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Transcript of Lac des Iles Mines21.q4cdn.com/326998455/files/doc_presentations/2017… · · 2017-06-20Lac des...
January 2017
Lac des Iles Mine
Investor Presentation June 19, 2017
A final base shelf prospectus containing important information relating to the securities described in this presentation has been filed with the securities regulatory authorities in each of the provinces and territories of Canada, excluding Quebec. A copy of the final base shelf prospectus, any amendment to the final base shelf prospectus and any applicable shelf prospectus supplement that has been filed, is required to be delivered with this presentation. This presentation does not provide full disclosure of all materials facts relating to the securities offered. Investors should read the final base shelf prospectus, any amendment and any applicable shelf prospectus supplement for disclosure of those facts, especially risk factors relating to the securities offered, before making an investment decision. The securities described in this presentation have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"), or the securities laws of any state in the United States and are being offered and sold within the United States exclusively to "qualified institutional buyers" under Rule 144A under the U.S. Securities Act and outside the United States in compliance with Regulation S under the U.S. Securities Act.
2 Disclaimers
Certain information contained in this presentation constitutes 'forward-looking statements' or 'forward-looking information within the meaning of applicable Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. The words ‘target’, ‘plan’, ‘should’, ‘could’, ‘estimate’, ‘guidance’, and similar expressions identify forward-looking statements. Forward-looking statements in this news release include, without limitation: information pertaining to the Company’s strategy, plans or future financial or operating performance, such as statements with respect to, long term fundamentals for the business, operating performance expectations, project timelines, tailings management plan, mining method change, production forecasts, operating and capital cost estimates, expected mining and milling rates, cash balances, projected grades, mill recoveries, metal price and foreign exchange rates and other statements that express management ’s expectations or estimates of future performance. Forward-looking statements involve known and unknown risk factors that may cause the actual results to be materially different from those expressed or implied by the forward -looking statements. Such risks include, but are not limited to: the possibility that metal prices and foreign exchange rates may fluctuate, the risk that the Lac des Iles (“LDI”) mine may not perform as planned, that North American Palladium Ltd. (the “Company”) may not be able to meet production forecasts, the possibility that the Company may not be able to generate sufficient cash to service its indebtedness and may be forced to take other actions, inherent risks associated with development, exploration, mining and processing including environmental risks and risks to tailings capacity, employment disruptions, including in connection with collective agreements between the Company and unions and the risks associated with obtaining necessary licenses and permits. For more details on these and other risk factors see the Company’s most recent Management’s Discussion and Analysis report and Annual Information Form on file with Canadian securities regulatory authorities on SEDAR at www.sedar.com under the heading “Risk Factors”.
This presentation also contains references to estimates of mineral resources and mineral reserves. The estimation of mineral resources is inherently uncertain and involves subjective judgments about many relevant factors. Mineral resources that are not mineral reserves do not have demonstrated economic viability. The accuracy of any such estimates is a function of the quantity and quality of available data, and of the assumptions made and judgments used in engineering and geological interpretation (including estimated future production from the LDI mine, the anticipated tonnages and grades that will be mined and the estimated level of recovery that will be realized), which may prove to be unreliable and depend, to a certain extent, upon the analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate. Mineral resource or mineral reserve estimates may have to be re-estimated based on: (i) fluctuations in the price of platinum; (ii) results of drilling, (iii) metallurgical testing and other studies; (iv) mining operations, including dilution; (v) the evaluation of mine plans subsequent to the date of any estimates; and (vi) the possible failure to receive required permits, approvals and licenses or changes to existing mining licences.
Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions contained in this news release, which may prove to be incorrect, include, but are not limited to: that the Company will be able to continue normal business operations at its LDI mine, that metal prices and exchange rates between the Canadian and United States dollar will be consistent with the Company’s expectations, that there will be no significant disruptions affecting operations, and that prices for key mining and construction supplies, including labour, will remain consistent with the Company’s expectations. The forward-looking statements are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise, except as expressly required by law. Readers are cautioned not to put undue reliance on these forward-looking statements.
Investing in the Company's common shares involves significant risks. Prospective investors should carefully read and consider the risk factors described or referenced under the heading “Risk Factors” in the final base shelf prospectus, contained in any of the documents incorporated by reference therein, and in any applicable prospectus supplement, before purchasing common shares.
All dollar amounts shown are in Canadian dollars, unless otherwise stated.
The Company prepares and presents its financial statements in accordance with IFRS. Certain financial measures highlighted in this presentation are financial measures that have not been prepared in accordance with IFRS. For a definition and reconciliation of these non-IFRS financial measures to the nearest IFRS financial measures, please refer to the appendix to this presentation. Such non-IFRS financial measures are used from time to time herein but should not be viewed as a substitute for IFRS measures of performance and others in the industry may define these measures differently.
Cautionary Statement on Forward-Looking Information
3
Operational Turnaround
New corporate and site leadership teams • An engaged and motivated workforce with excellent safety and productivity
performance.
