NORTH AMERICAN PALLADIUM THE WORLD’S ONLY PURE PLAY PALLADIUM PRODUCER
TSX:PDL | OTC:PALDF May 3, 2019
FIRST QUARTER 2019
MANAGEMENT PARTICIPANTS
AGENDA
Jim Gallagher President and Chief Executive Officer
1. Q1 Highlights
2. Operation Update Tim Hill Vice President, Finance & Chief Financial Officer
3. Financial Update 4. Exploration 5. Market Activity
David Peck Vice President, Exploration
6. Dividend QUARTERLY RESULTS
7. Q&A
Friday, May 3, 2019
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Disclaimers and Forward-Looking Information
QUARTERLY RESULTS
All dollar amounts shown are in Canadian dollars unless otherwise stated.
Friday, May 3, 2019
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Q1 HIGHLIGHTS Health & Safety • LTI-free quarter and 1.5 TRIF (2018 Industry Average is 3.8) Production • Average daily underground production – 6,755 tonnes at a cost of $38/tonne mined •
52,698 ounces of payable palladium produced
• Mine expansion on track • Mill recovery – 82.4% • Mill throughput below expectations Sustained Profitability • Revenue – $128.3 million • Net income – $29.5 million • Cash provided from Operations - $75.8 million
• Free cash flow1 - $46.9 million • Quarterly dividend increased to $0.10 Exploration • Very positive developments
QUARTERLY RESULTS
• Debt – $0
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Friday, May 3, 2019 1. Non-IFRS measure.
MINE EXPANSION New dry facility
• Underground ramping up to 12,000 tpd by 2021 • 2019 – A year of development: • Total metres of development in Q1 2019; 28% increase over Q1 2018
Camp expansion
• Ramped up to 30.5m/day in March – 75% higher than 2018 annual average Water treatment plant upgrade
• Scope of expansion project extends significantly beyond just mine activity
Friday, May 3, 2019
Ventilation system upgrade
QUARTERLY RESULTS
• Moved 8,570 tpd underground (ore + waste) in March – 23% higher than 2018 annual average
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Q1 PRODUCTION HIGHLIGHTS UNDERGROUND PRODUCTION Average tonnes per day & average grade
6,327
6,755
RGO
SHERIFF PIT
Average tonnes per day & average grade
Average tonnes per day & average grade
3,922
PAYABLE PALLADIUM Ounces produced
1,422
2,683
3.3 g/t
3.2 g/t
0.9 g/t
2.4 g/t
Q1 2018
Q1 2019
Friday, May 3, 2019
Q1 2018
Q1 2019
Q1 2018
22 1.3 g/t Q1 2019
Q1 2018
Q1 2019
2019 Guidance: 220,000- 235,000
QUARTERLY RESULTS
0.8 g/t
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MILL PERFORMANCE • Average throughput 8,984 tpd vs 12,000 tpd target • Challenges: • Two conveyer belt failures • Major work on primary and secondary crushers • Fines from SLS underground • Mitigation: • Organizational changes • Renewed focus on preventative maintenance • Design changes to crushing and conveying
• High ratio of fines presents an opportunity for a potential increase in total throughput above 12,000 tpd
Friday, May 3, 2019
QUARTERLY RESULTS
• Opportunity:
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Q1 Financial Highlights
STRONG BALANCE SHEET Liquidity (C$ million)
Net Debt
+$144.8
(C$ million – Total debt less Cash)
$165.5
-$100.4
Current Ratio
Debt/Equity Ratio
(Current Assets / Current Liabilities)
(Total Liabilities / Shareholders’ Equity)
Q1 2018
Q1 2019
Q1 2018
Q1 2019
Q1 2018 Cash
Q1 2018
Q1 2019
Friday, May 3, 2019
Q1 2019 Credit
QUARTERLY RESULTS
$20.7
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SIGNIFICANT CASH GENERATION Palladium Revenue per Ounce Sold 1
Palladium Sold
Revenue
(payable ounces)
(C$ million)
Cash Flow from Operations
(US$ per ounce sold)
(C$ million)
Q1 2018
+48%
+1%
Q1 2019
Q1 2018
Q1 2019
Q1 2018
+$62.3
Q1 2019
Q1 2018
Q1 2019
QUARTERLY RESULTS
+51%
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Friday, May 3, 2019 1. Non-IFRS measure, please refer to Non-IFRS Measures in the MD&A.
