View Annual Report
Total Page：16
File Type：pdf, Size：1020Kb
Head Office Royal Bank Plaza, South Tower 200 Bay Street, Suite 2350 Toronto, Ontario, M5J 2J2 Tel: (416) 360-7590 Fax: (416) 360-7709 Email: [email protected] www.nap.com Investing for GROWTH 2010 ANNUAL REPORT DIRECTORS ONTARIO QUEBEC 1_André J. Douchane B.Sc. CHAIRMAN 2_William J. Biggar B.Comm., M.B.A., C.A. PRESIDENT AND CHIEF EXECUTIVE OFFICER 3_C. David A. Comba B.Sc., M.Sc. RETIRED MINING EXECUTIVE 4_Robert J. Quinn B.S.B.A., L.L.B. PARTNER , Q UINN & B ROOKS LLP 5_Steven R. Berlin M.B.A., C.P.A. RETIRED FINANCIAL EXECUTIVE 6_Greg J. Van Staveren C.P.A., C.A. STRATEGIC FINANCIAL CONSULTANT Vezza 7_William J. Weymark B.A.Sc., P.Eng. PRESIDENT , W EYMARK ENGINEERING LTD . 1 LAC DES ILES SLEEPING GIANT Gold Mine Discovery Palladium Mine Cameron Shear JV Florence Timmins Thunder Flordin Bay Val d’Or Harricana North Dormex Sudbury Sleeping Giant Mine & Mill Laflamme Montreal Toronto 2 NAP is a Canadian OFFICERS precious metals company focused 3 on growing its production of palladium and gold in mining-friendly 4 jurisdictions. The Company’s flagship mine, Lac des Iles, is one of the world’s two primary palladium producers. NAP also has a growing gold business in the prolific Abitibi region of Quebec, where it operates the Sleeping 5 Giant mine. The Company has extensive landholdings adjacent to both its Lac des Iles and Sleeping Giant mines, and a number of advanced exploration projects. Trent Mell Jeff Swinoga TABLE OF CONTENTS VICE PRESIDENT , C ORPORATE VICE PRESIDENT , F INANCE DEVELOPMENT , G ENERAL COUNSEL AND CHIEF FINANCIAL OFFICER AND CORPORATE SECRETARY 1 Why Invest in NAP? 2 Letter to Shareholders 6 4 Lac des Iles Palladium Mine William J. Biggar Michel Bouchard 6 Gold Division PRESIDENT AND VICE PRESIDENT , E XPLORATION CHIEF EXECUTIVE OFFICER AND DEVELOPMENT 8 Highly Leveraged to the Palladium Market Greg Struble 9 Management’s Discussion and Analysis VICE PRESIDENT AND 40 Management’s Responsibility for Financial Statements CHIEF OPERATING OFFICER 41 Independent Auditors’ Report 42 Consolidated Balance Sheets 43 Consolidated Statements of Operations, Comprehensive Loss and Deficit 44 Consolidated Statements of Cash Flows 7 45 Consolidated Statements of Shareholders’ Equity 46 Notes to the Consolidated Financial Statements 64 Corporate Information 65 Directors and Officers NAP trades on the NYSE Amex under the symbol PAL and on the TSX under the symbol PDL. NORTH AMERICAN PALLADIUM 2010 ANNUAL REPORT 65 GROWTH PALLADIUM With a growing reserve and EXPOSURE resource base and a rising As one of only two primary production profile, over the palladium producers in the world, next few years we plan to our plans to significantly increase significantly increase our our palladium production while palladium and gold production lowering our operating costs are while lowering our operating well timed with the rising price costs. Our LDI mine expansion of palladium. Palladium was the is expected to transform our best performing metal in 2010 Why company into a long life, low and the outlook for 2011 and cost producer of palladium, beyond remains favourable, and we expect to see increased underpinned by stagnant supply Invest production from our Sleeping and growing demand from the Giant gold mine, as well as auto and investment sectors. potential production from in NAP? our Vezza project in 2012. EXPLORATION FINANCIAL UPSIDE STRENGTH Future growth will come With significant cash balances, from our significant exploration no long-term debt, and operating upside and through the continued cash flow, we are able to exploration and development continue investing in our mine of our high-quality projects. The expansions and exploration exploration success from our activities. Our ability to finance recent programs highlights our working capital supports our potential to organically grow funding flexibility as we continue our reserve base and extend to make significant investments to mine lives. With permits, mine position NAP for future growth. infrastructure and excess capacity at both of our mills, we are confident that we can move from exploration success to production on an accelerated timeline. STABILITY OPERATIONAL Our mines are located in EXPERTISE Ontario and Quebec in At the end of the day, it is Canada. Internationally, people that build businesses. Canada is one of the While we are fortunate to have world’s leading mining exceptional assets, the proven countries and is recognized track record of success of our as a mining-friendly jurisdiction senior management and that has low political risk, operating teams enhances stable government policies NAP’s investment proposition and available skilled labour. and substantially reduces With global supply of our operating risk in all our palladium limited to mostly endeavours. In 2010 we proved South Africa and Russia, NAP that we can deliver growth by offers