Exhibit 1
North American Palladium Ltd.
TABLE OF CONTENTS
| | | | |
| | | Page | |
Management’s Discussion and Analysis | | | | |
| |
INTRODUCTION | | | 1 | |
| |
FORWARD-LOOKING INFORMATION | | | 1 | |
| |
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING MINERAL RESERVES AND RESOURCES | | | 2 | |
| |
OUR BUSINESS | | | 2 | |
| |
GUIDANCE | | | 3 | |
| |
QUARTERLY TRENDS | | | 3 | |
| |
HIGHLIGHTS | | | 4 | |
| |
LDI OPERATING & FINANCIAL RESULTS | | | 6 | |
| |
OTHER EXPENSES | | | 11 | |
| |
SUMMARY OF QUARTERLY RESULTS | | | 12 | |
| |
CASH FLOWS, FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES | | | 13 | |
| |
OUTSTANDING SHARE DATA | | | 16 | |
| |
CRITICAL ACCOUNTING POLICIES AND ESTIMATES | | | 16 | |
| |
RISKS AND UNCERTAINTIES | | | 21 | |
| |
INTERNAL CONTROLS | | | 21 | |
| |
OTHER INFORMATION | | | 21 | |
| |
NON-IFRS MEASURES | | | 22 | |
North American Palladium Ltd.
Management’s Discussion and Analysis
INTRODUCTION
Unless the context suggests otherwise, references to “NAP” or the “Company” or similar terms refer to North American Palladium Ltd. and its subsidiaries. “LDI” refers to Lac des Iles Mines Ltd. and “NAP Quebec” refers to its previously held subsidiary, NAP Quebec Mines Ltd.
The following is management’s discussion and analysis of the financial condition and results of operations (“MD&A”) to enable readers of the Company’s condensed interim consolidated financial statements and related notes to assess material changes in financial condition and results of operations for the three months ended March 31, 2014, compared to those of the respective periods in the prior year. This MD&A has been prepared as of April 30, 2014 and is intended to supplement and complement the condensed interim consolidated financial statements and notes thereto for the three months ended March 31, 2014 (collectively, the “Financial Statements”), which have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the IASB. Readers are encouraged to review the Financial Statements in conjunction with their review of this MD&A and the most recent Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission (“SEC”) and Canadian provincial securities regulatory authorities, available at www.sec.gov and www.sedar.com, respectively.
All amounts are in Canadian dollars unless otherwise noted and all references to production ounces refer to payable production.
FORWARD-LOOKING INFORMATION
Certain information contained in this MD&A constitutes ‘forward-looking statements’ within the meaning of the ‘safe harbor’ provisions of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities laws. All statements other than statements of historical fact are forward-looking statements. The words ‘expect’, ‘believe’, ‘anticipate’, ‘contemplate’, ‘target’, ‘may’, ‘will’, ‘could’, ‘intend’, ‘estimate’ and similar expressions identify forward-looking statements. Forward-looking statements included in this MD&A include, without limitation: information as to our strategy, plans or future financial or operating performance, such as the ramp-up of the Company’s mine, project timelines, production plans, projected cash flows or expenditures, operating cost estimates, mining methods, expected mining rates and other statements that express management’s expectations or estimates of future performance. The Company cautions the reader that such forward-looking statements involve known and unknown risk factors that may cause the actual results to be materially different from those expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to: the risk the Company may not be able to continue as a going concern, the possibility that the Company may not be able to obtain sufficient financing, that the Company may not be able to generate sufficient cash to service all its indebtedness and may be forced to take other actions to satisfy its obligations, events of default on its indebtedness, hedging could expose it to losses, competition, the possibility title to its mineral properties will be challenged, dependency on third parties for smelting and refining, the possibility that metal prices and foreign exchange rates may fluctuate, inherent risks associated with development, exploration, mining and processing including risks related to tailings capacity and ground conditions, the mine transition from mining via ramp to mining via shaft, environmental hazards, uncertainty of mineral reserves and resources, the possibility that the mine may not perform as planned, changes in legislation, regulations or political and economic developments in Canada and abroad, risks related to employee relations and to the availability of skilled labour, litigation and the risks associated with obtaining necessary licenses and permits. For more details on these and other risk factors see the Company’s most recent Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities. Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions contained in this MD&A, which may prove to be incorrect, include, but are not limited to: that the Company will continue in operation for the foreseeable future and will be able to realize its
FIRST QUARTER REPORT 2014
1
North American Palladium Ltd.
assets and discharge its liabilities in the normal course of business, that metal prices and exchange rates between the Canadian and United States dollar will be consistent with the Company’s expectations, that there will be no material delays affecting operations or the timing of ongoing projects including the mine ramp-up, that prices for key mining and construction supplies, including labour costs, will remain consistent with the Company’s expectations, and that the Company’s current estimates of mineral reserves and resources are accurate. The forward-looking statements are not guarantees of future performance. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise, except as expressly required by law. Readers are cautioned not to put undue reliance on these forward-looking statements.
CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING MINERAL RESERVES AND RESOURCES
Mineral reserve and mineral resource information contained herein has been calculated in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects, as required by Canadian provincial securities regulatory authorities. Canadian standards differ significantly from the requirements of the SEC, and mineral reserve and mineral resource information contained herein is not comparable to similar information disclosed in accordance with the requirements of the SEC. While the terms “measured”, “indicated” and “inferred” mineral resources are required pursuant to National Instrument 43-101, the SEC does not recognize such terms. U.S. investors should understand that “inferred” mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. In addition, U.S. investors are cautioned not to assume that any part or all of NAP’s mineral resources constitute or will be converted into reserves. For a more detailed description of the key assumptions, parameters and methods used in calculating NAP’s mineral reserves and mineral resources, see NAP’s most recent Annual Information Form/Form 40-F on file with Canadian provincial securities regulatory authorities and the SEC.
OUR BUSINESS
NAP is an established precious metals producer that has been operating its LDI Mine located in Ontario, Canada since 1993. LDI is one of only two primary producers of palladium in the world, offering investors leverage to the rising price of palladium.
The Company recently expanded the underground LDI Mine and is transitioning from ramp access to shaft access while utilizing long hole open stope mining. Through the utilization of the shaft and bulk mining methods, operations are expected to benefit from increased mining rates and decreased operating costs, transforming LDI into a low cost producer with a rising production profile.
The Company is planning an exploration program in 2014 targeting the lower portion of the Offset Zone, with the intention to perform a preliminary economic assessment that would entail deepening the shaft, installation of a lower level bulk ore handling systems that would increase production and extend the mine life.
The Company has significant exploration potential near the LDI Mine, where a number of growth targets have been identified, and is engaged in an exploration program aimed at increasing its palladium reserves and resources. As an establishedpalladium-platinum group metal (“PGM”) producer with excess mill capacity on a permitted property, NAP has potential to convert exploration success into production and cash flow on an accelerated timeline.
NAP trades on the TSX under the symbol PDL and on the NYSE MKT under the symbol PAL.
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
GUIDANCE
Given the recent financings and improved operating results, the Company is increasing its guidance for exploration by $6 million to $10 million for 2014. The increased exploration spending is to expand the current drill program for the Offset zone to increase reserves and resources and to upgrade existing reserves and resources.
While we are encouraged that the operating results in the first quarter of 2014 generally exceeded our expectations, pending completion of the ore handling system late in the second quarter or early in the third quarter of 2014, the Company is maintaining all other 2014 guidance.
