North American Palladium (PDL-T, PAL-X) is raising $87 million in a bought-deal financing paving the way to develop the Offset zone at its Lac des Iles palladium mine near Thunder Bay, Ont.
A syndicate of underwriters led by Cormark Securities and Haywood Securities originally agreed to buy 15 million units at $5 per share amounting to $75 million but within a day had increased the offering to 17.4 million units for $87 million.
Each unit consists of one share and half a warrant; warrants are exercisable at $6.50 per share for 18 months but if North American’s stock rises above $7.50 for longer than 20 consecutive days the company can accelerate the expiry date.
North American shares were trading 29¢ lower today, or about 6%, at $4.93 apiece on a trading volume of 3.1 million shares.
The company shut down Lac des Iles in October 2008 due to low metals prices with operations finally resuming again last week (April 14). It’s anticipated that the Roby zone, where the company is currently mining, has enough ore to last two more years. In that time, the company hopes to have the Offset zone fully developed, transitioning seamlessly to the new zone.
A preliminary economic assessment on the Offset zone that was released in 2008 estimated that it could extend the Lac des Iles mine life by another 10 years, producing about 250,000 oz. of palladium per year. An updated study is being planned for August 2010.
The Offset zone has measured and indicated resources of 4.6 million tonnes grading 4.9 grams palladium and 0.4 gram platinum per tonne for 3.7 million oz. palladium and 303,000 oz. platinum.
At last count, the Roby underground mine had indicated resources of 3.3 million tonnes grading 7.61 grams palladium per tonne and 0.44 gram platinum for 805,000 oz. palladium and 47,000 oz. platinum.
When the mine was placed on care and maintenance in 2008, the open pit at Lac des Iles had less than one year of reserves. At one point the company thought the open pit could be extended to the south, adding three years of reserves but a more detailed assessment during the shutdown showed that the capital and operating costs make it not worth developing.
Instead North American will focus the Offset zone as well as the Cowboy zone. Cowboy was discovered last June less than 50 metres away from Offset. It extends for up to 250 metres along strike. Some of the best grades so far include 4 metres grading 5.1 grams palladium per tonne and 4 metres grading 3.88 grams palladium per tonne.