The outlook for palladium is strong enough that North American Palladium (PDL-T, PAL-X) has asked miners to come back to work at Lac des Iles, near Thunder Bay, Ont., after a year-long shutdown.
“Fortunately, over the last year, we’ve had a recovery in the global economy and that’s resulted in the price of palladium going from US$200 per ounce a year ago, and now we are at about US$370,” says president and CEO William Biggar.
And although the current price is hovering just above the company’s anticipated cash costs for the foreseeable future — US$335-350 per oz. — Biggar says brighter days are ahead for several reasons.
North American Palladium plans to mine the underground Roby zone for the next year two years, producing 140,000 oz. palladium per year.
At that time, the company will start mining from the newly discovered Offset zone, a fault-displaced continuation of Roby that is a bit lower and about 250 metres to the west. Production then will increase to at least 250,000 oz. per year, similar to the level before the shutdown.
Biggar expects the cash costs for the Offset zone will be significantly lower than Roby because of the mining method. Instead of costly trucks hauling ore up a ramp, the company will be developing a raise-bore shaft to surface and using a high-volume bulk-mining method thanks to the good rock conditions.
“One of the great features of our orebody up there is the rock conditions — it doesn’t get any better for underground mining,” Biggar says. “It’s a very hard rock so we are able to blast very large stopes and that reduces your mining costs.”
On top of that, there has been a rebound in vehicle production due to higher demand in emerging countries like China, India and Brazil. As a result, Biggar is expecting to see a rise in the price of palladium eventually as about half of all palladium is used to make catalytic converters for cars.
“The stats we are seeing suggest that over the next twelve to twenty-four months, vehicle production globally will get back to the same level as a year and a half ago,” Biggar says.
The current palladium price is still a ways off the US$580 per oz. it fetched in early 2008 and Biggar admits there’s a chance that palladium could drop again.
If the price did fall too low, he’s prepared to wait it out for a bit.
“We would ride it out for a certain amount of time,” Biggar says.
North American Palladium will rehire about 150 people, bringing the workforce total to 180. That’s a significant drop from before the shutdown, when there were about 200 people working in the open pit and another 200 underground.
The underground portion of the mine was nearly depleted when the mine was shut. If prices rise significantly, the company will process some of the low-grade stockpiled ore, but it has no plans to restart mining in the pit.