| | | | | | | | |
| | | 2014
Guidance | | | First Quarter
2014 Results | |
Palladium production – payable oz | | | 170,000-175,000 | | | | 42,641 | |
US$ cash cost per palladium oz sold – year/Q4 | | US$ | 550/US$450 | | | US | $ 492 (US$422 | (1)) |
Production cost per tonne milled | | $ | 51 to $55 | | | $ | 62 ($56 | (1)) |
Underground mining | | | | | | | | |
Tonnes mined per day | |
| 3,000 ramping
up to 5,000 |
| | | 3,065 | |
Tonnes | | | 1.3 million | | | | 276,000 | |
Palladium head grade (g/t) | | | 4.2 | | | | 5.0 | |
Surface stockpile processing | | | | | | | | |
Tonnes | | | 1.0 million | | | | 254,000 | |
Palladium head grade (g/t) | | | 1.0 | | | | 1.0 | |
Milling | | | | | | | | |
Palladium head grade (g/t) | | | 3.0 | | | | 3.3 | |
Palladium recovery | | | 82.0 | % | | | 84.5 | % |
Capital expenditures ($ millions) | | | Under $30 | | | $ | 2.9 | |
Exploration expense ($ millions) | | | | | | | | |
Original | | $ | 4.0 | | | $ | 0.8 | |
Revised | | $ | 10.0 | | | | | |
| (1) | After adjusting for the impact of approximately $2.7 million of power and propane costs associated with an unusually cold winter, see highlight section for additional details. |
QUARTERLY TRENDS
| | | | | | | | | | | | |
| | | For the three months ended | |
| | | March 31
2014 | | | December 31
2013 | | | September 30
2014 | |
Palladium production – payable oz | | | 42,641 | | | | 30,979 | | | | 30,097 | |
US$ cash cost per palladium oz sold | | US | $ 492 (US$422 | (1)) | | US$ | 621 | | | US$ | 581 | |
Underground mining – tonnes | | | 275,845 | | | | 231,346 | | | | 208,097 | |
Underground mining – tonnes per day | | | 3,065 | | | | 2,515 | | | | 2,262 | |
Milling – palladium head grade (g/t) | | | 3.3 | | | | 2.9 | | | | 2.5 | |
Milling – palladium recovery | | | 84.5 | % | | | 81.5 | % | | | 80.7 | % |
Adjusted EBITDA ($000s) | | $ | 9,764 | | | $ | 1,369 | | | $ | 3,189 | |
| (1) | After adjusting for the impact of approximately $2.7 million of power and propane costs associated with an unusually cold winter, see highlight section for additional details. |
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
HIGHLIGHTS
| | | | | | | | |
| | | Three months ended March 31 | |
OPERATIONAL HIGHLIGHTS | | 2014 | | | 2013 | |
Mining | | | | | | | | |
Tonnes ore mined | | | 530,139 | | | | 540,694 | |
Palladium head grade (g/t) | | | 3.1 | | | | 3.1 | |
Milling | | | | | | | | |
Tonnes ore milled | | | 516,511 | | | | 503,585 | |
Palladium head grade (g/t) | | | 3.3 | | | | 3.3 | |
Palladium recovery (%) | | | 84.5 | | | | 80.1 | |
Palladium production – payable oz | | | 42,641 | | | | 38,654 | |
Palladium sales – payable oz | | | 39,485 | | | | 39,760 | |
Realized palladium price per ounce (US$) | | $ | 739 | | | $ | 730 | |
Cash cost per ounce palladium sold (US$)1 | | $ | 492 | | | $ | 490 | |
| | |
FINANCIAL HIGHLIGHTS ($000s except per share amounts) | | 2014 | | | 2013 | |
Revenue | | $ | 48,736 | | | $ | 47,090 | |
Expenses | | | | | | | | |
Production costs | | | 29,735 | | | | 28,941 | |
Smelting, refining and freight | | | 4,183 | | | | 3,802 | |
Royalty | | | 2,074 | | | | 2,509 | |
Depreciation and amortization | | | 10,368 | | | | 6,085 | |
Income from mining operations | | | 1,929 | | | | 5,124 | |
Earnings | | | | | | | | |
Loss from continuing operations | | $ | (26,666 | ) | | $ | (5,357 | ) |
Loss from continuing operations per share | | $ | (0.11 | ) | | $ | (0.03 | ) |
Loss and comprehensive loss | | $ | (26,666 | ) | | $ | (2,848 | ) |
Loss per share | | $ | (0.11 | ) | | $ | (0.02 | ) |
Adjusted net income (loss)1 | | $ | (13,886 | ) | | $ | 69 | |
EBITDA1 | | $ | 1,020 | | | $ | 2,937 | |
Adjusted EBITDA1 | | $ | 9,764 | | | $ | 8,282 | |
Capital spending, continuing operations | | $ | 2,888 | | | $ | 38,068 | |
| 1 | Non-IFRS measure. Please refer to Non-IFRS Measures on pages 22-23. |
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
In 2014, the Company continues to transition from ramp to shaft based underground mining and the sources of ore milled have changed significantly. In the first quarter of 2014:
| | • | | 530,139 tonnes at an average grade of 3.1 g/t palladium were mined and processed from the Offset zone and low grade stockpile respectively. |
| | • | | The mill processed 516,511 tonnes of ore at an average palladium head grade of 3.3 grams per tonne and a recovery of 84.5% to produce 42,641 ounces of payable palladium. |
| | • | | Payable palladium production was 42,641 ounces while payable palladium sales were 39,485 ounces. The 3,156 ounce difference was primarily due to a build-up of concentrate inventory in the first quarter of 2014. |
| | • | | Revenue increased by $1.6 million primarily due to more favourable exchange rates partially offset by lower payable metal sales at lower realized prices. |
| | • | | Production costs increased $0.8 million to $29.7 million in 2014 compared to in the prior year primarily due to $4.2 million higher power and propane costs in the first quarter of 2014 compared to 2013 ($2.7 million above plan, see below) partially offset by favourable inventory and other cost movements. Excluding the higher than planned propane and power costs noted above, production costs would have been $27.0 million or 7% lower than the first quarter of 2013. |
| | • | | Adjusted EBITDA increased $1.5 million or 18% to $9.8 million. |
| | • | | Capital expenditures from continuing operations totaled $2.9 million in the first quarter of 2014 compared to $38.1 million in the same period in 2013. |
| | • | | Incurred a net loss of $26.7 million which included non-cash items of $10.4 million of depreciation and amortization, $7.5 million of unrealized foreign exchange losses and $17.5 million of interest expense and other. |
The Company is pleased with its production ramp-up progress during the first quarter of 2014. A colder than normal winter resulted in approximately $2.7 million ($5 per tonne milled or $70 per ounce of palladium sold) higher costs for propane and power than planned. Compared to the first quarter of 2013, 2014 propane and power costs were approximately $4.2 million higher. In addition to the weather, operations also had to contend with some unexpected delays such as repairs to the primary surface crusher and the low grade stockpile excavator, both of which reduced the planned number of days milled during the quarter and the amount of low grade stockpile processed.
The colder weather resulted in the Company using 31% more litres of propane than planned in the first quarter of 2014 to heat the underground and surface buildings while a regional shortage of propane resulted in a 44% price increase per litre above plan. As a result, propane costs were $1.7 million or 88% above plan in the first quarter of 2014. Compared to the first quarter of 2013, propane costs were $2.5 million higher (206%) with unit costs 89% higher and volumes 62% higher.
Despite 6% less power used in the first quarter of 2014 compared to plan, costs were 27% higher ($1.0 million) than planned due to a 35% increase in unit rates. The cold weather caused greater than normal freezing on rivers which feed the hydro stations and required the power authority to switch to higher cost generation alternatives which included natural gas. Compared to the first quarter of 2013, hydro costs were $1.7 million higher with unit costs 59% higher on 1% higher volumes.
Repairs in March 2014 to the primary surface crusher required the Company to split the planned mill run into two segments and resulted in the mill running until the final days of the month which is not the normal practice at LDI. The mill run to the end of March 2014 resulted in a buildup of concentrate inventory at the end of the quarter (March 31, 2014 concentrate inventory value $5.2 million; December 31, 2013 $2.2 million) and reduced revenues recognized. The higher concentrate inventories will be recognized as revenue in the second quarter of 2014.
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
LDI OPERATING & FINANCIAL RESULTS
The LDI mine consists of an underground mine, an open pit (currently inactive), a mill with a processing capacity of approximately 15,000 tonnes per day and a shaft with a capacity of approximately 8,000 tonnes per day. The primary underground deposits on the property are the Offset zone and the Roby zone, both of which are disseminated magmaticpalladium-platinum group metal deposits.
Operating Results
The key operating results for the palladium operations are set out in the following table.