A re-engineered asset • Conversion to sub-level cave mining at higher production, lower cost. • Increasing mill utilization from ~50% to 100% (Q4 2017). • Lower power costs, new 5 year concentrate sales agreement • New long-term tailings management plan. • A return to open pit mining
Increased ore reserve and new LOM plan released in Q2 2017
Promising exploration program
Multiple targets on mine site property with high probability of success Extensive regional property portfolio within 50km of the existing site
• 40,000 hectares assembled over last five years Strong PGM exploration expertise with a track record of adding
reserves
Exposure to palladium in an established mining camp and jurisdiction
Favourable supply/demand fundamentals (structural deficit) and increasing palladium prices
Sustainability: palladium is used to reduce emissions in gasoline automobiles
Only pure play palladium producer.
1. Based on 2017 guidance published on February 22, 2017. 2. Based on C1 cash costs net of by-product credits.
1
2
3
Exploration upside
Operational Excellence
Leverage to Palladium
Why Invest in North American Palladium?
4 Market Dynamics – Attractive Fundamentals
• Demand is expected to continue to exceed supply in the near future, driven by continued growth in automobile sales
• Analyst consensus forecasts higher prices over the 2017-2021 period (see Appendix A, page 24)
Palladium Demand/Supply and Price
Historical data based on Johnson Matthey and forecast data based on BMO Capital Markets Equity Research.
Supply Gap
Long-term Consensus
$700 - $835 - $1000
Currently: US$800/oz
5 Overview
• North American Palladium (“NAP”) is the only pure play palladium producer in the world
• Located 90 km northwest of Thunder Bay, with all season road access
• Existing producer operating with +20 year history and +5,000 tpd underground mine and 15,000 tpd mill facility
• 550 employees; 50% Thunder Bay, 50% other areas of Canada
• Recapitalized in 2015 by Brookfield (92% owned) to sponsor a turnaround of the Company
• New management team
• Substantial operating improvements
• De-levered balance sheet
• Mill currently operates on a two week on/off batch process due to tailings capacity but will return to full time operations this fall
• New LOM plan published June 6, 2017
• 38 Mt reserves at 2.25 g/t palladium
• 9.5 year mine life combining underground production with recommencement of open pit operations
Capital Structure
(As at March 31, 2017)
Shares Outstanding (M) 58.1 Options Granted (M) 1.5 Share Price (C$) $5.39
Market Capitalization (C$M) $ 313 Cash (C$M) $ 18 Debt1 (C$M) $ 123
Enterprise Value (C$M) $ 418
1. Debt includes senior secured term loan (C$65.5 M), credit facility (C$46.5 M) and capital leases (C$11.3M).
6
Modern Mill Complex (2002) Nameplate capacity: 15,000 tpd
Shaft Infrastructure (2015) 825 m deep, +8,000 tpd capacity
Permitted Tailings Facility
Lac des Iles
Unique World Class Ore Body with Modern Infrastructure • Two primary sources of ore to fill a 15,000 tpd modern mill constructed in 2002
• Underground:
• Unusually thick, vertical orebody allows for low cost bulk mining - widths up to 80 metres and strike length of >600 metres
• Palladium deposits are typically found in narrow reef structures with high mining costs
• Open Pit:
• Lower grade stockpiles from prior open pit mining total nearly 5 million tonnes (total resources) and can be used to fill excess mill capacity
• Future sources of surface ore will come from re-development of the existing Roby open pit and a new pit (Sheriff)
* Pd equivalent grade calculated using February, 2017 consensus metal prices (see Appendix A), metal recovery equations and smelter terms
May 2017 Reserves and Resources
7
Open pit production along with existing low grade stockpiles (RGO) will supplement the higher grade underground feed to keep the mill at optimum capacity. Planned production:
Sherriff Pit
500,000 t @ 1.9 g/t
Roby Pit Pushback 11.7 mt @ 1.3 g/t
Life of Mine – Open Pit Development
8
New mining method
start
• New Sub Level Shrinkage (SLS) method is increasing production, improving reliability, increasing ore recovery and lowering costs
• Replaces longhole, open stoping method which left ore in remnant pillars and created ground control issues
• LDI’s new cost profile is favorable compared to a number of prominent underground mining operations in Canada
New Mining Method – Increasing Production at Low Cost
Historical and Forecasted Underground Production Rate since SLS inception (tpd)
6,0205,8405,125
4,0354,6814,4584,0934,2583,871
3,257
Q2 17 31-Oct 30-Nov 31-Dec Q1 17 Q3 17 Q4 17 31-Jul 31-Aug 30-Sep
9 Life of Mine Plan (43-101 Technical Report 06/07/17)
• Substantial conversion of mineral resources to reserve category resulting in 9.5 year mine life
• Includes surface reserves around existing pit
• Incorporates underground ore to +1305 m depth
• New mining method increases total ore recovery, lowers operating cost, raises production rate and improves geotechnical ground conditions
• Re-examines cut-off grade with consensus price forecast and cost assumptions
Goal is to maximize mill capacity with the highest grade possible
SLS Conversion Zone at Depth
Strong exploration upside which could lead to further mine life extensions , custom milling opportunities and potentially another LDI-type deposit
Total Ore indicates proven & probable mineral reserves mined in the LOM plan.
