TORONTO (miningweekly.com) – Toronto-based North American Palladium’s (NAP’s) TSX-listed shares on Friday climbed by as much as C$0.09 apiece in early trading after the company announced that it had expanded the reserves and resources at its flagship Lac des Iles (LDI) mine by 24% from last year and that palladium production and operating costs in January and February were ahead of guidance.

NAP also announced that it had completed a new life-of-mine (LoM) plan for LDI, which is located in north-western Ontario, which gave the mine a base case net present value (NPV) at a 5% discount rate of $173-million when using three year average pricing of $700/oz of palladium and a C$0.95 foreign exchange rate.

However, under the current price scenario using a price of $770/oz of palladium and a C$0.90 foreign exchange rate, the NPV calculates to about $299-million when using a 5% discount rate, an increase of $161-million from the previous NPV in the January 2013 technical report.

Cash costs of the base case averaged $440/oz of palladium.

LDI now had total compliant reserves and resources estimated at 5.2-million ounces of contained palladium. Of the total reserve, the underground reserve accounted for 9.2-million tonnes at a diluted grade of 3.9 g/t palladium. The total reserve is 15-million tonnes at a grade of 2.8 g/t palladium, which now included salvage mining in the openpit and a portion of the low-grade stockpile on the surface.

The total reserves increased by 140 000 contained ounces of palladium, to 1.3-million ounces, an increase of 12% when compared with the previous technical report.

The total resources increased by 860 000 oz of contained palladium to 3.9-million ounces, an increase of 28% when compared with the previous technical report.

NAP said that when using only the proven and probable reserves, the current LoM increased by one year to 2019, with yearly output peaking at more than 200 000 oz of payable palladium and a total mined reserve of 1.1-million ounces of payable palladium, an increase of about 34% from the 2013 technical report.

The new mine plan, however, did not include the potential shaft extension to access the lower Offset zone, on which management said it would focus to potentially extend the LoM through converting the resources into reserves in the future.

NAP added that it expected to allocate more exploration funding this year to conduct conversion and extension drilling below the 1 000 m level in the lower part of the Offset zone in support of a potential shaft expansion and future LoM extension.

The company said that it would file a new LoM plan as part of an updated prefeasibility study with securities regulators before month end.

"Mine operations continue to perform well with several large stopes in the production cycle and significant broken ore inventory underground. Tonnage mined is as per plan and grade has been above guidance year to date due partly to some strategic stope sequencing decisions made late last year," NAP COO Jim Gallagher said.

He added that the concentrator’s performance had been above guidance with recoveries in the first two months averaging 84.5%, reflecting positive results from the process improvements implemented in December.

“We have also taken short-term measures to improve throughput of the ore handling system feeding the shaft and are on track to complete permanent solutions in the second half of 2014, which are expected to allow us to achieve higher production rates at lower unit costs,” Gallagher said.

NAP said in January that it planned to boost its payable palladium production to between 170 000 oz and 175 000 oz this year, while dropping its capital investment budget to $30-million and its exploration budget to $4-million.

The miner said it expected underground production to gradually increase from about 3 000 t/d in the first half of the year, up to 5 000 t/d by the end of 2014, and that it planned to commission a preliminary economic assessment study to define future growth potential at LDI, by optimising the Offset zone resources and several alternative, supplemental development opportunities that could leverage the capacity of existing infrastructure.

NAP also said that it was bullish on palladium, saying it expected the price to remain strong through 2014. Palladium traded at $789/oz on the spot market in New York on Friday.

NAP’s TSX-listed stock traded at C$0.56 apiece on Friday afternoon. So far this year, the stock had lost 32.47% in value.