NAP Focused On Operational Performance At LDI
TORONTO - "2015 was a year of change at North American Palladium" stated Jim Gallagher, Chief Executive Officer. "The financial restructuring that occurred in August resulted in a substantial reduction in debt on our balance sheet and Brookfield Asset Management taking a 92% equity position in the Company. The Company's workforce, partly in response to lower overall metal prices, was reduced both at the corporate office and at the LDI site. The management team is now focused on operational performance at LDI. With ongoing financial support from Brookfield, the site is in the first phase of an expansion of the long-term tailings and water management facility that will remove current production rate restrictions. The underground mine is currently transitioning to a sub-level shrinkage mining method that is expected to improve production reliability and rate. We expect these changes should lower our unit costs over the life-of-mine and will enable NAP to fully realize the benefit of improved metal prices should they occur later in 2016".
Revenue for the year ended December 31, 2015 was $193.6 million compared to $220.1 million in the prior year. The 12% year-over-year decrease in revenue was primarily due to declining metal prices and lower sales volumes, partially offset by a weaker Canadian dollar and higher mill feed grades. During the year, the Company realized an average palladium selling price of US$718 per ounce, compared to US$802 per ounce realized in 2014.
Net loss for the year was $216.4 million or $9.39 per share compared to a net loss of $66.7 million or $78.74 per share in 2014. The increase in the net loss is primarily due to: the $26.5 million reduction in revenue; a $66.8 million change in fair value of the senior secured term loan that was settled as part of the recapitalization transaction that closed in August 2015; $28.3 million non-cash loss relating to the fair value of the Company's common shares having a higher value than the carrying value of the debt that was settled at the time of recapitalization; the impact of a $39.5 million increased foreign exchange loss related to US$ denominated debt; an increase in production costs of $11.8 million primarily due to increased mining and milling costs associated with increased power consumption, reagent use and contractor costs; and, $5.5 million of mine restoration and mitigation costs relating to the water balance event that occurred in May 2015.
Lac des Iles Operations - In 2015, the Company's LDI mine produced 166,785 ounces of payable palladium at a total cash cost of US$557 per ounce compared to 174,194 ounces of payable palladium at a cash cost of US$513 in 2014. The increase in cash cost in 2015 was mostly due to increased production costs and decreased by-product metal revenue impacted by decreased sales volumes and declining metal prices.
During 2015, the LDI mill processed 2,135,915 tonnes of ore at an average palladium grade of 3.2 grams per tonne and at an 82.8% palladium recovery rate. The 19% year-over-year grade increase was primarily due to reduced blending of stockpiled low-grade ore.
Production costs per tonne milled in 2015 were $67 compared to $49 in 2014. The increase was primarily due to the suspension of low-grade stockpile processing leading to fewer tonnes milled as well as increases in labour, contractor and consultant costs, reagent use and increased power costs.
Underground mining in 2015 produced 1,532,050 tonnes (4,197 tonnes per day) at an average grade of 4.4 g/t palladium compared to 1,225,547 tonnes (3,358 tonnes per day) at an average palladium grade of 4.4 g/t in 2014. During 2015, 779,937 tonnes of the low-grade surface stockpile and tailings at an average grade of 1.1 g/t palladium was processed compared to 1,411,476 tonnes at an average grade of 1.1 g/t in 2014.
From May 8 to June 26, 2015 the mill was shut down due to a temporary lack of capacity in our water management facilities following spring runoff, which had a detrimental effect on total annual production. In the fourth quarter, the mill operated on a 14-day on/14-day off schedule only as a result of the suspension of processing of low-grade stockpile material in response to lower metal prices The daily rate of underground mining decreased in the latter half of 2015 due to changes to the stope sequence and increased seismic activity in the underground workings. Since this seismic activity was first experienced, additional monitoring equipment has been installed and stope sequencing has been modified to address the issue. Improvement head grade to the mill in the latter half of 2015 was a result of suspending low-grade ore feed from surface.
In 2015, the Company incurred $8 million in exploration expenditures compared to $8.3 million in 2014. The 2015 exploration program focused on deep drilling in the lower part of the Offset zone to the south of the Camp Lake fault, extension drilling in the upper Offset southeast extension zone, and surface exploration that was primarily focused on extending higher-grade palladium resources in the northern part of the Sheriff zone, including the Powerline zone. Of particular interest is the initial intersection of what is interpreted to be the extension of the south-plunging Offset zone to the south of the Camp Lake fault, opening up the potential for a new resource at the bottom of the Offset zone. The Upper Offset southeast extension zone continues to deliver positive results and has now been traced for approximately 350m vertically starting at a depth of 350 meters below surface. In addition, the higher-grade portion of the Sheriff Zone (Powerline zone) has been traced to surface and continues to deliver encouraging results. Selected drilling results are provided in the table, below. As the Company is in the process of transitioning to a different mining method, namely sub-level shrinkage, it expects that it's mineral reserve and resource estimate following the implementation will be materially different than what is currently published. As a result, it will not produce an updated estimate in the first quarter of 2016, as has been the past practice. The next estimates will be provided in Q1 2017 when the engineering and resource calculations have been completed.
Payable palladium production for 2016 is expected to be between 160,000 and 175,000 ounces versus the 166,785 ounces achieved in 2015. The business plan for 2016 includes a slight increase in underground production but assumes no processing of the low-grade surface stockpiles due to the current low metal price environment.