10
New mining method
start
Life of Mine – Economic Analysis (43-101 Technical Report 06/07/17)
Key Statistics
1. Net of by-product revenue and excluding taxation. 2. Metal price and currency exchange assumptions detailed in Appendix A. 3. Non-IFRS measure. Refer to Appendix A for reconciliation to the nearest IFRS financial measure.
Total Palladium Reserves (Contained) 2.7 M oz
Average Palladium Reserve Grade 2.21 g/t
Open Pit / Underground Tonnes 46% OP / 54% UG
Average Mill Throughput 10,900 tpd
Estimated Palladium Recovery 81%
Total Palladium Production (Payable) 2.04 M oz
Ave. Annual Palladium Production (Payable) 214,000 oz
Reserve Life 9.5 Years
Average Cash Costs (LOM)1,3 USD$428/oz sold
Average All-in Sustaining Costs (LOM)1,3 USD$527/oz sold
Cumulative EBITDA3 C$1,056M
Cumulative Post-tax Free Cash Flow C$678M
Post-Tax NPV(5%) C$536M
Post-Tax NPV(8%) C$470M
11
New mining method
start
Life of Mine – Economic Analysis (43-101 Technical Report 06/07/17)
Post-tax NPV 1,3 @ 8% (CAD) USD/CAD
US$/oz Pd 1.20 1.25 1.28 1.30 1.35
$ 700 $ 164 M $ 224 M $ 265 M $ 282 M $ 339 M
$ 750 $ 242 M $ 302 M $ 344 M $ 362 M $ 421 M
$ 800 $ 315 M $ 379 M $ 423 M $ 441 M $ 495 M
$ 835 $ 364 M $ 429 M $ 470M $ 486 M $ 537 M
$ 850 $ 390 M $ 454 M $493 M $ 508 M $ 560 M
$ 900 $ 461 M $ 517 M $ 555 M $ 571 M $ 624 M
$1000 $ 579 M $ 636 M $ 677 M $ 693 M $ 750 M
1. Palladium price and forex rate adjusted 2018 forward. 2. Palladium price and discount rate adjusted 2018 forward. 3. Metal price and currency exchange assumptions detailed in Appendix A.
Post-tax NPV 2,3 @ 1.28 FX rate (CAD) Discount
US$/oz Pd 0% 5% 7% 8% 10%
$ 700 $ 394 M $ 305 M $ 277 M $ 265 M $ 242 M
$ 750 $ 502 M $ 394 M $ 360 M $ 344 M $ 316 M
$ 800 $ 616 M $ 482 M $ 441 M $ 423 M $ 390 M
$ 835 $ 678 M $ 536 M $ 491 M $ 470M $ 433 M
$ 850 $ 704 M $560 M $ 514 M $493 M $456 M
$ 900 $ 783 M $ 627 M $ 578 M $ 555 M $ 514 M
$1000 $ 944 M $ 761 M $ 703 M $ 677 M $ 629 M
12
Low-cost mining operation
• Low-cost underground mining method (SLS)
• Increased underground mining rate
• Increased throughput from low-cost sources (surface mining)
• Continued focus on cost control (maintenance, power & consumables)
Life of Mine – Operating Expenses
74.60
10.037.857.08
15.70
33.94
60.61
7.265.214.66
13.94
29.54
43.07
4.903.452.66
10.76
21.30
0
10
20
30
40
50
60
70
80
Total Site G&A Freight, Smelting & Refining
Surface Milling Mining
2017 LOM1 2016
1. 2018-2026 average
Operating Expenses (C$/t)
13 Life of Mine – Capital Expenditures
Capital Expenditures (C$ M)
40
50
10
60
80
30
70
20
0
5
2024
17
2023
22
2022
25
2021
33
2020
52
2019
76
41
35
2018
73
38
2025
34
2017
50
32
18
2016
50
16
35
Sustaining Project
Pre-LOM Total LOM = $303
Project Roby pre-stripping 18,785 19,806 - - - - - -
Roby infrastructure 15,505 15,060 - - - - - -
34,290 34,866 - - - - - -
Sustaining UG development 8,817 8,401 10,577 10,802 9,402 1,959 - -
UG infrastructure 5,907 2,169 11,154 2,271 2,351 1,008 - -
Mobile equipment 6,812 15,701 10,501 8,846 1,778 7,042 7,411 -
TMF 14,310 12,545 16,972 8,556 9,507 10,254 8,269 4,474
Other 2,375 2,375 2,375 2,375 2,375 2,075 1,500 800
38,221 41,190 51,579 32,850 25,413 22,338 17,180 5,274
14 Life of Mine – All-in Sustaining Costs
527
352376
494505514558
634580
524
650728
0
200
400
600
800-28%
LOM2 2026 2025 2024 2023 2022 20171 2016 2021 2020 2019 2018
All-in Sustaining Cost 3 Net of By-product Revenue (US$/oz palladium sold)
Payable Palladium Production (000 oz)
0
300
250
200
150
100
50
2026 2025 2024 2023
150
43%
LOM2 2018 20171 2022
199
2021
254
2020
240
2019
238
2016
214
109
205 205 219 224 229
1. 12-months 2. 2018-2026 average 3. Non-IFRS measure. Refer to Appendix A for reconciliation to the nearest IFRS financial measure.
