North American Palladium Ltd. announced that due to declining metal prices it will temporarily place its Lac des Iles Mine (LDI) in Thunder Bay, Ontario on a care and maintenance basis effective October 29, 2008. The closure will result in the layoff of approximately 350 employees.

Details for a conference call to be held at 10:00 a.m. today are set out at the end of this press release.

The Company completed a positive second quarter at the end of June due to strong metal prices and efficient operations at LDI. However, due to the impact of recent adverse market conditions on global commodity prices, LDI is currently operating well below breakeven. In particular, declining sales and production in the automotive industry, the major consumer of palladium and platinum, suggest that PGM producers will face significant challenges in the near term.

“The Board of Directors and management believe it is in the best long term interests of our employees and shareholders to preserve our valuable reserves and not continue selling them into the market at these loss-making commodity prices,” said William Biggar, President and Chief Executive Officer. “The temporary closure of the mine will allow us to conserve cash and focus on strategic initiatives that we believe will help enhance shareholder value over the long term, while we wait for metal prices to recover.”

The Company believes that the mid to long term outlook is quite positive for palladium and platinum, based on forecasted growth in global automotive sales. However, in 2008, palladium has fallen from a high of $582/oz to $180/oz and platinum has dropped from a high of $2,273/oz to around $880/oz. The Company produces approximately 4% of the global supply of palladium.

The Company has a strong balance sheet, with approximately $65 million in cash and minimal debt. Following the closure of operations, the Company intends to restrict spending at LDI while management focuses on strategic initiatives including:

- Continuing the work required to complete a feasibility study on the Offset High Grade Zone (OHGZ) at LDI;
- Ongoing drilling and exploration to further delineate reserves and resources at LDI, as well as grassroots exploration on property adjacent to the mine; and
- Leveraging the Company’s strong balance sheet to evaluate potential acquisitions and joint venture opportunities that may arise in these difficult markets.

“In addition to our cash on hand, we expect to realize significant cash flow over the next six months as we receive payment for concentrate produced prior to the closure,” said Mr. Biggar. “This will put us in a strong position to evaluate acquisition opportunities in metals where we have extensive mining experience.”

Mr. Biggar added: “This decision is disappointing as we have an efficient, cost-competitive mining and milling operation at LDI, supported by a workforce that is second to none in the Canadian mining industry.” Management believes the long-term interests of employees are best served by taking this action now to preserve the health of the Company. This will place the Company in a stronger position for a return to profitability upon the re-start of operations when metal prices improve.

This entry was posted by Gold Mining on Tuesday, October 21st, 2008 at 9:46 pm and is filed under Palladium, Platinum. Tags: Acquisition, acquisitions, America, Company, Conference Call, cost-competitive mining, Directors, Drilling, Iles Mine, Joint Venture, Ltd, Managem, metal, metal price, metal prices, Mine, mining, North, North America, North American Palladium Ltd., Ontario, Platinum, PROPERTY, Resources, Thunder Bay, William Biggar. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.