TORONTO (miningweekly.com) – Toronto-based North American Palladium expects to achieve commercial production from the new Offset zone at its Lac des Iles mine, in Ontario, in the third quarter of 2012, CEO Bill Biggar said on Tuesday.

The company has completed a scoping study on the project, and expects pre-commercial-production capex will amount to C$204,1-million, including some C$25-million contingency allocation.

The firm, which has C$150-million in cash and no long-term debt, is confident it can fund the project itself, Biggar said.

NAP expects to produce more than 250 000 oz/y, at a life-of-mine cash cost of $132/oz once the new shaft reaches commercial production.

Output from the top of the Offset zone is forecast at 80 000 oz next year, and the company also expects some 140 000 ounces from the current Roby zone in 2011.

NAP is currently building a ramp from the botom of the Roby zone to access the upper levels of the Offset zone, which will be used as a platform to raisebore the new shaft to surface.

The raise-boring is scheduled to start in November, while shaft construction is planned to get under way in the third quarter of 2011.

Detailed engineering of the surface hoisting plant, production shaft, and underground crushing and conveying will be completed in December, and construction of the hoisting plant is scheduled to start in the fall of this year.

The company has bought a 12-foot service cage hoist and 15-foot production hoist.

Based on the CPM Group's palladium price forecast of an average of $588/oz over the eight-year mine life, the Offset zone project would have a 33-month payback period, Biggar said on a conference call.