15 LOMP Post-tax Cash Flow
-$90,000
$10,000
$110,000
$210,000
$310,000
$410,000
$510,000
$610,000
$710,000
$(25,000)
$-
$25,000
$50,000
$75,000
$100,000
$125,000
$150,000
$175,000
$200,000
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Post Tax Free Cash Flow Cumm Post Tax Free Cash Flow
Post-tax Free Cash Flow (C$ 000)
16
1. South Offset • Best potential for a major near-term resource gain
that would be additive to the SLS mine plan
• Major gap in drilling below the shaft and extending south to the Camp Lake fault
2. Camp Lake Block
• Best potential for a transformative discovery at LDI
• Modeled as the southern extension of the vertical structure hosting the Offset deposit
• Initial, positive indications from deep drilling in 2015 where Offset-type mineralization was found
3. Mystery Zone
• Vertical, cylindrical-shaped target similar to B2 zone – represents a new mineralization style
• Determine vertical extent and tonnage potential of currently defined higher-grade Pd-rich core
Exploration – Underground Targets
2017 Underground Exploration
Add to higher-grade Pd resources and extend life of UG operations
1
2
3
17
1. South LDI • Historical Cu-Ni showings on
extension of the main LDI feeder fault
• Very limited prior exploration 2. Shorty Lake Fault • Potentially a 2nd major north-
south feeder structure • Following up on positive drill
results from 2013 3. Creek Zone • Testing a new model
involving a newly recognized SW-trending feeder fault
4. NW Pit • Potential near-surface
extension of west Roby Zone • Easy test with short drill holes
2017 Mine Site Surface Exploration Program
Creek Zone
Shorty Lake 2 3
4 NW Pit
1
2nd major feeder fault?
Main Feeder Fault
Add to surface mineral inventory to fill the mill
Roby Open Pit
Exploration – Open Pit Targets
18
North LDI
Location of NAP Greenfields Properties in Northwestern Ontario (LDI mine and mill complex shown by yellow star)
Greenfields Exploration
Area of Interest
Exploration – Regional Greenfield Opportunities
2017 Greenfields Program
Finding the Next LDI
Recently assembled, extensive portfolio • Properties staked
opportunistically during last downturn
• Most with historical surface occurrences, locally in the 1-5 g/t Pd range
Find the Feeder Structures • LDI is a structurally-controlled
vertical ore body that formed within a major, regional fault (new model)
• Historical greenfields exploration has not tested this model – a different approach is being implemented
Geophysical and Geochemical Surveying • Leading edge geochemical
and geophysical survey methods are being applied to all properties
Exploration Drilling • Target testing will begin later
this year (Legris, Shelby) • $ 0.6 million spending
including minimum of 2,000 metres of drilling
19
Three Keys to Exploration Success
1. Balanced, PGE exploration portfolio (in place) • 40,000 hectares property portfolio within 50 km of LDI mill and covering all known regional LDI-type intrusions • Recent acquisition of 75% interest in Sunday Lake property 2. Experienced team with proven track record (in place) • Near-mine success in adding resources and converting reserves 3. Sustained investment • Current plan envisages annual spend of $8M per year for next several years (2018 forward)
Three Pillars of NAP’s Exploration Strategy
1. Underground Exploration: Reserve Replacement • In near-term, highest probability of success will come from extending the known orebodies at Lac des Iles 2. Mine site Surface Exploration • Identify additional surface ore sources that can be developed and produced from open pit operations to feed mill 3. Resource Definition Drilling on Advanced Greenfields Projects • Focus on developing greenfields projects on a 5-10 year timeline that are within trucking distance to mill
New Discoveries on Early-stage Greenfields Projects