| | | | | | | | |
| | | Three months ended March 31 | |
| | | 2014 | | | 2013 | |
Ore mined (tonnes) | | | | | | | | |
Underground | | | | | | | | |
Offset | | | 269,943 | | | | 102,619 | |
Roby | | | 5,902 | | | | 143,037 | |
| | | | | | | | |
| | | 275,845 | | | | 245,656 | |
| | | | | | | | |
Surface | | | | | | | | |
Low grade stockpile | | | 254,294 | | | | 4,669 | |
Open pit | | | — | | | | 290,369 | |
| | | | | | | | |
| | | 254,294 | | | | 295,038 | |
| | | | | | | | |
Total | | | 530,139 | | | | 540,694 | |
| | | | | | | | |
Mined ore grade (Pd g/t) | | | | | | | | |
Underground | | | | | | | | |
Offset | | | 5.0 | | | | 3.8 | |
Roby | | | — | | | | 4.3 | |
| | | | | | | | |
| | | 5.0 | | | | 4.1 | |
| | | | | | | | |
Surface | | | | | | | | |
Low grade stockpile | | | 1.0 | | | | 1.0 | |
Open pit | | | — | | | | 2.4 | |
| | | | | | | | |
| | | 1.0 | | | | 2.4 | |
| | | | | | | | |
Average | | | 3.1 | | | | 3.1 | |
| | | | | | | | |
Milling | | | | | | | | |
Tonnes of ore milled | | | 516,511 | | | | 503,585 | |
Palladium head grade (g/t) | | | 3.3 | | | | 3.3 | |
Palladium recoveries (%) | | | 84.5 | | | | 80.1 | |
Tonnes of concentrate produced | | | 5,002 | | | | 4,502 | |
Production cost per tonne milled | | $ | 62 | | | $ | 57 | |
Payable production | | | | | | | | |
Palladium (oz) | | | 42,641 | | | | 38,654 | |
Platinum (oz) | | | 3,005 | | | | 2,842 | |
Gold (oz) | | | 2,978 | | | | 3,001 | |
Nickel (lbs) | | | 400,719 | | | | 391,506 | |
Copper (lbs) | | | 799,871 | | | | 701,923 | |
Cash cost per ounce of palladium sold (US$)1 | | $ | 492 | | | $ | 490 | |
| 1 | Non-IFRS measure. Please refer to Non-IFRS Measures on pages 22-23. |
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
Mining
In the first quarter of 2014, underground mining focused almost exclusively on the Offset zone which was blended with the low grade surface stockpile material for processing in the mill. Underground ore mined at LDI during the three months ended March 31, 2014, consisted of 275,845 tonnes at an average grade of 5.0 g/t palladium compared to 245,656 tonnes at an average palladium grade of 4.1 g/t in the prior year from the Offset and Roby zones. LDI processed 254,294 tonnes of the low grade surface stockpile at an average grade of 1.0 g/t in the first quarter of 2014 compared to 295,038 tonnes at an average grade of 2.4 g/t mined primarily from the open pit in the prior year. On a combined basis, similar tonnages and grades of ore were mined and processed in 2014 as in 2013 despite significant changes in the sources of ore.
Milling
During the three months ended March 31, 2014, the LDI mill processed 516,511 tonnes of ore at an average palladium head grade of 3.3 g/t palladium and a recovery of 84.5 % to produce 42,641 ounces of payable palladium (2013 – 503,585 tonnes milled, average palladium head grade of 3.3 g/t, recovery of 80.1 %, produced 38,654 ounces of payable palladium).
The higher mill recovery for the three months ended March 31, 2014 compared to 2013 was primarily due to improvements in the mill circuit late in 2013 which increased the percentage of palladium recovered while processing similar ore grades in both periods.
Production Costs per Tonne Milled
Production costs per tonne milled were $62 in the three months ended March 31, 2014, compared to $57 per tonne in 2013. The increase was primarily due to significantly higher propane and power costs noted above. Adjusting for the $2.7 million higher than planned power and propane costs noted above, production costs per tonne milled would have been $56.
Payable Production
Payable production was higher for all metals in the first quarter of 2014 compared to 2013. Payable palladium production increased 3,987 ounces (10%) to 42,641 ounces in the first quarter of 2014 compared to 2013 and increased 11,662 ounces (38%) compared to the fourth quarter of 2013.
Cash Cost per Ounce of Palladium Sold
Cash cost per ounce of palladium sold is a non-IFRS measure and the calculation is provided in the Non-IFRS Measures section of this MD&A. In 2013, the Company was in transition, sinking a shaft and completing related infrastructure at the same time it was developing and transitioning to mining the Offset zone. In 2014, the development and transitioning to the Offset zone was virtually complete.
The cash cost per ounce of palladium sold remained similar at US$ 492 1 for the three months ended March 31, 2014 compared to the prior year. Lower by-product metal revenues, fewer payable palladium ounces sold and increased production costs (including $2.7 million of propane and power costs above plan) were primarily offset by a weakening of the Canadian dollar. If the $2.7 million of propane and power costs were excluded, the cash cost per ounce of palladium sold would have been approximately US$422 or 14% lower than the first quarter of 2013. Please refer to the LDI revenue, production costs, smelting, refining and freight costs and royalty expense sections of this MD&A for additional details.
| 1 | Non-IFRS measure. Please refer to Non-IFRS Measures on pages 22-23. |
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
Financial Results
Income from mining operations for the LDI operations is summarized in the following table.
| | | | | | | | |
| | | Three months ended March 31 | |
(expressed in thousands of dollars) | | 2014 | | | 2013 | |
Revenue | | $ | 48,736 | | | $ | 47,090 | |
| | | | | | | | |
Mining operating expenses | | | | | | | | |
Production costs | | | | | | | | |
Mining | | | 18,756 | | | | 17,648 | |
Milling | | | 8,007 | | | | 6,933 | |
General and administration | | | 5,154 | | | | 4,301 | |
| | | | | | | | |
| | | 31,917 | | | | 28,882 | |
Inventory and others | | | (2,182 | ) | | | 59 | |
| | | | | | | | |
| | | 29,735 | | | | 28,941 | |
Smelting, refining and freight costs | | | 4,183 | | | | 3,802 | |
Royalty expense | | | 2,074 | | | | 2,509 | |
Depreciation and amortization | | | 10,368 | | | | 6,085 | |
Loss on disposal of equipment | | | 447 | | | | 629 | |
| | | | | | | | |
Total mining operating expenses | | $ | 46,807 | | | $ | 41,966 | |
| | | | | | | | |
Income from mining operations | | $ | 1,929 | | | $ | 5,124 | |
| | | | | | | | |
The Company has included income from mining operations as an additional IFRS measure to provide the user with information on the actual results of the LDI operations.
Revenue
Revenue is affected by production and sales volumes, commodity prices, currency exchange rates, mill run timing and shipment schedules. Metal sales for LDI are recognized in revenue at provisional prices when delivered to a smelter for treatment or a designated shipping point. Final pricing is determined in accordance with LDI’s smelter agreements. In most cases, final pricing is determined two months after delivery to the smelter for gold, nickel and copper and four months after delivery for palladium and platinum. These final pricing adjustments can result in additional revenues in a rising commodity price environment and reductions to revenue in a declining commodity price environment. Similarly, a weakening in the Canadian dollar relative to the U.S. dollar would have a positive impact on revenues and a strengthening in the Canadian dollar would have a negative impact on revenues. The Company periodically enters into financial contracts for past production delivered to the smelters to mitigate the smelter agreements’ provisional pricing exposure to rising or declining palladium prices and an appreciating Canadian dollar. These financial contracts represent 39,000 ounces of palladium as at March 31, 2014 (December 31, 2013 – 31,000 palladium ounces) and mature from April 2014 through August 2014 at an average forward price of US$744 (C$820) per ounce (December 31, 2013 – US$735 (C$768) per ounce of palladium). For substantially all of the palladium delivered to the customers under the smelter agreements, the quantities and timing of settlement specified in the financial contracts match final pricing settlement periods. The palladium financial contracts are being recognized on a mark-to-market basis as an adjustment to revenue. The fair value of these contracts at March 31, 2014 was a liability of $1.6 million included in accounts payable and accrued liabilities (December 31, 2013 – an asset of $0.2 million included in accounts receivable).
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
Revenue for the three months ended March 31, 2014
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Palladium | | | Platinum | | | Gold | | | Nickel | | | Copper | | | Others | | | Total | |
Sales volume(1) | | | 39,485 | | | | 2,767 | | | | 2,788 | | | | 368,581 | | | | 748,786 | | | | n.a. | | | | n.a. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Realized price (US$)(1) | | $ | 739 | | | $ | 1,419 | | | $ | 1,280 | | | $ | 6.53 | | | $ | 3.21 | | | | n.a. | | | | n.a. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue before price adjustment ($000s) | | $ | 32,300 | | | $ | 4,362 | | | $ | 3,964 | | | $ | 2,792 | | | $ | 2,676 | | | $ | 46 | | | $ | 46,140 | |
Price adjustment ($000s): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commodities | | | 2,481 | | | | 179 | | | | 126 | | | | 145 | | | | (243 | ) | | | (1 | ) | | | 2,687 | |
Foreign exchange | | | (684 | ) | | | 237 | | | | 145 | | | | 93 | | | | 116 | | | | 2 | | | | (91 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue ($000s) | | $ | 34,097 | | | $ | 4,778 | | | $ | 4,235 | | | $ | 3,030 | | | $ | 2,549 | | | $ | 47 | | | $ | 48,736 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper. |
Revenue for the three months ended March 31, 2013
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Palladium | | | Platinum | | | Gold | | | Nickel | | | Copper | | | Others | | | Total | |
Sales volume(1) | | | 39,760 | | | | 2,903 | | | | 3,076 | | | | 391,506 | | | | 712,277 | | | | n.a. | | | | n.a. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Realized price (US$)(1) | | $ | 730 | | | $ | 1,630 | | | $ | 1,645 | | | $ | 7.70 | | | $ | 3.60 | | | | n.a. | | | | n.a. | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue before price adjustment ($000s) | | $ | 30,128 | | | $ | 4,734 | | | $ | 4,992 | | | $ | 3,087 | | | $ | 2,564 | | | $ | 45 | | | $ | 45,550 | |
Price adjustment ($000s): | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commodities | | | 1,273 | | | | 238 | | | | (29 | ) | | | (28 | ) | | | (84 | ) | | | — | | | | 1,370 | |
Foreign exchange | | | (187 | ) | | | 170 | | | | 106 | | | | 35 | | | | 46 | | | | — | | | | 170 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Revenue ($000s) | | $ | 31,214 | | | $ | 5,142 | | | $ | 5,069 | | | $ | 3,094 | | | $ | 2,526 | | | $ | 45 | | | $ | 47,090 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Quantities and prices are per ounce for palladium, platinum and gold and per pound for nickel and copper. |
During the first three months of 2013, the Company was sinking a shaft and completing related infrastructure while developing and transitioning to mining the Offset zone. As noted above, an increase in concentrate inventory as a result of repairs to the primary surface crusher resulted in lower concentrate sales and revenues being recognized in the first quarter of 2014. The March 31, 2014 concentrate inventory will be recognized as revenue in the second quarter of 2014. Revenue for the three months ended March 31, 2014 increased $1.6 million or 3% compared to 2013 primarily due to a weakening of the Canadian dollar partially offset by lower realized prices for all metals except palladium and lower payable metal sales for all metals except copper.