COST STRUCTURE Underground Costs (C$ per tonne mined)
Production Costs
AISC1
(C$ per tonne milled)
(US$ per ounce produced)
+30%
+34%
-3%
$210
AISC Variance - Less by-product revenue - Increased royalty – 5% of NSR - Increased production costs; milling issues and expansion - Less ounces produced
- Weaker CAD
Q1 2018
Q1 2019
Q1 2018
Q1 2019
Q1 2018
Q1 2019
QUARTERLY RESULTS
- Increased sustaining capital; u/g dev. TMF & site expansion
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Friday, May 3, 2019 1. Non-IFRS measure, please refer to Non-IFRS Measures in the MD&A.
FINANCIAL RESULTS Net Income (C$ million)
(C$ million)
+$33.2
Q1 2018
Q1 2019
Capital Investment
Exploration Expenditures
(C$ million)
(C$ million)
+$24.9
Q1 2018
Q1 2019
+20%
Q1 2018
+74%
Q1 2019
Q1 2018
Q1 2019
QUARTERLY RESULTS
Adjusted EBITDA
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Friday, May 3, 2019 1. Non-IFRS measure, please refer to Non-IFRS Measures in the MD&A.
Exploration
EXPLORATION RESULTS Expanding resource potential at Lac des Iles and new discoveries at Sunday Lake Lac des Iles • Three new underground zones delineated • Enhanced potential to expand resources • New exploration drift in progress • Surface drilling ongoing, new results coming
Regional Program • Geophysical screening program continues
Friday, May 3, 2019
Q1 2019 Investor Call Exploration
Sunday Lake • #1 opportunity in our blue sky portfolio • Potential for a large deposit has improved
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LAC DES ILES UNDERGROUND EXPLORATION New Zones Added, Drilling Program Expanded
Q1 2019 Investor Call Exploration
C Zone Target: Expansion • Initial results suggest the C Zone in the Offset Block splits into two divergent trends: 1) a persistent north-south trend that parallels the Offset Zone Deposit and 2) a south-west trend that has significant strike length potential and is open in most directions. Assays pending.
Friday, May 3, 2019
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LAC DES ILES UNDERGROUND EXPLORATION Offset Satellites
•
Three discrete satellite zones of palladium mineralization referred to as the B1 to B3 zones, were identified within a few tens of metres of previous or planned mining areas in the Offset block.
•
The upper parts of the B2 and B3 zones are already in the mining plan. Whereas their lower extensions as well as the other B zones required additional drilling.
•
The Mystery Zone is an isolated area of Pd mineralization located on the eastern side of mining area in Offset Block.
•
Recent drilling and geological modelling suggest that the Mystery Zone is likely a much larger area of mineralization than previously believed and could connect to the surface of the Twilight Zone in the southeast extension of the Roby pit. Friday, May 3, 2019
Q1 2019 Investor Call Exploration
B series and the Mystery Zone
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LAC DES ILES SURFACE EXPLORATION Near Surface Resource Potential
New Geophysical Targets • Final targets emerging from 2018/19 geophysical programs
Expanded Drill Program • Plan to drill over 30 km this year based on recent success • Distinct mineralized trends found at Creek Zone, below and south of historical Baker Zone and along the North Rim of the complex
Friday, May 3, 2019
Q1 2019 Investor Call Exploration
Three Pd Zones (so far)
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SUNDAY LAKE PGM Zone expanded, best ever drill results reported 2019 Drilling Program •
Completed 7,300 metres in 6 holes in ~3 months and expanded the PGM zone to cover nearly the full strike length and width of the intrusion
Highlights •
Big Red Target returned best results to date on the property with first two holes in the western target area:
•
SL-19-029: 275m step out from hole 26 intersected 32.0 metres with 3.35 g/t 3E, including 8.17 metres of 5.44 g/t 3E and 0.51% Cu.