• In longer-term, systematic testing of exploration targets will deliver the new discoveries needed to maintain a balanced portfolio
Strong Exploration Potential – Strategic Plan
Creating Value from Exploration
20 Investment Thesis
Operational turnaround near completion at Lac des Iles
New LOM plan. Low risk, low cost, robust economics
Excellent exploration potential
Positive palladium supply and demand fundamentals
North American Palladium is the world’s only pure play palladium producer
21
Questions
One University Avenue Suite 402 Toronto, ON M5J 2P1 (TSX:PDL) (OTC PINK:PALDF) www.nap.com Investor Relations & Corporate Communications [email protected] +1-416-360-7374
Corporate Office:
Security Symbols:
Website: Investor Relations:
Jim Gallagher, President & Chief Executive Officer +1-416-360-7492
Tim Hill, Vice President, Finance & Chief Financial Officer +1-416-360-1952
Dave Peck, Vice President, Exploration +1-204-721-1797
22
Appendix A – Additional information
23 Sub-level Shrinkage Mining Method
Primary Advantages of Sub-Level Shrinkage Mining
1. Increased Mineable Reserve
2. Lower Operating Costs
3. Increased Production Rate
4. Reduced Seismicity
Waste
24
LOM Metal Prices and Foreign Exchange Assumptions1
2017 H2 2018 2019 2020 2021 fwd
US$/oz Palladium $ 770 $ 800 $ 830 $ 850 $ 840
US$/oz Platinum $ 1,002.50 $ 1,069.00 $ 1,200.00 $ 1,250.00 $ 1,225.00
US$/oz Gold $ 1,242.13 $ 1,270.63 $ 1,300.00 $ 1,350.74 $ 1,325.37
US$/lb Copper $ 2.60 $ 2.61 $ 2.75 $ 2.97 $ 2.86
USD/CAD 1.355 1.310 1.300 1.260 1.280
Analyst Consensus Prices
1. Source: Bloomberg. Annual median of analysts’ forecasts at May 9, 2017
Metal Prices1 used for Mineral Reserve Estimation
US$/oz Palladium $ 793.00
US$/oz Platinum $ 1,175.00
US$/oz Gold $ 1,298.00
US$/lb Copper $ 2.66
USD/CAD 1.305
1. Source: Bloomberg. Annual median of analysts’ forecasts at February 9, 2017
25 LOMP Production Plan
26 Annual Operating Expense per tonne mined
33.94 29.5421.01 22.14 23.31 22.25 20.73 20.08 24.54
18.26 16.57
15.7013.94
10.37 10.41 10.30 10.32 10.41 10.8411.64
11.73 11.60
12.93
9.50
5.83 5.79 5.74 5.74 5.76 6.096.57
6.04 6.84
5.21
7.85
2.942.832.96
2.702.532.532.532.532.62
4.66
7.08
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
62.85
2016
77.50
3.52
2024
49.16
3.44
2023
43.06
2026
41.52
3.58
2025
42.39
2017
3.36
2022
42.71
3.29
2021
44.30
3.44
2018
43.69
3.85
44.18
3.34
2020
45.23
3.35
2019
Operating Expense (C$/t)
Surface S&R & Freight Mining Site G&A1 Milling
2017 Cost Structure
9.6% Power
4.4%
Propane Contractors
Fuel
3.7%
5.7%
Parts & Supplies
Consumables
38.4%
Compensation
22.2%
16.0%
Activity Unit cost (C$)1 Ore Blend
Underground mining Surface mining Weighted average
31.98 / t 8.98 / t 21.30 / t
54% 46%
Mining 21.30 / t
Milling 10.76 / t
Surface 2.66 / t
G&A 4.90 / t
Total Site 39.62 / t
S&R & Freight 3.45 / t
Corporate 1.08 / t
Closure2 0.67 / t
Total 44.82 / t
1. 2018-2026 average 2. Total costs (2027-2031) / Total tonnes (2018-2026)
1. Includes corporate costs`
27 Non-IFRS Measures – EBITDA
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 fwd
Gross Revenue C$ 000 151,806 340,729 333,218 334,951 328,983 325,441 311,335 292,651 293,691 156,573
Production Costs C$ 000 (73,648) (173,491) (178,083) (183,148) (177,988) (171,670) (161,791) (170,077) (140,388) (71,477)
Smelt, Refine & Freight C$ 000 (7,061) (16,090) (15,370) (15,007) (14,915) (14,691) (14,069) (13,150) (13,143) (6,956)
Royalty C$ 000 (7,237) (16,232) (15,892) (15,997) (15,703) (15,537) (14,863) (13,975) (14,027) (7,481)
Corporate Costs C$ 000 (3,176) (4,575) (4,575) (4,575) (4,575) (4,575) (4,575) (4,575) (4,575) (2,287) (1,716)
EBITDA C$ 000 60,683 130,342 119,298 116,224 115,802 118,968 116,037 90,874 121,558 68,372 (1,716)
EBITDA
28 Non-IFRS Measures – Cash cost per palladium ounce sold
2018 2019 2020 2021 2022 2023 2024 2025 2026
