North American Palladium (USA) (PAL)

jempsall (< 20) Submitted: 4/23/08 8:35 PM : Start Price: $5.10 PAL Score: 47.00

PAL has a less than stellar financial record based on my review of the last 3 years. They only achieved positive cash flow in mid-2006. Losses in 2006 were much less than 2005, but increased slightly in 2007. If these guys are lossing money at these prices, what happens when prices go down?


Looking at mining, PAL is running out of low cost open pit reserves - about 2-4 years. They started underground mining in 2006. The good news is that average grade increased to 5.8 gm/t Pd vs 1.8 gm/t in the open pit. The bad news is that mining costs are much higher. PAL did not improve profitability in 2006-07 even with substantial underground production. PAL was not forthcoming on underground reserves, perhaps because they're not well delineated. My guess is they have about 10 years with a possibility for expansion. A little seulthing should find a better number.


PAL is earning a 50% interest in 2 other projects. One is with INCO on an old prospect in Ontario. The other is with Goldfields in Finland. The obvious question is why would two large mining companies let a juniior buy into a good project - perhaps they are not all that attractive.


In summary, if you think Pd prices are going to rise, I think you can find more attractive companies.

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