements. quality of available data, and of the assumptions made and performance expectations, project timelines, tailings management judgments used in engineering and geological interpretation Investing in the Company's common shares involves significant plan, mining method change, production forecasts, operating and (including estimated future production from the LDI mine, the risks. Prospective investors should carefully read and consider the capital cost estimates, expected mining and milling rates, cash anticipated tonnages and grades that will be mined and the risk factors described or referenced under the heading “Risk balances, projected grades, mill recoveries, metal price and foreign estimated level of recovery that will be realized), which may prove Factors” in the final base shelf prospectus, contained in any of the exchange rates and other statements that express management ’s to be unreliable and depend, to a certain extent, upon the analysis documents incorporated by reference therein, and in any expectations or estimates of future performance. Forward-looking of drilling results and statistical inferences that may ultimately applicable prospectus supplement, before purchasing common statements involve known and unknown risk factors that may cause prove to be inaccurate. Mineral resource or mineral reserve shares. the actual results to be materially different from those expressed or estimates may have to be re-estimated based on: (i) fluctuations in The Company prepares and presents its financial statements in implied by the forward -looking statements. Such risks include, but the price of platinum; (ii) results of drilling, (iii) metallurgical testing accordance with IFRS. Certain financial measures highlighted in this are not limited to: the possibility that metal prices and foreign and other studies; (iv) mining operations, including dilution; (v) the presentation are financial measures that have not been prepared in exchange rates may fluctuate, the risk that the Lac des Iles (“LDI”) evaluation of mine plans subsequent to the date of any estimates; accordance with IFRS. For a definition and reconciliation of these mine may not perform as planned, that the Company may not be and (vi) the possible failure to receive required permits, approvals non-IFRS financial measures to the nearest IFRS financial measures, able to meet production forecasts, the possibility that the Company and licenses or changes to existing mining licences. please refer to the appendix to this presentation. Such non-IFRS may not be able to generate sufficient cash to service its Forward-looking statements are necessarily based upon a number financial measures are used from time to time herein but should not indebtedness and may be forced to take other actions, inherent of factors and assumptions that, while considered reasonable by be viewed as a substitute for IFRS measures of performance and risks associated with development, exploration, mining and management, are inherently subject to significant business, others in the industry may define these measures differently. processing including environmental risks and risks to tailings economic and competitive uncertainties and contingencies. The capacity, employment disruptions, including in connection with factors and assumptions contained in this presentation, which may collective agreements between the Company and unions and the prove to be incorrect, include, but are not limited to: that the risks associated with obtaining necessary licenses and permits. For Company will be able to continue normal business operations at its more details on these and other risk factors see the Company’s 2018-09-20 2
Investment Summary The Only Pure Play Palladium Producer • Five consecutive quarters of positive earnings. • Adjusted EBITDA of $65.6 million for the first half of 2018. Lac des Iles mine (“LDI”) • Adjusted EBITDA of $86.2 million in 2017. re-engineered into a strong • Improved key financial metrics in 2018 Feasibility Study; including total revenue of $3.64 billion, total operating cash flow generator EBITDA 1 of $1.51 billion and after-tax NPV (8%) of $637 million, generated by an average operating margin of 43% ($37.86 per tonne of ore milled). • NAP is the only pure play palladium producer in the world. Primary palladium mine in a • Located in Canada, a proven mining-friendly jurisdiction. low risk jurisdiction • ~80% of global palladium production is from higher-risk regions (South Africa and Russia). • Ideal balance of early-stage and advanced greenfields properties and brownfields resource delineation targets. World-class PGM exploration • Brownfields opportunities continue to replace reserves at a very low cost. portfolio • Several currently active greenfields exploration targets, providing encouraging results. • Long-term analysts’ consensus continues to forecast a supply deficit, driven by a lack of new primary production, and potential significant supply risks from declining South African production. Favourable palladium market • Tightening global emission standards, the shift from diesel to gasoline powered vehicles, and the growth of fundamentals hybrid sales support increased global consumption of palladium. • Analysts are forecasting strong palladium pricing >US$1,000/oz through 2021 2 . ( 1 Non-IFRS measure. 2 Bloomberg) 2018-09-20 3
Company Overview Strong Cash Flow | Improved Balance Sheet | Strategic Process Underway The Lac des Iles mine is located 90km northwest of Thunder Bay, with all season road access. • Existing producer with over 25 years in operation, with 15,000 tpd mill facility. • New Feasibility Study and Technical Report published in October 2018, outlining a 9 year mine life: • 40.9 million tonnes of underground and surface reserves at an average • Capital Structure palladium grade of 2.31 g/t. (as at September 18, 2017) Developing a second, bulk mining area to extract maximum value from • Shares Outstanding 58.1 million several near-surface resources. Options Granted 1.5 million Current management team, with the support of • Share Price $9.03 ONTARIO Brookfield (92% shareholder), completed the turnaround of the Company by: Market Capitalization $525 million Lac des Iles Substantially improving operating Cash $33 million • performance; and Debt 1 $76 million De-levering the balance sheet. • Enterprise Value $568 million ( 1 Debt includes senior secured term loan ($45.5mm), credit facility ($14.0 mm) and capital leases ($16.4mm).) 2018-09-20 4
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