Direct Operating C$ 000 53,140 57,435 62,969 57,830 50,744 42,556 53,404 33,977 13,790 Indirect Operating C$ 000 120,350 120,648 120,179 120,158 120,926 119,235 116,673 106,411 57,688 Total Production Costs C$ 000 173,491 178,083 183,148 177,988 171,670 161,791 170,077 140,388 71,477
Corporate Expenses C$ 000 4,575 4,575 4,575 4,575 4,575 4,575 4,575 4,575 2,287 Smelt, Refine & Freight C$ 000 16,090 15,370 15,007 14,915 14,691 14,069 13,150 13,143 6,956 Royalty C$ 000 16,232 15,892 15,997 15,703 15,537 14,863 13,975 14,027 7,481 Total Other C$ 000 36,897 35,837 35,579 35,193 34,803 33,507 31,700 31,745 16,724
Total Cash Costs C$ 000 210,387 213,920 218,728 213,181 206,473 195,298 201,777 172,133 88,201 Less: By-product Revenue C$ 000 (74,192) (74,269) (80,257) (82,280) (84,611) (76,309) (71,809) (73,738) (38,859) Cash Costs net of by-products C$ 000 136,195 139,651 138,471 130,901 121,862 118,989 129,968 98,395 49,342
Payable Palladium Sold oz 254,329 239,990 237,810 229,448 223,986 218,588 205,396 204,570 109,481
Cash Cost per Pd oz Sold C$ 536 582 582 571 544 544 633 481 451
USD/CAD Exchange Rate USD/CAD 1.31 1.30 1.26 1.28 1.28 1.28 1.28 1.28 1.28
Cash Cost per Pd oz Sold US$ 409 448 462 446 425 425 494 376 352
Cash Cost
29 Non-IFRS Measures – All-in sustaining cost (AISC)
2018 2019 2020 2021 2022 2023 2024 2025 2026
Total Cash Costs C$ 000 210,387 213,920 218,728 213,181 206,473 195,298 201,777 172,133 88,201 Sustaining Capital Investment C$ 000 38,221 41,190 51,579 32,850 25,413 22,338 - - - Less: By-product Revenue C$ 000 (74,192) (74,269) (80,257) (82,280) (84,611) (76,309) (71,809) (73,738) (38,859) AISC net of by-products C$ 000 174,416 180,842 190,050 163,751 147,275 141,328 129,968 98,395 49,342
Payable Palladium Sold oz 254,329 239,990 237,810 229,448 223,986 218,588 205,396 204,570 109,481
AISC per Pd oz Sold C$ 686 754 799 714 658 647 633 481 451
USD/CAD Exchange Rate USD/CAD 1.31 1.30 1.26 1.28 1.28 1.28 1.28 1.28 1.28
AISC per Pd oz Sold US$ 524 580 634 558 514 505 494 376 352
AISC
30 Reserves and Resources (43-101 Technical Report 06/07/17)
Notes: M&I resources are exclusive of reserves PdEq calculation based on price assumptions of: Palladium – US$793/oz, Platinum – US$1175/oz, Gold – US$1298/oz, Copper – US$2.66/lb
Current Reserve and Resource Statement
Grade Contained Metal
Tonnes Pd Pt Au Cu PdEq Pd Pt Au Cu PdEq (millons) (g/t) (g/t) (g/t) (%) (g/t) (K oz) (K oz) (K oz) (M lbs) (K oz)
Underground Proven 4.0 2.93 0.23 0.20 0.05 3.63 379 29 25 4.4 470 Probable 17.2 3.13 0.26 0.28 0.09 4.13 1,631 138 143 32.8 2,288 2P Reserves 21.3 3.09 0.26 0.26 0.08 4.03 2,113 176 180 37.2 2,754 Measured 3.7 2.97 0.26 0.21 0.07 3.79 353 31 25 5.7 450 Indicated 5.0 2.97 0.28 0.22 0.08 3.88 482 45 36 8.9 629 M&I Resources 8.7 2.97 0.27 0.22 0.08 3.84 835 76 61 14.6 1,079 Inferred 3.2 3.11 0.27 0.20 0.08 3.95 318 27 20 5.3 403
Surface Proven 1.9 1.55 0.18 0.12 0.05 2.05 95 11 7 2.1 126 Probable 15.4 1.17 0.17 0.09 0.04 1.59 577 83 44 13.5 785 2P Reserves 17.3 1.21 0.17 0.09 0.04 1.64 673 95 52 15.7 911 Measured 10.1 1.47 0.15 0.10 0.05 1.90 478 49 33 11.2 618 Indicated 9.5 1.35 0.18 0.10 0.05 1.83 411 55 30 10.4 558 M&I Resources 19.6 1.41 0.16 0.10 0.05 1.86 890 104 63 21.6 1,172 Inferred 1.3 1.38 0.16 0.09 0.04 1.79 56 7 4 1.2 73
Combined 2P Reserves 38.5 2.25 0.22 0.19 0.06 2.95 2,787 272 235 51.0 3,654 M&I Resources 28.3 1.89 0.20 0.14 0.06 2.48 1,722 182 128 37.5 2,260 Inferred 4.4 2.62 0.24 0.17 0.07 3.32 374 34 24 6.5 474
31 Unit Costs
Historical Unit Production Costs1 (C$ / t milled)
66.26
59.14
88.59
78.3276.27
37.50
58.2157.57
37.09
44.24
52.6358.10 58.39
68.02
0
10
20
30
40
50
60
70
80
90
900
800
400
600
700
300
1,100
1,000
500
0
200
100
Q1 2014
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q1 2016
Q4 2015
Q3 2015
Q2 2015
Q1 2015
55.31
Q4 2014
1,080
Q3 2014
53.16
Q2 2014
Q3 2016
Q2 2016
Q4 2016
C$
/ t m
illed kt m
illed
1. Includes mining, milling, surface, & G&A costs