Sales of payable palladium, platinum and gold sold decreased 275, 136 and 288 ounces respectively for the three months ended March 31, 2014 compared to 2013 while sales of nickel decreased 36,509 pounds and sales of copper increased 36,509 pounds. Realized price per unit in US$ terms decreased for all metals for the three months ended March 31, 2014 compared to 2013.
Spot Metal Prices* and Exchange Rates
For comparison purposes, the following table sets out spot metal prices and exchange rates.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Mar-31 | | | Dec-31 | | | Sep-30 | | | Jun-30 | | | Mar-31 | | | Dec-31 | | | Sep-30 | | | Jun-30 | |
| | | 2014 | | | 2013 | | | 2013 | | | 2013 | | | 2013 | | | 2012 | | | 2012 | | | 2012 | |
Palladium – US$/oz | | $ | 778 | | | $ | 711 | | | $ | 726 | | | $ | 643 | | | $ | 770 | | | $ | 699 | | | $ | 642 | | | $ | 578 | |
Platinum – US$/oz | | $ | 1,418 | | | $ | 1,358 | | | $ | 1,411 | | | $ | 1,317 | | | $ | 1,576 | | | $ | 1,523 | | | $ | 1,668 | | | $ | 1,428 | |
Gold – US$/oz | | $ | 1,292 | | | $ | 1,202 | | | $ | 1,327 | | | $ | 1,192 | | | $ | 1,598 | | | $ | 1,664 | | | $ | 1,776 | | | $ | 1,599 | |
Nickel – US$/lb | | $ | 7.14 | | | $ | 6.34 | | | $ | 6.29 | | | $ | 6.20 | | | $ | 7.50 | | | $ | 7.75 | | | $ | 8.40 | | | $ | 7.46 | |
Copper – US$/lb | | $ | 3.01 | | | $ | 3.34 | | | $ | 3.31 | | | $ | 3.06 | | | $ | 3.44 | | | $ | 3.59 | | | $ | 3.75 | | | $ | 3.44 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Exchange rate (Bank of Canada) – CDN$1 = US$ | | US$ | 0.90 | | | US$ | 0.94 | | | US$ | 0.97 | | | US$ | 0.95 | | | US$ | 0.98 | | | US$ | 1.01 | | | US$ | 1.02 | | | US$ | 0.98 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| * | Based on the London Metal Exchange |
FIRST QUARTER REPORT 2014
9
North American Palladium Ltd.
Operating Expenses from Continuing Operations
The Company continues to modify the design of the underground ore handling system which, upon completion, should increase the tonnage hoisted through the shaft and reduce mining costs. Utilization of the shaft in 2014 is expected to reduce per unit operating costs and increase underground production to 5,000 tonnes per day
As noted previously, significantly higher propane and power costs as a result of a colder than normal winter negatively impacted the first quarter of 2014 operating costs and repairs to the primary crusher which negatively impacted payable metal sales in the period and deferred the recognition of revenue from the first quarter of 2014 to the second quarter.
Production costs
For the three months ended March 31, 2014, operating expenses were $29.7 million compared to $28.9 million in 2013.
Mining costs for the first quarter of 2014 were $18.8 million, a $1.1 million (6%) increase from the same period in 2013. The increased costs were primarily due to a $1.7 million increase in propane, a $0.6 million increase in power and a $0.7 million increase in equipment rentals partially offset by a $1.8 million decrease in parts and supplies and a $0.5 million decrease in fuel costs. In 2014, there was a $2.8 million reduction in mining contractors which was offset by a $2.9 million increase in wages as the labour force has increased significantly. In the first quarter of 2013, $1.1 million of mining costs were capitalized while only $0.3 million were capitalized in 2014 – this movement accounted for an additional $0.8 million of the increase in 2014.
For the three months ended March 31, 2014, milling costs increased $1.1 million or 15% compared to 2013 primarily due to a $1.1 million increase in power costs and a 3% increase in tonnes milled.
General and administration costs in the first quarter of 2014 increased $0.9 million compared to the same period in 2013 primarily due to a $0.8 million increase in propane costs related to surface structures and the camp.
Inventory and other costs reduced production costs by $2.2 million for the three months ended March 31, 2014 compared to an increase of $0.1 million in 2013 for a net change of $2.2 million. The net change was primarily due to a $2.9 million increase in inventory in 2014 compared to 2013 partially offset by $0.7 million of net insurance proceeds received in 2013 that did not recur in 2014.
Smelting, refining and freight costs
Smelting, refining and freight costs for the three months ended March 31, 2014 were $4.2 million, compared to $3.8 million in 2013. Theincrease over the prior year was primarily due to the impact of a weaker Canadian dollar and the impact of concentrate shipments in which 4,638 tonnes were shipped in the first quarter of 2014 compared to 4,505 tonnes in the same period in the prior year.
Royalty expense
For the three months ended March 31, 2014, royalty expense was $2.1 million, compared to $2.5 million in 2013. The decrease was primarily due to lower payable metal prices and quantities for most metals sold partially offset by the impact of a weaker Canadian dollar.
Depreciation and amortization
Depreciation and amortization for the three months ended March 31, 2014 was $10.4 million, compared to $6.1 million in 2013. The increase over the prior year was primarily due to a significant increase in depreciable assets associated with the LDI mine expansion including the Offset zone and tailings management facilities.
Income from mining operations
For the three months ended March 31, 2014, income from mining operations was $1.9 million compared to $5.1 million in the prior year. The decreased income is primarily due to higher depreciation and amortization and production expenses partially offset by higher revenues.
FIRST QUARTER REPORT 2014
10
North American Palladium Ltd.
OTHER EXPENSES
Exploration
Exploration expenditures for the three months ended March 31, 2014 were $0.8 million (2013—$4.8 million). The $4.0 million decrease was primarily due to a more limited exploration program in 2014 compared with 2013. Given the recent financing and improved operating results in the first quarter of 2014, the Company is planning an expanded $10.0 million exploration program to target the lower portion of the Offset zone to increase reserves and resources and to upgrade existing reserves and resources. As at April 30, 2014, both surface and underground drilling rigs were operating at site.
General and administration
The Company’s general and administration expenses for the three months ended March 31, 2014 were $2.6 million compared to $2.9 million in the prior year. The $0.3 million decrease is primarily due to a reduction in professional fees.
Interest and other income
Interest and other income for the three months ended March 31, 2014 was nominal compared to income of $0.3 million in 2013. The decrease of $0.3 million was primarily due to a 2013 gain on renunciation of flow through expenditures.
Interest expense and other costs
Interest expense and other costs for the three months ended March 31, 2014 were $17.3 million, compared to $2.2 million in the prior year. The increase of $15.1 million for the three months ended March 31, 2014 was primarily due to a $10.0 million increase in interest expenses associated with completion of the Offset zone development project, $4.0 million of financing costs associated with financing activities in the first quarter of 2014, and $3.0 million of changes in the fair value of the convertible debentures issued in the first quarter of 2014.
Prior to the commencement of commercial production of the shaft on January 1, 2014, the Company had capitalized interest expenses related to the senior secured term loan and the revolving operating line of credit. In 2014, interest related to these loans was expensed. This was partially offset by a $0.7 million reduction of unrealized loss on palladium warrants.
