North American Palladium Update – February 19 2015

The mining world is global. ActLabs in Thunder Bay tests mineral samples from around the region and around the world
The mining world is global.

The mining world is global. ActLabs in Thunder Bay tests mineral samples from around the region and around the world
The mining world is global.

THUNDER BAY – BUSINESS – North American Palladium Ltd. (“NAP” or the “Company”) (TSX:PDL)(NYSE MKT:PAL) today announced financial and operational results for the year ended December 31, 2014 from its Lac des Iles palladium mine (“LDI”) in northern Ontario.

2014 Results Summary

  • Produced 174,194 ounces of payable palladium, a 29% increase compared to 2013, at a cash cost per ounce(1) of US$513;
  • Realized palladium selling price of US$802 per ounce, giving a palladium operating margin of US$289 per ounce, or US$50.3 million;
  • Revenue of $220.1 million, an increase of $66.9 million or 44% compared to 2013;
  • Adjusted EBITDA(1) of $50.0 million, an increase of $34.7 million or 227% compared to 2013;
  • Invested $23.8 million in capital expenditures, compared to $109.5 million in 2013; Successfully completed the transition to underground mining utilizing the new shaft and related ore handling infrastructure;
  • Invested $8.3 million in exploration;
  • Gradual production ramp up was successful, with numerous days in the fourth quarter reaching and surpassing target of 5,000 tonnes per day from underground.

“During 2014, a number of milestones were achieved that marked the end of the ramp up and transition period. The focus for 2015 is reliability and efficiency improvements,” said Phil du Toit, President and Chief Executive Officer. “Our exploration results for 2014 also showed promising mineralization areas that put us in a good position to study future extension to the mine life.”

“The hard work and dedication of all of our employees, particularly those on site at LDI, has to be acknowledged,” added Mr. du Toit. “Through perseverance and commitment they have endured challenging times and have helped put the Company back in a position to pursue growth.”

Financial Update (2)

2014 Year-End Results

Revenue for the year ended December 31, 2014 was $220.1 million compared to $153.2 million in the prior year. The 44% year-over-year increase in revenue was primarily due to increased palladium production and sales ($29.1 million), higher palladium prices ($12.9 million) and more favorable exchange rates ($13.1 million).

Income from mining operations was $21.9 million, compared to a loss from mining operations of $0.8 million in the prior year. During the year, the Company realized an average palladium selling price of US$802 per ounce, compared to US$724 per ounce realized in 2013.

Net loss for the year was $66.7 million or $0.20 per share compared to a net loss of $46.2 million or $0.25 per share in the prior year. Included in the 2014 net loss was $60.9 million of non-cash expenses consisting of $37.7 million of depreciation and amortization, $15.7 million on unrealized foreign exchange losses and $7.5 million of financing costs.

EBITDA(1) was $23.4 million for the year, compared to negative $3.8 million in 2013. Adjusted EBITDA(1) (which excludes interest expenses and other costs, financing costs, interest and other income, loss on extinguishment of debt, foreign exchange loss, depreciation and amortization, exploration, mine restoration costs net of insurance recoveries, inventory price adjustment and income and mining tax recovery) [NTD: I would strike everything in the brackets as it is covered by the footnore reference to non-IFRS measures] was $50.0 million in 2014, compared to $15.3 million in 2013.

Financial Liquidity

As at December 31, 2014, the Company had cash and cash equivalents of $4.1 million and availability under the credit facility of US$7.1 million.

Lac des Iles Operations

2014 Production

In 2014, operations were focused on the transition and ramp up of underground mining utilizing the new shaft and updated ore handling system to access new and deeper mining areas in the Offset Zone. Production was predominately sourced from the Offset Zone and a lower grade surface stockpile. The successful ramp up led to an increase in underground mining volumes, higher tonnes processed in the mill and a significant increase in payable palladium production.