32
Project Work Component Permit Responsible Ministry
Date Submitted
Date Approval Received
Permit Approval Timeline
1. 2015 Closure Plan Amendment
Acceptance by MNDM Director
Ministry of Northern Development & Mines
September 2015 December 2015 3 Months
2. 2015/2016 WMF1 Grubbing & Clearing Land Use Permit
Land Use Permit
Ministry of Natural Resources & Forestry
November 2015 December 2015 2 Months
3. 2015 East TMF Centerline Raise Stage 1
Lakes Rivers Improvement Act (LRIA)
Ministry of Natural Resources & Forestry
January 2015 March 11, 2015 3 Months
4. 2016 East TMF Centerline Raise Stage 2
Lakes Rivers Improvement Act (LRIA)
Ministry of Natural Resources & Forestry
October 5, 2015 December 1, 2015
2 Months
5. 2016 Water Management Facility #1
Lakes Rivers Improvement Act (LRIA)
Ministry of Natural Resources & Forestry
August 2015 December 23, 2015
5 Months
6. Environmental Compliance Approval Water Management Facility #1
Environmental Compliance Approval (ECA)
Ministry of Environment & Climate Change
October 2015 February 2016 5 Months
7. 2017 East & South TMF Grubbing & Clearing Land Use Permit
Land Use Permit
Ministry of Natural Resources & Forestry
January 2017 February 2017 2 Months
Environmental Permitting History
33
Appendix B – The Market for Palladium
34 What is Palladium?
• One of the “Platinum Group Metals” (PGMs) • Used as a thin coating on ceramic filters inside of catalytic converters in
automobile engines • Acts as a catalyst to convert carbon monoxide to carbon dioxide and also
converts hydrocarbons and oxides of nitrogen into pure oxygen, nitrogen and water
• Predominant in gasoline engines • Platinum has been predominant in diesel engines due to its ability
to better resist the more oxidizing environment in diesel exhaust • Approximately 3 to 4 grams of palladium per automobile (US$75 to
US$100 per car @ US$800/oz Pd)
Primary Use – Manufacture of Catalytic Converters
Automotive (catalytic converters)
78%
Electronics 9%
5% Dental
1% Other
2% Jewellery 5%
Chemical
Source: Johnson Matthey, 2016
35
• Global automobile sales expected to increase to over 100 million vehicles by 2023
• Largely driven by increase in automobile sales in China and India
Global Automobile Sales
+2% CAGR
Vehicles Per Capita (Automobiles per 1,000 people)
18
128
572
591
797
India
China
Germany
Japan
North America
Demand – Growing Global Auto Sales
Source: IHS Automotive
36 Improving Global Emissions Standards • Rising emission standards are driving higher PGM loadings • Chinese palladium loadings are ultimately expected to match or exceed Western levels • Palladium loadings expected to increase as diesel market share decreases (2.6% drop in 2016)
Palladium Loadings (grams/vehicle)
Based on palladium demand divided by automobiles produced. Europe has a higher diesel market share. Source: Johnson Matthey, IHS Automotive.
2.3
2.6
2.9
3.7
China
Europe
North America
Japan
Growth in Palladium Autocatalyst Demand in China (millions ounces)
1.2
1.3
1.5 1.6 1.7
1.9
0.0
0.5
1.0
1.5
2.0
2.5
2011 2012 2013 2014 2015 2016
Source: Johnson Matthey.
37 Alternate Fuel Vehicle Threats
Hybrids - neutral • Hybrids use palladium in their gasoline engines. • Hybrid sales have declined recently with lower gasoline
prices.
Battery Electric • No Palladium in current technology. • Not expected to have a material impact on the auto
sector in the foreseeable future • Gas is cheap again. • Range issues • High cost • Charging times • Lack of charging infrastructure • Limitations on electric grids in many jurisdictions.
Fuel Cell • Platinum is used in fuel cell technology, up to an ounce
per vehicle • Growth expected in this market particularly in
replacement of diesel generators in typical backup power supply, home off grid applications.
• Toyota and others have a big push to FCV. • Supply and logistics of hydrogen are a problem.