Foreign exchange loss
Foreign exchange loss for the three months ended March 31, 2014 was $8.0 million, compared to $0.8 million for the prior year. The increase of $7.2 million was primarily due to the impact of exchange rate movements on the US$ denominated senior secured term loan and the US$ denominated credit facility.
Net loss from continuing operations
For the three months ended March 31, 2014, the Company reported a net loss from continuing operations of $26.7 million or $ 0.11 per share compared to $2.8 million or $0.02 per share in the same prior year period. The increase in the net loss is primarily due to the impact of increased foreign exchange losses, depreciation and amortization, and interest expenses, partially offset by decreased exploration expenses.
FIRST QUARTER REPORT 2014
11
North American Palladium Ltd.
SUMMARY OF QUARTERLY RESULTS
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (expressed in thousands of Canadian dollars | | 2014 | | | 2013 | | | 2012 | |
except per share amounts) | | Q1 | | | Q4 | | | Q3 | | | Q2 | | | Q1 | | | Q4 | | | Q3 | | | Q2 | |
Revenue | | $ | 48,736 | | | $ | 39,582 | | | $ | 33,348 | | | $ | 33,213 | | | $ | 47,090 | | | $ | 42,368 | | | $ | 36,193 | | | $ | 40,563 | |
Production costs, net of mine restoration costs | | | 29,735 | | | | 29,890 | | | | 21,663 | | | | 25,701 | | | | 28,941 | | | | 25,421 | | | | 25,852 | | | | 27,948 | |
Exploration expense | | | 768 | | | | 1,360 | | | | 3,874 | | | | 2,192 | | | | 4,840 | | | | 5,962 | | | | 2,603 | | | | 2,764 | |
Capital expenditures | | | 2,888 | | | | 16,728 | | | | 26,885 | | | | 27,805 | | | | 38,068 | | | | 41,810 | | | | 34,088 | | | | 32,072 | |
Loss from continuing operations | | | (26,666 | ) | | | (11,746 | ) | | | (5,324 | ) | | | (26,268 | ) | | | (5,357 | ) | | | (3,739 | ) | | | (5,908 | ) | | | (1,903 | ) |
Net loss | | | (26,666 | ) | | | (11,746 | ) | | | (5,324 | ) | | | (26,268 | ) | | | (2,848 | ) | | | (54,010 | ) | | | (8,046 | ) | | | (3,033 | ) |
Cash provided by (used in) operations | | | (16,749 | ) | | | 4,193 | | | | 2,022 | | | | (2,849 | ) | | | 3,165 | | | | 37,970 | | | | 5,174 | | | | 4,833 | |
Cash provided by (used in) financing activities | | | 31,765 | | | | 4,289 | | | | (2,087 | ) | | | 51,970 | | | | 17,096 | | | | 1,926 | | | | 35,280 | | | | 46,712 | |
Cash used in investing activities | | | (2,888 | ) | | | (16,723 | ) | | | (26,710 | ) | | | (27,805 | ) | | | (37,078 | ) | | | (41,831 | ) | | | (33,864 | ) | | | (31,829 | ) |
Net loss per share from continuing operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
– basic | | $ | (0.11 | ) | | $ | (0.05 | ) | | $ | (0.03 | ) | | $ | (0.15 | ) | | $ | (0.03 | ) | | $ | (0.02 | ) | | $ | (0.04 | ) | | $ | (0.01 | ) |
– diluted | | $ | (0.11 | ) | | $ | (0.05 | ) | | $ | (0.03 | ) | | $ | (0.16 | ) | | $ | (0.03 | ) | | $ | (0.02 | ) | | $ | (0.04 | ) | | $ | (0.02 | ) |
Net loss per share | | | | | | | | | | | | | | | | | | | | | | | | |
– basic | | $ | (0.11 | ) | | $ | (0.05 | ) | | $ | (0.03 | ) | | $ | (0.15 | ) | | $ | (0.02 | ) | | $ | (0.31 | ) | | $ | (0.05 | ) | | $ | (0.02 | ) |
– diluted | | $ | (0.11 | ) | | $ | (0.05 | ) | | $ | (0.03 | ) | | $ | (0.16 | ) | | $ | (0.02 | ) | | $ | (0.31 | ) | | $ | (0.05 | ) | | $ | (0.03 | ) |
Tonnes milled | | | 516,511 | | | | 544,074 | | | | 517,157 | | | | 483,266 | | | | 503,585 | | | | 511,226 | | | | 504,022 | | | | 528,068 | |
Palladium ounces sold | | | 39,485 | | | | 35,205 | | | | 27,370 | | | | 32,620 | | | | 39,760 | | | | 44,394 | | | | 36,218 | | | | 42,285 | |
Trends:
| | • | | Revenue, production costs, tonnes milled and palladium ounces sold, varied over the last eight quarters as mining has transitioned from the Roby zone underground and the surface open pit to the Offset zone underground and surface stockpiles. Changes in tonnes, grades and sources of ore significantly impacted revenue realized, production costs, ore available for milling and palladium ounces produced. |
| | • | | Readily available material in the Roby and open pit zones were largely mined out in the first half of 2013 while the Offset zone production has been ramping up since 2012. The transition away from the Roby and open pit zones to the Offset zone entailed processing some lower grade surface stockpile material, which negatively impacted payable metal production in the second and third quarters of 2013. |
| | • | | Realized quarterly average prices for palladium have ranged from US$578 to US$770 per ounce in the last eight quarters while prices for platinum, gold, copper and nickel have generally been declining over the same period. The weakening of the Canadian dollar versus the United States dollar has resulted in generally higher revenues. |
| | • | | Underground mining operations have been transitioning to a shaft based ore handling system from a ramp based one in the most recent quarters. The Company is currently moving material to surface using both the ramp and the shaft and therefore costs are somewhat higher than those expected once the ore handling system modification noted above has been completed. |
| | • | | Capital expenditures have been declining for the last five quarters as the construction activities associated with the construction of the shaft and related infrastructure to process the upper Offset zone ore is virtually complete. |
FIRST QUARTER REPORT 2014
12
North American Palladium Ltd.
CASH FLOWS, FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
| | | | | | | | |
| | | Three months ended March 31 | |
(expressed in thousands of dollars) | | 2014 | | | 2013 | |
Cash provided by operations prior to changes in non-cash working capital | | $ | 9,461 | | | $ | 3,031 | |
Changes in non-cash working capital | | | (26,210 | ) | | | 134 | |
| | | | | | | | |
Cash provided by (used in) operations | | | (16,749 | ) | | | 3,165 | |
Cash provided by financing | | | 31,765 | | | | 17,096 | |
Cash used in investing | | | (2,888 | ) | | | (37,078 | ) |
| | | | | | | | |
Increase (decrease) in cash from continuing operations | | | 12,128 | | | | (16,817 | ) |
Net cash provided by discontinued operations | | | — | | | | 20,142 | |
| | | | | | | | |
Increase in cash and cash equivalents | | $ | 12,128 | | | $ | 3,325 | |
| | | | | | | | |
Operating Activities
For the three months ended March 31, 2014, cash provided by operations prior to changes in non-cash working capital was $9.5 million, compared to $3.0 million in the prior year. The increase of $6.5 million was primarily due to the $21.3 million increase in net loss, partially offset by a $4.3 million non-cash increase in depreciation and amortization, a $7.5 million non-cash unrealized foreign exchange loss, and $17.5 million relating to interest expense and other costs.
For the three months ended March 31, 2014, changes in non-cash working capital resulted in a use of cash of $26.2 million, compared to a source of cash of $0.1 million in the prior year. The decreased source of $26.3 million was primarily due to movements of $15.5 million and $10.2 million in accounts payable and accrued liabilities and accounts receivable respectively.
Financing Activities
For the three months ended March 31, 2014, financing activities resulted in a source of cash of $31.8 million consisting primarily of $28.5 million net proceeds related to the issuance of convertible debentures, which were largely converted into equity in the first quarter of 2014, and the drawdown of $6.1 million of the credit facility, partially offset by $1.5 million of interest paid and $0.8 million of finance leases repayments.
Investing Activities
For the three months ended March 31, 2014, investing activities used cash of $2.9 million (2013 - $37.1 million) primarily due to additions to mining interests of $2.9 million (2013 - $38.1 million). For 2014, the Company expects capital expenditures not ot be greater than $30.0 million. For the three months ended March 31, 2014, capital expenditures from continuing operations totaled $2.9 million, and consisted primarily of $1.8 million of Offset zone level access, engineering and other costs and $0.7 million of tailings management facility costs. Capital expenditures in the first quarter of 2014 were approximately $2.0 million below planned expenditures and this expenditure shortfall is expected to reverse later in the year.
FIRST QUARTER REPORT 2014
13
North American Palladium Ltd.
