On October 29, 2008, the Company temporarily placed the Lac des Iles mine on care and maintenance due to declining metal prices. Prior to this, North American Palladium was Canada’s only primary producer of platinum group metals (“PGMs”), producing an estimated 4% of annual global palladium production. While the majority of the Company’s revenue was derived from the sale of palladium, the Company also generated a considerable portion of its revenue from the sale of platinum, nickel, gold, and copper, all of which are by-products of the Company’s palladium mining operations.
The Company owns and operates the Lac des Iles mine located 85 kilometres from Thunder Bay, Ontario, Canada. The Lac des Iles mine consists of an open pit mine, an underground mine and two processing plants (one of which has been idle since 2001). The primary deposits on the LDI Property are the Roby Zone and the Offset Zone, both disseminated magmatic nickel-copper-PGM deposits. The Company began mining the Roby Zone in 1993 using open pit mining methods. In April 2006, an underground mine went into commercial production to access a higher grade portion of the Roby Zone. In 2007, the Company produced 286,334 ounces of palladium from the Lac des Iles mine and in 2008, the Company produced 212,046 ounces of palladium up to October 29, 2008, when the mine was placed on temporary care and maintenance.
At the time the mine was placed on temporary care and maintenance, the open pit had a remaining mine life of less than one year at the current rate of production. During more favourable PGM market conditions, management assessed the economic viability of a southern extension of the open pit, which might have prolonged the mine life of the open pit by an additional two to three years. However, as a result of a more detailed assessment of development scenarios, management now believes that the capital and operating costs associated with a pushback of the open pit, particularly in current market conditions, make it unlikely that the open pit will be extended.
Furthermore, given the short remaining mine life of the current open pit, the Company is considering shutting down the pit permanently and mining the high grade core at the bottom of the pit from the current underground mine. The Company is also contemplating commencing production from the upper portion of the Offset Zone as the current underground mine ceases operations.