In 2014, the Company’s LDI mine produced 174,194 ounces of payable palladium at a total cash cost(1) of US$513 per ounce. Total payable palladium production was at the higher end of Company guidance for 2014. The cash cost per ounce of palladium sold decreased to US$513(1) in 2014 compared to US$560(1) in 2013, mainly due to more payable palladium ounces sold, favourable movements of the Canadian dollar and higher by-product revenues that were offset by increased production, smelting, refining, freight and royalty costs.

During 2014, 2,637,023 tonnes of ore was mined with 1,411,476 tonnes coming from surface (at an average grade of 1.1 g/t) and 1,225,547 tonnes mined from underground (at an average grade of 4.4 g/t).

During 2014, the mill processed 2,684,782 tonnes of ore at an average palladium head grade of 2.7 grams per tonne palladium, a recovery of 82.4%, and a total cost of $49 per tonne milled.

The following table includes quarterly results for 2014 and full year results to help demonstrate some of the key trends in the business:

March 31

2014

June 30

2014

September 30

2014

December 31

2014

2014

Full Year

Revenue ($millions)

$

48.7

$

50.5

$

46.4

$

74.5

$

220.1

Palladium production – payable oz

42,641

39,223

32,560

59,770

174,194

US$ cash cost per palladium oz sold

US$492

US$510

US$589

US$473

US$513

Surface mining – tonnes

254,294

243,041

270,860

643,281

1,411,476

Underground mining – tonnes

275,845

263,904

304,804

380,994

1,225,547

Underground mining – tonnes per day

3,065

2,900

3,313

4,141

3,358

Milling – palladium head grade (g/t)

3.3

3.1

2.4

2.3

2.7

Milling – palladium recovery

84.5

%

83.6

%

80.7

%

81.0

%

82.4

%

Adjusted EBITDA ($millions)

$

9.7

$

10.4

$

8.3

$

21.6

$

50.0

Throughout the fourth quarter of 2014, the Company performed a trial full time mill run that fully utilized the mill compared to the batch basis of operations in 2013 and the first nine months of 2014. Improvements in the rate of underground mining, combined with available surface low grade ore stockpiles and a buildup of inventory of underground ore on surface at September 30, 2014, allowed the higher mill production. The increased mill tonnage favorably impacted revenue and unit operating costs in the fourth quarter of 2014.

Exploration

In 2014, NAP invested $8.3 million in exploration and infill drilling, exclusive of $1.1 million that was capitalized in connection with the LDI mine expansion.

Sixty-six holes were drilled at LDI totaling 36,309 metres including 33,415 metres on the Offset Zone and the remaining 2,894 metres on surface targets, the majority of which were directed to the Powerline Zone. The Company plans to release its updated mineral reserve and resource estimate in the first quarter of 2015.

Year End 2014 Conference Call & Webcast Details

Date: Thursday, February 19, 2015

Time: 8:30 a.m. ET

Webcast: www.nap.com

Live Call: 1-866-229-4144 or 1-416-216-4169 (PIN: 8347411, followed by # sign)

Replay: 1-888-843-7419 or 1-630-652-3042 (PIN: 8347411, followed by # sign)

The conference call replay will be available for 90 days after the live event. An archived audio webcast of the call will also be posted to NAP’s website.

About North American Palladium

NAP is an established precious metals producer that has been operating its Lac des Iles mine (“LDI”) located in Ontario, Canada since 1993. LDI is one of only two primary producers of palladium in the world, offering investors exposure to palladium. The Company’s shares trade on the NYSE MKT under the symbol PAL and on the TSX under the symbol PDL.

Notes:

(1) Non-IFRS measure. Please refer to Non-IFRS Measures in the MD&A.

(2) NAP’s consolidated financial statements for the year ended December 31, 2014 are available in the Appendix of this news release. These financial statements should be read in conjunction with the notes and management’s discussion and analysis available at www.nap.com, www.sedar.com, and www.sec.gov.