significant leverage to restarting two mines and the PGM market with minimal commencing two mine geopolitical risk. expansions. Our progress has been fueled by an entrepreneurial business culture that transcends a team of over 400 employees spread across our palladium and gold operations. NORTH AMERICAN PALLADIUM 2010 ANNUAL REPORT 1 LETTER TO SHAREHOLDERS INVESTING FOR GROWTH Over the next two years, we plan to invest over a quarter of a billion dollars in our mine expansions, thereby increasing our palladium and gold production while lowering our operating costs, and in doing so, expect to create significant value for our shareholders. FELLOW SHAREHOLDERS , 2010 was a year of transition and investment. We successfully restarted our Lac des Iles (LDI) palladium mine as an William J. Biggar underground only operation, producing 95,000 ounces of palladium. With the price of palladium and gold reaching PRESIDENT AND new decade highs, we embarked on a number of initiatives to advance our growth strategy. From starting two mine CHIEF EXECUTIVE OFFICER expansions to position our palladium and gold mines for near-term growth, to the aggressive exploration programs that have increased our reserve and resource base, and to the financing activities and corporate milestones that have allowed us to grow NAP’s market capitalization to over $1 billion – we began to lay the groundwork to transition the Company into a mid-tier precious metals producer. In 2010, with a strong financial foundation and shareholder value creation in mind, we invested in development, exploration and in our people. Over the next two years, we plan to invest over a quarter of a billion dollars in our mine expansions, thereby increasing our palladium and gold production while lowering our operating costs, and in doing so, expect to create significant value for our shareholders. INVESTING IN DEVELOPMENT I firmly believe that with focus comes excellence. Our objective here is quite straightforward – to create value for our shareholders through the development of our assets. With planned capital expenditures of nearly $190 million in 2011, we are certainly very focused on our development activities. Our first and most critical priority is the timely expansion of our flagship asset, the LDI palladium mine – one of only two primary palladium producing mines in the world. With a growing reserve base and a rising production profile, LDI’s mine expansion is well-timed to benefit from the increasing price of palladium, which was the best performing metal in 2010. With the goal of achieving a seamless transition from mining via ramp access, to mining via shaft, we commenced the mine expansion at the start of 2010. Commercial production from the shaft is targeted for the fourth quarter of 2012. Once fully completed and running at full capacity, the LDI mine is expected to become a low cost, long life producer of palladium. Looking ahead to LDI’s future in 2015 and beyond, we plan to significantly increase production to over 250,000 ounces per year at substantially reduced cash costs – expected to decline to less than US$150 per ounce, possibly positioning LDI as the world’s lowest cost producer of palladium. In an environment where the demand for palladium is forecasted to outpace mine supply, the successful expansion of LDI will secure our future growth. Over the next couple of years, LDI will be in a key transitional phase. While our mining and development plans may evolve during this time to factor in the exploration upside we recently identified, our decisions will be strategic to maximize the mine’s long-term production and future operating cash flow potential. In our gold division, at the Sleeping Giant mine we took a step back in 2010 to refocus on development and exploration. We are currently completing a 200-metre shaft deepening to gain access to the higher grade zones at depth, following which development of three new mining levels will commence in preparation for 2012 production. While disappointed that the production ramp up has proceeded slower than anticipated, I remain confident in the mine’s long-term prospects for value creation, and commend the diligent work of our employees and contractors at the mine. I believe that we are now in a better position to unlock this mine’s potential and produce in the range of 40,000 to 50,000 ounces at lower cash costs around US$750 per ounce starting in 2012. In conjunction with Sleeping Giant’s shaft deepening, we are also expanding the mill capacity to allow us to serve our other gold projects in the region. We are advancing our Vezza gold project through underground development and exploration towards a production decision that we intend to make by year end. Vezza, which we acquired in September of 2010, is in a very advanced stage, so from an operating point of view, production can commence as early as 2012 with its ore trucked to the expanded Sleeping Giant mill.