NAP heads underground at Lac des Iles

North American Palladium (PDL-T) will begin construction of an underground mine at its Lac des Iles operation, near Thunder Bay, Ont., in May.

A full feasibility study by Roscoe Postle Associates concludes that an integrated open-pit and underground mining operation would generate about $92 million in cumulative pre-tax cash flow at a palladium price of US$325 per oz.

The plan calls for development of a mechanized, 2,000-tonne-per-day underground mine, with longhole stoping employed as an extraction method. Reserves would be accessible via a portal in the existing pit.

The underground operation would target an initial 3.5 million tonnes of proven and probable reserves running 6.6 grams palladium, 0.4 grams of platinum, and 0.3 grams of gold per tonne, based on a cut-off grade of 4.5 grams palladium. These Main High Grade zone reserves also contain copper and nickel credits.

The higher-grade underground ore will be blended with lower-grade material from the existing open pit to produce a little more than 300,000 oz. of palladium annually for seven years. Operating costs are figured at around US$152 per oz. palladium, after by-product metal credits.

The underground development plan comes with a $40 million price tag; another $15 million is budgeted to lease mining equipment. The company will also invest about another $10 million to install a secondary crusher at the Lac des Iles mill to help maintain mill throughput of around 1.5 million tonnes per quarter, and reduce processing costs.

All construction approvals are in place, and the first ore production from underground is slated for the third quarter of 2005. A portion of the project will be financed via operating cash flow; the balance has yet to be negotiated.

In late 2003, open-pit reserves at Lac des les have were halved after a recalculation based on a long-term palladium price of US$325 per oz. NAP’s sales contracts ensure it a floor price of US$325 per oz. on all palladium production through mid-2005.

At last count, proven and probable reserves totalled 39 million tonnes running 1.9 grams palladium, 0.2 gram platinum and 0.15 gram gold per tonne, plus 0.06% copper and 0.08% nickel. The estimate employs a cutoff grade of 1.1 grams palladium.

Looking ahead, NAP envisages the underground development as a staging area for resource definition drilling of the deeper Offset High Grade zone, which averages around 23 metres in true widths and contains grades comparable to the Main High Grade zone.