Liquidity and Capital Resources
| | | | | | | | |
| | | As at March 31 | | | As at December 31 | |
(expressed in thousands of dollars) | | 2014 | | | 2013 | |
Cash balance | | $ | 21,921 | | | $ | 9,793 | |
Net working capital | | $ | 30,475 | | | $ | (174,211 | ) |
Shareholders’ equity | | $ | 227,139 | | | $ | 222,496 | |
Total debt | | $ | 268,565 | | | $ | 239,086 | |
As at March 31, 2014, the Company had cash and cash equivalents of $21.9 million compared to $9.8 million as at December 31, 2013. The increase is due primarily to the sources and uses of cash as noted above. The funds are deposited with major Canadian chartered banks.
The Company has, subject to a borrowing base cap, a US$60.0 million credit facility that is secured by certain of the Company’s accounts receivables and inventory and may be used for working capital liquidity and general corporate purposes and is due July 4, 2014. As at March 31, 2014, the borrowing base calculation limited the credit facility to a maximum of US$38.6 million of which US$36.4 million was utilized.
The Company has $11.2 million of finance leases funding equipment for operations. Please also see the contractual obligations below for additional commitments.
The Company’s ability to continue operations and exploration and development activities is dependent upon the Company achieving profitable operations. The achievement of this is dependent on a number of variables including, but not limited to, metal prices, operational costs, capital expenditures, timely transition to mining by shaft, and meeting production targets. Adverse changes in any of these variables may require the Company to seek additional financing. Please also see the going concern section below.
In the first quarter of 2014, the Company closed an aggregate of $32.0 million gross principal amount of convertible unsecured subordinated debentures (the “Tranche 1 Debentures”) of the Company at a price of $1,000 per debenture, including approximately 16.8 million warrants (the “Tranche 1 Warrants”). The conversion price of the Tranche 1 Debentures is $0.635 per share and the exercise price of the Tranche 1 Warrants was initially $0.762 per share and has been adjusted to $0.5786 per share (pursuant to Tranche 1 Warrant terms). The Tranche 1 Debentures mature on January 31, 2019 and bear interest at an annual rate of 7.5%. Holders may convert their Tranche 1 Debentures into common shares of NAP at any time at a conversion rate of approximately 1,575 Common Shares per $1,000 principal amount of Tranche 1 Debentures. Holders converting their debentures will receive all accrued and unpaid interest, as well as interest that would have been paid if the debenture were held through to maturity (the “Tranche 1 Make Whole Amount”). At the Company’s option, interest and Tranche 1 Make-Whole Amounts can be paid in common shares. The Tranche 1 Warrants entitle the holders to purchase up to 33.33% of the number of common shares of the Company into which the principal amount of the Tranche 1 Debentures purchased by the holders are convertible at the initial fixed conversion price at any time before the third anniversary of the date that shareholder approval is received. Shareholder approval for the Tranche 1 Warrants was obtained on March 28, 2014.
FIRST QUARTER REPORT 2014
14
North American Palladium Ltd.
Subsequent to the period ended March 31, 2014, the Company closed an aggregate at $35.0 million gross principal amount of convertible unsecured subordinated debentures (the “Tranche 2 Debentures”) of the Company at a price of $1,000 per debenture, including approximately 18.9 million warrants (the “Tranche 2 Warrants”). The conversion price of the Tranche 2 Debentures is $0.4629 per share and the exercise price of the Tranche 2 Warrants is $0.5786 per share. The Tranche 2 Debentures mature on April 11, 2019 and bear interest at an annual rate of 7.5%. Holders may convert their Tranche 2 Debentures into common shares of NAP at any time at a conversion rate of approximately 2,160 Common Shares per $1,000 principal amount of Tranche 2 Debentures. Holders converting their debentures will receive all accrued and unpaid interest, as well as interest that would have been paid if the debenture were held through to maturity (the “Tranche 2 Make Whole Amount”). At the Company’s option, interest and Tranche 2 Make-Whole Amounts can be paid in common shares. The Tranche 2 Warrants entitle the holders to purchase up to 25.0% of the number of common shares of the Company into which the principal amount of the Tranche 2 Debentures purchased by the holders are convertible at the initial fixed conversion price at any time before the second anniversary of the Tranche 2 Debenture closing date.
The Company’s senior secured term loan and credit facility contain several financial covenants which, if not met, would result in an event of default. This debt also includes certain other covenants, including limits on liens, material adverse change provisions and cross-default provisions. Certain events of default result in this debt becoming immediately due. Other events of default entitle the lender to demand repayment.
Contractual Obligations
Contractual obligations are comprised as follows:
| | | | | | | | | | | | | | | | |
| As at March 31, 2014 | | Payments Due by Period | |
($000s) | | Total | | | 1-3 Years | | | 3-5 Years | | | 5+ Years | |
Finance lease obligations | | $ | 12,311 | | | $ | 3,388 | | | $ | 8,923 | | | $ | — | |
Operating leases | | | 4,373 | | | | 2,098 | | | | 1,910 | | | | 365 | |
Purchase obligations | | | 1,622 | | | | 1,622 | | | | — | | | | — | |
| | | | | | | | | | | | | | | | |
| | $ | 18,306 | | | $ | 7,108 | | | $ | 10,833 | | | $ | 365 | |
| | | | | | | | | | | | | | | | |
In addition to the above, the Company also has asset retirement obligations at March 31, 2014 in the amount of $14.6 million for the LDI Mine. The Company also has contractual obligations reflected in accounts payable and has obligations related to its credit facility and long-term debt. The Company obtained letters of credit of $14.4 million as financial surety for these future outlays. As a result, no funding is required prior to or upon closure of these properties.
Contingencies and Commitments
Please refer to notes 15, 18 and 21 of the Company’s Financial Statements. Subsequent to the quarter end, the Company entered into a proposed settlement for $2.4 million in respect of the previously disclosed potential class action lawsuit. The proposed settlement owing will be paid by the Company’s insurer and there is no admission of wrongdoing on the part of the Company. The proposed settlement is subject to finalization of the settlement agreement and approval by the court.
Related Party Transactions
There were no related party transactions for the period ended March 31, 2014.
FIRST QUARTER REPORT 2014
15
North American Palladium Ltd.
OUTSTANDING SHARE DATA
As of April 30, 2014, there were 362,800,866 common shares of the Company outstanding. In addition, there were options outstanding pursuant to the Amended and Restated 2013 Corporate Stock Option Plan entitling holders thereof to acquire 3,110,086 common shares of the Company at a weighted average exercise price of $1.88 per share. In conjunction with a $72.0 million term loan issued in 2011 and repaid in June 2013, a palladium warrant consisting of 0.35 of an ounce of palladium at a strike price of US$620 per ounce was issued with each $1,000 convertible debenture representing an aggregate of 25,200 ounces of palladium. As at April 30, 2014, 12,000 palladium warrants were outstanding representing 4,200 ounces. On the exercise of the palladium warrants, in certain circumstances the Company has the option of settling the warrants with either cash or common shares.
As of April 30, 2014, $31.7 million and $27.4 million of the Tranche 1 Debentures and Tranche 2 Debentures respectively had been converted into 164,462,733 common shares.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical accounting policies generally include estimates that are highly uncertain and for which changes in those estimates could materially impact the Company’s financial statements. The following accounting policies are considered critical:
The condensed interim consolidated financial statements have been prepared on a going concern basis which contemplates that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of business. While the Company has operations that generate revenue; has recently completed an expansion that is reducing operating costs and increasing production; has exceeded plan in the first quarter of 2014; and, completed an offering of 7.5% convertible unsecured subordinated debentures for gross aggregate proceeds of $35 million subsequent to March 31, 2014, it has suffered losses from continuing operations.
The Company’s ability to continue operations and exploration and development activities is also dependent upon a number of variables including, but not limited to, meeting production targets, metal prices, operational costs, capital expenditures, achieving profitable operations of the LDI mine and meeting future covenant requirements under the Company’s credit facility and senior secured term loan.
The Company’s senior secured term loan and credit facility contain several financial covenants, which, if not met would result in an event of default. Certain events of default result in these loans becoming immediately due. Other events of default entitle the lender to demand repayment and, the senior secured term loan provides for the payment of a prepayment fee and penalty interest upon an event of default. If the Company’s lenders were to demand repayment of outstanding amounts, the Company would not have sufficient funds to repay its obligations when due. As at March 31, 2014, the Company was in compliance with the covenants of the senior secured term loan and the credit facility.
The Company’s credit facility matures in July 2014, and while the Company is in discussions with the lender about extending the credit facility, the Company does not have any committed alternative available financing in place and, while it has been successful at doing so in the past, there is no certainty that the required financing will be available or, if available, on acceptable terms.