Encouraging results from the central part of intrusion
SL-19-025: 14.80 metres with 2.33 g/t 3E and 0.29% Cu including 2.30 metres with 4.11 g/t 3E and 0.48% Cu and 1.60 metres with 5.18 g/t 3E and 0.70% Cu.
SL-19-030: 20.61 metres with 1.87 g/t 3E, including a higher-grade sub-interval of 5.50 metres with 3.67 g/t 3E and 0.83% Cu.
Friday, May 3, 2019
Big Red
Q1 2019 Investor Call Exploration
SL-19-026: 41.2 metres with 3.22 g/t Pt, 2.08 g/t Pd and 0.21 g/t Au (5.51 g/t 3E) with 0.57% Cu and 0.19% Ni. Includes 15.8 metre of 9.11 g/t 3E with 0.88% Cu and a 8.30 metre subinterval of 13 g/t 3E, 1.23% Cu.
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SUNDAY LAKE Future plans
Many targets remain to be tested • New drilling results warrant additional testing of geophysical anomalies • Additional geophysics also warranted • Extension drilling recommended around recent, higher-grade intersections
Q1 2019 Investor Call Exploration
• After completing this work, a decision will be taken on whether or not to proceed to an initial resource delineation program
Friday, May 3, 2019
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Market Activity
Q1 MARKETING
QUARTERLY RESULTS
• Multiple desk presentations • Road shows: Toronto, Montreal, New York, Boston, London • Conferences: PDAC, BMO and Zurich • Media interviews: BNN, The Globe and Mail, Bloomberg, Kitco, Northern Miner (and others) • NAP Investor Day Toronto (March 26) • Analyst LDI Site Tour (March 27)
Friday, May 3, 2019
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BROOKFIELD SECONDARY OFFERING • Sold 5,770,000 shares at $13.00/share • Bought deal with a consortium of Canadian banks led by BMO and RBC • Reduced ownership from 91% to 81% • Brookfield pleased with transaction outcome:
• Brookfield will be back to the market in the future – potentially larger transaction, no specific timeline
Friday, May 3, 2019
QUARTERLY RESULTS
• Increased market liquidity – at a price that should allow good upside for investors • Helped provide shareholder diversity • Raised NAP profile to broader global audience
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NAP 2018 Annual Earnings Release
Momentumbased trading & shorting
Secondary Offering
QUARTERLY RESULTS
MARKET VOLITILITY
Friday, May 3, 2019
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CURRENT COVERAGE Firm
Analyst
Valuation
Derek Macpherson
Feb. 18, 2019 - $23.50 Apr. 30, 2019 - $23.50
QUARTERLY RESULTS
• Following Analyst Site Tour in March; additional coverage expected
Friday, May 3, 2019
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PALLADIUM FUNDAMENTALS: STILL STRONG
Growth of Hybrid vehicle market worldwide Lower diesel sales, replaced with gasoline engines in Europe Growth of SUV market share, increase in engine size
Heightened emissions standards worldwide
Friday, May 3, 2019
QUARTERLY RESULTS
Platinum not likely to substitute palladium in catalytic convertors
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Q1 DIVIDEND • Confidence in future cash generation – surplus to business requirements • Increase $0.10 per share (from $0.03) • Common shareholders of record on June 1, 2019
Friday, May 3, 2019
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QUESTIONS:
QUARTERLY RESULTS
Click “Call Me” link on left side of the screen
Friday, May 3, 2019
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