Once awash in red ink,
Net earnings in the three months ended June 30 topped $11.7 million (or 82 per share) on revenue of $25.4 million, bringing earnings for the first six months of 2000 to an impressive $20.8 million ($1.45 per share) on $48.7 million. In the corresponding periods of 1999, the company incurred a loss of $3.9 million (42 per share) on $7.7 million and a loss of $5.5 million (65 per share) on $17.6 million.
NAP attributes the turnaround to sharply improved palladium prices and significantly higher palladium production at its Lac des les mine in northwestern Ontario. The open-pit operation is Canada’s only primary producer of the metal.
The company produced 25,842 oz. palladium, 1,520 oz. platinum and 1,391 oz. gold, plus 138 tonnes copper and 99 tonnes nickel, in the recent quarter. Palladium production was 88% higher than a year ago — a reflection of higher grades in the pit.
Cash costs averaged US$128 per equivalent-ounce of palladium. Figures for the comparable quarter of 1999 were not reported, though costs are known to be 39% lower than in the first quarter of 2000.
NAP mined 728,297 tonnes of ore and 724,135 tonnes of waste — 121% more and 49% less, respectively, than in the second quarter of 1999. A total of 216,988 tonnes of ore was passed through the mill (27% better than in the first quarter), increasing stockpiles to greater than 1 million tonnes.
Equally impressive are results from an ongoing 100,000-metre drill campaign aimed at proving up existing resources and finding new material.
Excluding drill results for the current year, measured and indicated resources stand at 23.5 million tonnes grading 1.46 grams palladium plus byproduct credits. The resource, which lies outside a proposed pit enlargement (part of an expansion program now under way), is not part of the reserves, which stand at 74.2 million tonnes averaging 1.64 grams palladium plus byproduct credits. The reserves are based on a cutoff grade of 0.92 oz. palladium-equivalent.
A new series of stepout holes uncovered near-surface mineralization outside the western limit of the proposed pit shell. Hole 129 cut 90 metres of 1.84 grams palladium (starting at a down-hole depth of 138 metres), whereas hole 130 intersected 132 metres of 1.7 grams palladium (starting at 100.5 metres down-hole).
NAP notes that the new zone complements the Twilight zone on the eastern side of the proposed pit in that it will help maintain low stripping ratios as the current pit is deepened. The average stripping ratio over the life of the mine is projected to be 2.26-to-1.
Holes 129 and 130 also intersected the main Roby zone, below the proposed pit shell. The former cut 208 metres averaging 0.77 gram palladium; the latter, 430 metres averaging 0.87 gram palladium.
Similarly, new holes sunk in the North Roby zone demonstrate an improvement at depth, again below the pit shell. Hole 008 cut 105 metres of 1.08 grams palladium (starting at 258 metres down-hole) below two intervals in each of holes 3 and 6. This suggests the zone splits nearer the surface, a pattern also seen on two sections to the south.
In all, 59 holes totalling 27,282 metres were drilled in the second phase. All mineralized intercepts contained credits of platinum, gold, copper and nickel.
In June, NAP closed a US$90-million term-loan facility with a syndicate of Canadian banks. The funds are earmarked for the expansion program, which will see daily milling capacity increase to 15,000 from 2,400 tonnes. Once complete, annual production is expected to rise to 248,9000 oz. palladium, 24,200 oz. platinum and 19,100 oz. gold, plus copper, nickel and cobalt credits. Current reserves are sufficient for 11 years of production. Construction is scheduled to be completed in the second quarter of next year.
Kaiser-Francis Oil, NAP’s largest shareholder, with 17.4%, has guaranteed the loan until completion tests are met. The loan carries a floating interest rate and matures on Sept. 30, 2006.
At June 30, NAP had $27.6 million in working capital and a negative book value of $27.3 million.
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