These conditions have resulted in a material uncertainty that casts substantial doubt about the Company’s ability to continue as a going concern. The condensed interim consolidated financial statements do not include adjustments to the carrying values and classifications of recorded assets and liabilities and related revenues and expenses that might be necessary should the Company be unable to continue as a going concern.
FIRST QUARTER REPORT 2014
16
North American Palladium Ltd.
The preparation of the condensed interim consolidated financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the application of accounting policies and the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the year. Significant estimates and assumptions relate to recoverability of mining operations and mineral exploration properties. While management believes that these estimates and assumptions are reasonable, actual results could vary significantly.
Certain assumptions are dependent upon reserves, which represent the estimated amount of ore that can be economically and legally extracted from the Company’s properties. In order to estimate reserves, assumptions are required about a range of geological, technical and economic factors, including quantities, grades, production techniques, recovery rates, production costs, transportation costs, commodity prices and exchange rates. Estimating the quantity and/or grade of reserves requires the size, shape and depth of ore bodies to be determined by analyzing geological data such as drilling samples. This process may require complex and difficult geological judgments to interpret the data. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Because the economic assumptions used to estimate reserves change from period to period, and because additional geological data is generated during the course of operations, estimates of reserves may change from period to period. Changes in reported reserves may affect the Company’s financial results and financial position in a number of ways, including the following:
| | • | | Asset carrying values including mining interests may be affected due to changes in estimated future cash flows; |
| | • | | Depreciation and amortization expensed in the statement of operations may change or be impacted where such expenses are determined by the units of production basis, or where the useful economic lives of assets change; |
| | • | | Decommissioning, site restoration and environmental provisions may change where changes in estimated reserves affect expectations about the timing or cost of these activities; and |
| | • | | The carrying value of deferred tax assets may change due to changes in estimates of the likely recovery of the tax benefits. |
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North American Palladium Ltd.
| c. | Impairment assessments of long-lived assets |
The carrying amounts of the Company’s non-financial assets, excluding inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. Impairment is assessed at the level of cash-generating units (“CGUs”). An impairment loss is recognized in the Consolidated Statements of Operations and Comprehensive Loss for any excess of carrying amount over the recoverable amount.
Impairment is determined for an individual asset unless the asset does not generate cash inflows that are independent of those generated from other assets or groups of assets, in which case, the individual assets are grouped together into CGUs for impairment purposes.
The recoverable amount of an asset or cash-generating unit is the greater of its “value in use”, defined as the discounted present value of the future cash flows expected to arise from its continuing use and its ultimate disposal, and its “fair value less costs to sell”, defined as the best estimate of the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
An impairment loss is recognized in the Consolidated Statements of Operations and Comprehensive Loss if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount.
Impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss on non-financial assets other than goodwill is reversed if there has been a change in the estimates used to determine the recoverable amount, only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of amortization, if no impairment loss had been recognized.
| d. | Depreciation and amortization of mining interests |
Mining interests relating to plant and equipment, mining leases and claims, royalty interests, and other development costs are recorded at cost with depreciation and amortization provided on the unit-of-production method over the estimated remaining ounces of palladium to be produced based on the proven and probable reserves or, in the event that the Company is mining resources, an appropriate estimate of the resources mined or expected to be mined.
Mining interests relating to small vehicles and certain machinery with a determinable expected life are recorded at cost with depreciation provided on a straight-line basis over their estimated useful lives, ranging from three to seven years, which most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Straight-line depreciation is calculated over the depreciable amount, which is the cost of an asset, less its residual value.
Significant components of individual assets are assessed and, if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately using the unit-of-production or straight-line method as appropriate. Costs relating to land are not amortized.
Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the end of the lease term.
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
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North American Palladium Ltd.
Revenue from the sale of metals in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of volume adjustments. Revenue is recognized when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. The timing of the transfers of risks and rewards varies depending on the individual terms of the contract of sale.
Revenue from the sale of palladium and by-product metals from the LDI Mine is provisionally recognized based on quoted market prices upon the delivery of concentrate to the smelter or designated shipping point, which is when title transfers and significant rights and obligations of ownership pass. The Company’s smelter contract provides for final prices to be determined by quoted market prices in a period subsequent to the date of concentrate delivery. Variations from the provisionally priced sales are recognized as revenue adjustments until final pricing is determined. Accounts receivable are recorded net of estimated treatment and refining costs, which are subject to final assay adjustments. Subsequent adjustments to provisional pricing amounts due to changes in metal prices and foreign exchange are disclosed separately from initial revenues in the notes to the financial statements.
| f. | Asset retirement obligations |
In accordance with Company policies, asset retirement obligations relating to legal and constructive obligations for future site reclamation and closure of the Company’s mine sites are recognized when incurred and a liability and corresponding asset are recorded at management’s best estimate. Estimated closure and restoration costs are provided for in the accounting period when the obligation arising from the related disturbance occurs.
The amount of any liability recognized is estimated based on the risk-adjusted costs required to settle present obligations, discounted using a pre-tax risk-free discount rate consistent with the time period of expected cash flows. When the liability is initially recorded, a corresponding asset retirement cost is recognized as an addition to mining interests and amortized using the unit of production method.
The liability for each mine site is accreted over time and the accretion charges are recognized as a finance cost in the Consolidated Statements of Operations and Comprehensive Loss. The liability is subject to re-measurement at each reporting date based on changes in discount rates and timing or amounts of the costs to be incurred. Changes in the liability, other than accretion charges, relating to mine rehabilitation and restoration obligations, which are not the result of current production of inventory, are added to or deducted from the carrying value of the related asset retirement cost in the reporting period recognized. If the change results in a reduction of the obligation in excess of the carrying value of the related asset retirement cost, the excess balance is recognized as a recovery through profit or loss in the period.
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
Adoption of New Accounting Standards
The following new accounting standards have been adopted by the Company.
IAS 32 Financial Instruments: Presentation
This standard is amended to clarify requirements for offsetting of financial assets and financial liabilities. The amendment is effective for annual periods beginning on or after January 1, 2014. This amendment did not have a material impact on the condensed interim consolidated financial statements of the Company.
IAS 36 Recoverable Amounts
This standard was amended in May 2013 to change the disclosure required when an impairment loss is recognized or reversed. The amendments require the disclosure of the recoverable amount of an asset or cash generating unit at the time an impairment loss has been recognized or reversed and detailed disclosure of how the associated fair value less costs of disposal has been determined. The amendments are effective for annual periods beginning on or after January 1, 2014 with earlier adoption permitted. This amendment did not have a material impact on the condensed interim consolidated financial statements of the Company.
IFRIC 21 Accounting for Levies Imposed by Governments
This interpretation provides guidance on the obligating event giving rise to a liability in connection with a levy imposed by a government, and clarifies that the obligating event is the activity that triggers the payment of the levy as identified by the legislation. The interpretation is effective for annual periods beginning on or after January 1, 2014. This amendment did not have a material impact on the condensed interim consolidated financial statements of the Company.
New standards and interpretations not yet adopted
The following new standards, amendments to standards and interpretations are not yet effective or have otherwise not yet been adopted by the Company. The Company is evaluating the impact, if any, adoption of the standards will have on the disclosures in the Company’s condensed interim consolidated financial statements:
IFRS 9 Financial Instruments: Classification and Measurement
In October 2010, the IASB issued IFRS 9 “Financial Instruments” which will replace IAS 39, Financial Instruments: Recognition and Measurement. The replacement standard has two measurement categories: amortized cost and fair value. All equity instruments are measured at fair value. A debt instrument is at amortized cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. Otherwise, it is at fair value through profit or loss. An update to IFRS 9 includes guidance on financial liabilities and derecognition of financial instruments.
In November 2013, the IASB issued a new general hedge accounting standard, which forms part of IFRS 9Financial Instruments (2013). The new standard includes a new general hedge accounting standard which will align hedge accounting more closely with risk management. This standard does not fundamentally change the types of hedging relationships or the requirement to measure and recognize ineffectiveness, however it will provide more hedging strategies that are used for risk management to qualify for hedge accounting and introduce more judgment to assess the effectiveness of a hedging relationship. A tentative mandatory effective date of January 1, 2018 has been selected and the date is still subject to confirmation and enactment. Early adoption is permitted. The Company is presently evaluating the impact of adopting this additional disclosure.
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
RISKS AND UNCERTAINTIES
The risks and uncertainties are discussed within the Company’s most recent Form 40-F/Annual Information Form on file with the SEC and Canadian provincial securities regulatory authorities, the Company’s Short Form Base Shelf Prospectus filed on February 12, 2013, and the Company’s Prospectus Supplement filed on April 8, 2014.
INTERNAL CONTROLS
Disclosure Controls and Procedures
Management is responsible for the information disclosed in this MD&A and has in place the appropriate information systems, procedures and controls to ensure that information used internally by management and disclosed externally is, in all material respects, complete and reliable.
