Staged for Success Corporate Profile

` 2016 Annual Report Staged for Success Corporate Profile North American Palladium is the only mining company in the world that is a pure palladium play. We are a Canadian company with 20 years of production at our Lac des Iles mine. We offer investors exposure to palladium in a stable mining jurisdiction. With an experienced senior management team and guided by a supportive majority shareholder, our Company is well positioned to pursue its strategy to become a low cost, long term, sustainable palladium producer. We have an enhanced focus on operational improvements and as an established PGM producer, North American Palladium offers investors: A clear growth strategy that is increasing production and lowering cash costs; Exposure to palladium prices; An attractive PGM investment jurisdiction; Significant development and exploration upside; and A quality asset with a long life. Welcome to the New North American Palladium 2016 Letter to Shareholders Fellow Shareholders, 2016 was a transformational year for North American Palladium Following the events of 2015, that saw the financial restructuring of our business and the significant debt reduction on our balance sheet, 2016 has been focused on operational improvements and getting the company on a path to profitability. Our new senior management team is intensely focused on operational improvements intended to drive down costs, expand palladium production and optimize profits. In 2016 the Lac des Iles (LDI) mine site continued on a program of fundamental change and redesign, setting the operation up for long-term success. This includes a change to our primary mining method that is already delivering more reliable production and has all but eliminated the seismicity issues that challenged us a year ago. We have signed a new 5 year smelter agreement at materially better terms that reduces risk by providing access to two Canadian-based smelters. With an investment of $35 million in 2016 we have begun implementing a new long-term tailings management strategy that will allow the operation to achieve its full production potential. The other exciting piece of our story is the significant exploration potential at LDI and on nearby greenfields properties. Recent exploration on the mine property has resulted in the extension of known deposits, the discovery of additional mineralized zones, and the identification of new drilling targets. These positive outcomes will be reflected in a National Instrument 43-101 Technical Report that is expected to be published in mid 2017. Under the leadership of Dr. David Peck, the exploration team has acquired the dominant land position within 50 km of the mine site, encompassing all of the known Lac des Iles intrusions and capturing some of the best PGE exploration potential in the world. The Company is poised to discover additional palladium deposits in the region by drawing on its unique knowledge of the controls on palladium mineralization at LDI. None of this happens without an equally intense focus on health and safety. The Lac des Iles site has become an industry leader in the adoption of risk assessment as a daily tool for every worker. The cultural change is evident in our recent safety performance, with only one lost time injury in 2016. We see an improving outlook for palladium for 2017 and believe that the climate for palladium is more attractive than ever before. The majority of analysts are predicting a continuing supply deficit and strong price performance for palladium for the next several years. As the only mining company in the world that is a pure palladium play we offer investors direct exposure to palladium markets in a stable jurisdiction with significant development and exploration upside. For 2017 our top priorities include refining and executing our business strategy, increasing palladium production, publishing a long term life of mine plan and delivering additional exploration successes at LDI and on our greenfields properties. North American Palladium is uniquely positioned to translate improved performance and a bright outlook for the palladium industry into financial success. To reflect this new future for North American Palladium we have adopted a new corporate logo as seen on the front of this report. Its design reflects the strengths of this company: the stable North American base of operations, the positive market outlook for palladium and the fundamental role that palladium and hence, our mining operations play, in cleaning exhaust gases in automobiles around the world. Welcome to the new North American Palladium! Jim Gallagher President & Chief Executive Officer OPERATIONS Significant changes at our Lac des Iles mine site – such as a new mining method, additional satellite mining zones and an expanded tailings management facility are increasing production and lowering costs over the long term. 2016 was a transition year for the Lac des Iles mine site as we implemented a number of significant initiatives to set the operation up for long-term success. The recent change in mining method is already showing the intended results and the discovery of the B2 Zone will add ounces to an upcoming mineral reserve and resource report expected in mid 2017. We intend to follow this with an updated life-of-mine plan also to be published in mid 2017 which will incorporate a number of additional improvements and opportunities and extend the mine life. Exploration Upside Over the past several years we have acquired a dominant land position within a 50 km of the Lac des Iles mine that comprises approximately 38,000 hectares of mineral claims. Further work has identified a significant number of geophysical and geochemical anomalies that match the signature of the original mine site intrusion, which is host to the existing Roby, Offset and B2 zones. The Company intends to spend $5.5 million in 2017 to pursue a number of priority targets, including 14,000 metres of drilling. The exploration potential is further complemented by the existing surface and underground infrastructure, and the mill’s excess capacity. Accordingly, as an established PGM producer with a clearly defined strategy for growth, NAP is well positioned to convert exploration success into production and cash flow on an accelerated timeline Environment The Company values the importance of its social license to operate and as such is committed to operating its LDI mine in a manner that respects the local environment and in full compliance with Canadian and Ontario environmental legislation. Annual monitoring of water quality surrounding the property is ongoing and will be continued years after the mine has closed. Every three years there is an extensive biological monitoring study that covers an area of 300 km2 around the mine site. This includes the monitoring of fisheries, plants, soils, water, and benthic invertebrates, as well as algae quality and assessment. To date, no negative trends have been associated with the Lac des Iles mine on the surrounding ecosystem. Corporate Profile PEOPLE We recognize that people are crucial to strong corporate performance. As we transition our business, we recognize that our ability to execute our business strategy is highly dependent on employing the best people and motivating them to reach their full potential. The success of our Company is fueled by our entrepreneurial culture, where every employee has the opportunity and potential to make a difference in our operations. Employee contribution and entrepreneurship is encouraged and individuals are respected for their ideas, and granted accountability for their work. Our scale of operations and team-oriented culture offers individuals the chance to bring ideas into action - the ideas and skills of each individual make tangible contributions to company accomplishments. Developing our Employees Having a “say” in the decision-making process is one of the many benefits of working for a growing and Maintaining an engaged workforce is important to us and entrepreneurial company. we believe it is important for our Company to invest in the development of our employees. Proving that our people matter by making safety, respect & training top priorities Working with the Communities in which We Operate Our Company has a strong commitment to workplace We are responsible to the communities in which we operate safety, mutual respect, and the wellbeing of our in, and committed to our role as a responsible corporate employees. citizen. In keeping with this philosophy, North American Palladium always strives to be a good neighbor and employer, We are committed to ensuring a safe working to create economic prosperity for its stakeholders, and environment for all of our employees. Key features whenever possible, give preference to local and regional ensuring safety in our workplace include the internal suppliers when purchasing goods and services. responsibility system, our dedicated team of managers and supervisors who make safety an integral part of each We have partnered with a number First Nations and Metis workday, our Joint Health and Safety Committee which Nation Groups, all of whom claim the mine site and focuses on identifying safety concerns and making surrounding lands as traditional lands, and consider such improvements, crew safety meetings held to address relationships as key to the mines future success. worker concerns and communicate safe work issues, risk assessments, procedures that are developed and communicated for activities that may have related hazards, a fully-trained Mine Rescue team that is available to respond to any emergency situation, use of the Common Core modular training systems, and alliances with groups such as FM Global and the Electrical Safety Authority. Safety is at the forefront of everything we do. We also encourage employees to excel in their work by providing the technical training and support to succeed. Ethical and Responsible We always strive to maintain high standards of integrity and accountability in conducting business. We have adopted a Code of Conduct that is applicable to all directors, officers, employees and contractors.

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