Battery Electric Vehicles are less than 1% of sales in 2016 and only expected to account for ~2m units by 2023 out of >100m
2,000,000
100,000,000
Electric Vehicles
Gasoline/Deisel
Estimated Electric Vehicle Sales By 2023
38
• NAP and Stillwater in Montana, USA are the only two primary palladium producers in the world
• All other palladium is produced as a by-product
• Russia’s Noril’sk remains the largest single producer of palladium
• Future production expected to remain flat
• South Africa’s future production is at risk due to a lack of capital spending and rising labour costs
• Very few advanced palladium projects exist – no relief to supply gap
• Ivanhoe Mines – Platreef
• Platinum Group Metals – Waterberg
• With the acquisition of Stillwater by Sibanye, North American Palladium is the only pure-play palladium producer for investors in the mining industry
NORTH AMERICA
RUSSIA
SOUTH AFRICA
40%
14%
38%
Source: Johnson Matthey, 2016
Supply is Constrained Majority of Supply in Higher Risk Jurisdictions
39
Appendix C – Management/Executive Teams
40 Operational Turnaround – New Management Team
Jim Gallagher President and Chief Executive Officer
Jim Gallagher is a Professional Mining Engineer with over 34 years of experience in the mining industry which includes progressive roles in operations management, technical services, consulting and projects. During a 24 year career at Falconbridge and 8 years as Global Director of Mining for Hatch, Mr. Gallagher has had the opportunity to work for or benchmark some of the largest and most complex mines and mining projects around the world. He is a visionary leader who believes in cultural evolution as the means to achieving excellence in safety and operations. Mr. Gallagher joined NAP in October of 2013 as Chief Operating Officer and was instrumental in an operational turnaround at the Lac des Iles site. He was appointed President and Chief Executive Officer in August of 2015. Mr. Gallagher holds a Bachelor of Engineering degree from Laurentian University in Sudbury, Canada. Mr. Gallagher is currently a Director of Continental Gold Inc.
Timothy Hill Vice President, Finance & Chief Financial Officer
Timothy Hill joined North American Palladium in 2015 as Director of Business Improvement and was appointed to the position of Vice President, Finance and Chief Financial Officer on August 4, 2016. Mr. Hill plays a leading role in securing funding for North American Palladium’s growth and is responsible for the Company’s financial reporting and disclosure practices, corporate treasury, financial planning and information technology. Mr. Hill is a finance professional with 18 years of experience in the mining industry. Prior to joining North American Palladium, Mr. Hill held a series of progressively senior positions at Vale Canada Ltd. in operations, finance and business planning for the North Atlantic base metals business. Mr. Hill is a Chartered Public Accountant and a Certified Management Accountant and holds a MSc. (Finance) from Queen’s University Belfast and a BSc. (Economics) from the University of Victoria.
David Peck Vice President, Exploration
Dr. Peck is a Professional Geoscientist with over 30 years of exploration and applied research experience specializing in magmatic Ni-Cu-PGE ore deposits. Prior to joining NAP, Dr. Peck operated an independent geoscience consulting business, was President and co-founder of Revelation Geoscience Ltd., spent several years as Global Nickel Commodity Leader at Anglo American plc and worked as a mineral deposits geologist in both the government and academic sectors. He received a Ph.D. degree in Geology from Melbourne University and holds a M.Sc. degree in Geology from the University of Windsor.
41 Board of Directors
J. Peter Gordon, Chairman
Mr. Gordon is a Managing Partner at Brookfield Asset Management Inc. and has responsibility for the portfolio management team within Brookfield Asset Management’s private equity group. Mr. Gordon has 35 years of industry experience in operations and finance with Brookfield companies. He currently serves on the Board of Directors for Norbord Inc. He holds an engineering degree from Queen’s University and an MBA from the University of British Columbia.
David Nowak Director
Mr. Nowak is a Managing Partner at Brookfield Asset Management and has responsibility for transaction origination and execution for Brookfield Asset Management’s private equity group. Prior to joining Brookfield Asset Management in 2011, he was a principal at a Toronto-based private equity firm. He holds a Bachelor of Laws from the University of Western Ontario and an MBA from Duke University where he graduated as a Fuqua Scholar.
John W. Jentz, CA, CPA Director
Mr. Jentz is a financial and mining professional with 20 years experience in corporate finance and mergers and acquisitions in both public and private markets. Mr. Jentz has worked in global investment banking firms such as Bear, Stearns & Co. Inc. and independent Canadian firms such as Westwind Partners and Clarus Securities. Mr. Jentz is a CA and CPA in good standing with the Canadian Institute of Chartered Accountants. Mr. Jentz earned an MBA from McMaster University with a focus on Finance and Marketing.
Dean Chambers Director
Mr. Chambers is a financial executive and professional engineer with over 35 years of business, technical, and financial experience. Mr. Chambers recently retired as Executive Vice President and Chief Financial Officer at Sherritt International Corporation, a major international resource company involved in the production of nickel, cobalt, oil and electricity. Mr. Chambers previously worked at mining and chemical firms including Dynatec Corporation, Falconbridge Limited and The Dow Chemical Company. Mr. Chambers holds a Bachelor of Engineering and Management from McMaster University.
Greg Fauquier Director
Mr. Fauquier is a mining engineer with a broad range of management skills covering both mine and process operations, as well as development, together with experience in both open pit and underground operations. Mr. Fauquier recently retired as the Global Managing Director for Hatch Ltd., a consulting engineering and project implementation company, where he was responsible for mining and mineral processing, as well as the operational services. Prior to his employment at Hatch Ltd., Mr. Fauquier was the Senior Vice President of Barrick Gold Corporation where he was responsible for the U.S. and Peruvian operations. Mr. Fauquier holds a B.Sc. Mining from Queen's University.