For the quarter ended March 31, 2014, the Chief Executive Officer and Chief Financial Officer certify that they have designed, or caused to be designed under their supervision, disclosure controls and procedures to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.
The disclosure controls and procedures are evaluated annually through regular internal reviews which are carried out under the supervision of, and with the participation of, the Company’s management, including the Chief Executive Officer and Chief Financial Officer.
Internal Control over Financial Reporting
For the quarter ended March 31, 2014, the Chief Executive Officer and Chief Financial Officer certify that they have designed, or caused to be designed under their supervision, internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with IFRS.
There have been no changes in the Company’s internal controls over the financial reporting that occurred during the most recent period ended March 31, 2014 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management is responsible for establishing and maintaining adequate internal controls over financial reporting. Internal control over financial reporting, no matter how well designed, has inherent limitations and can only provide reasonable assurance, not absolute assurance, with respect to the preparation and fair presentation of published financial statements and management does not expect such controls will prevent or detect all misstatements due to error or fraud. The Company is continually evolving and enhancing its systems of controls and procedures.
Under the supervision and with the participation of the Chief Executive Officer and the Chief Financial Officer, management performs regular internal reviews and conducts an annual evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992).
OTHER INFORMATION
Additional information regarding the Company is included in the Company’s Annual Information Form and Annual Report on Form 40-F, which are filed with the SEC and the provincial securities regulatory authorities, respectively. A copy of the Company’s Annual Information Form is posted on the SEDAR website at www.sedar.com. A copy of the Annual Report or Form 40-F can be obtained from the SEC’s website at www.sec.gov.
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
NON-IFRS MEASURES
This MD&A refers to cash cost per ounce, adjusted net income, EBITDA and adjusted EBITDA which are not recognized measures under IFRS. Such Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Management uses these measures internally. The use of these measures enables management to better assess performance trends. Management understands that a number of investors, and others who follow the Company’s performance, assess performance in this way. Management believes that these measures better reflect the Company’s performance and are better indications of its expected performance in future periods. This data is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.
2013 was a transition year for the Company as it was sinking the shaft and completing related infrastructure at the same time it was developing and transitioning to mining the Offset zone. As a result, the 2013 financial results would not be directly comparable to the prior or future years.
The following tables reconcile these non-IFRS measures to the most directly comparable IFRS measures:
Cash Cost Per Ounce of Palladium
The Company uses this measure internally to evaluate the underlying operating performance of the Company for the reporting periods presented. The Company believes that providing cash cost per ounce allows the ability to better evaluate the results of the underlying business of the Company.
Cash cost per ounce include mine site operating costs such as mining, processing, administration and royalties, but are exclusive of depreciation, amortization, reclamation, capital and exploration costs. Cash cost per ounce calculation is reduced by any by-product revenue and is then divided by ounces sold to arrive at the by-product cash cost per ounce of sales. This measure, along with revenues, is considered to be a key indicator of a Company’s ability to generate operating earnings and cash flow from its mining operations.
The Company’s primary operation relates to the extraction of palladium metal. Therefore, all other metals extracted in conjunction with the palladium metal are considered to be a by-product credit for the purposes of the cash cost calculation.
Reconciliation of Palladium Cash Cost per Ounce
| | | | | | | | | | | | | | | | |
| | | For the three months ended | |
(expressed in thousands of dollars except ounce and per ounce amounts) | | March 31
2014 | | | December 31
2013 | | | September 30
2013 | | | March 31
2013 | |
Production costs including overhead | | $ | 29,735 | | | $ | 31,153 | | | $ | 21,663 | | | $ | 28,941 | |
Smelting, refining and freight costs | | | 4,183 | | | | 3,864 | | | | 2,922 | | | | 3,802 | |
Royalty expense | | | 2,074 | | | | 1,669 | | | | 1,464 | | | | 2,509 | |
Mine restoration costs, net of insurance recoveries | | | — | | | | — | | | | 1,214 | | | | 317 | |
| | | | | | | | | | | | | | | | |
Operational expenses | | | 35,992 | | | | 36,686 | | | | 27,263 | | | | 35,569 | |
Less by-product metal revenue | | | 14,639 | | | | 12,425 | | | | 10,703 | | | | 15,876 | |
| | | | | | | | | | | | | | | | |
| | $ | 21,353 | | | $ | 24,261 | | | $ | 16,560 | | | $ | 19,693 | |
| | | | | | | | | | | | | | | | |
Divided by ounces of palladium sold | | | 39,485 | | | | 35,206 | | | | 27,370 | | | | 39,760 | |
Cash cost per ounce (CDN$) | | $ | 541 | | | $ | 689 | | | $ | 605 | | | $ | 495 | |
Average exchange rate (CDN$1 – US$) | | | 0.91 | | | | 0.90 | | | | 0.96 | | | | 0.99 | |
| | | | | | | | | | | | | | | | |
Cash cost per ounce (US$), net of by-product credits | | $ | 492 | | | $ | 620 | | | $ | 581 | | | $ | 490 | |
| | | | | | | | | | | | | | | | |
FIRST QUARTER REPORT 2014
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North American Palladium Ltd.
Adjusted net income
The Company uses this measure internally to evaluate the underlying operating performance of the Company for the reporting periods presented. Providing adjusted net income allows the reader the ability to better evaluate the results of the underlying business of the Company.
Adjusted net income is a Non-IFRS financial measure, which excludes the following from loss: exploration; income from discontinued operations; mine start-up costs and closure costs; asset impairment charges and insurance recoveries; mine restoration costs due to flood and retirement payments; foreign exchange loss; loss on extinguishment of debt; loss in investments held for trading; and, financing costs.
| | | | | | | | |
| | | Three months ended March 31 | |
($000s) | | 2014 | | | 2013 | |
Loss and comprehensive loss for the year | | $ | (26,666 | ) | | $ | (2,848 | ) |
Exploration | | | 768 | | | | 4,840 | |
Income from discontinued operations | | | — | | | | (2,509 | ) |
Mine restoration costs, net of (insurance recoveries) and retirement payments | | | — | | | | (317 | ) |
Foreign exchange loss 1 | | | 7,976 | | | | 822 | |
Financing costs | | | 4,036 | | | | 81 | |
| | | | | | | | |
Adjusted net income (loss) | | $ | (13,886 | ) | | $ | 69 | |
| | | | | | | | |
| 1 | Foreign exchange loss was included in adjustments in 2014 due to the USD-denominated senior secured term loan financing in 2013. |
Adjusted EBITDA
The Company believes that EBITDA and Adjusted EBITDA are valuable indicators of the Company’s ability to generate operating cash flow to fund working capital needs, service debt obligations, and fund capital expenditures.
EBITDA excludes the impact of the cost of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS.
Other companies may calculate EBITDA differently. Adjusted EBITDA is a non-IFRS financial measure, which excludes the following from loss: income and mining tax expense; interest expense and other costs; depreciation and amortization; exploration; loss (income) from discontinued operations; mine start-up and closure costs; asset impairment charges and insurance recoveries; one-time costs (mine restoration costs due to flood and retirement payments); and, foreign exchange loss (gain).
| | | | | | | | | | | | | | | | |
| | | For the three months ended | |
($000s) | | March 31
2014 | | | December 31
2013 | | | September 30
2013 | | | March 31
2013 | |
Loss and comprehensive loss from continuing operations for the year | | $ | (26,666 | ) | | $ | (11,746 | ) | | $ | (5,324 | ) | | $ | (5,357 | ) |
Income and mining tax recovery | | | — | | | | (2,157 | ) | | | — | | | | — | |
Interest expense and other costs, net | | | 17,318 | | | | 1,612 | | | | 2,999 | | | | 2,209 | |
Depreciation and amortization | | | 10,368 | | | | 6,274 | | | | 6,144 | | | | 6,085 | |
| | | | | | | | | | | | | | | | |
EBITDA | | $ | 610 | | | $ | (6,017 | ) | | $ | 3,819 | | | $ | 2,937 | |
Exploration | | | 768 | | | | 1,360 | | | | 3,874 | | | | 4,840 | |
Insurance recoveries, net of mine restoration costs and retirement payments | | | — | | | | — | | | | (1,214 | ) | | | (317 | ) |
Inventory price adjustment | | | — | | | | 675 | | | | — | | | | — | |
Foreign exchange loss (gain)1 | | | 7,976 | | | | 5,351 | | | | (3,290 | ) | | | 822 | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 9,764 | | | $ | 1,369 | | | $ | 3,189 | | | $ | 8,282 | |
| | | | | | | | | | | | | | | | |
| 1 | Foreign exchange loss was included in adjustments in 2014 due to the USD-denominated senior secured term loan financing in 2013. |
FIRST QUARTER REPORT 2014
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