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North American Palladium Limited ┼×irket Message Board

  • bigsee4c bigsee4c Feb 14, 2013 3:30 PM Flag

    Vezza Expectation

    I was disappointed to read in the F10 addendum that NAP refers to Vezza as a not one of their "material properties" and a material write down was coming. I can't share the sentiment that this was completely surprising, though. The "tremendous interest" comment was made mid-year, likely before the interested parties completed any DD. Shareholders were given indications from the Q3 CC, albeit more cryptically than professionally, that suggested Vezza was not likely a shiny gold winner.

    I posted on Nov. 8th,
    "Regarding Vezza, production questions were not directly answered, though listening between the lines, it sounds negligible. They are trying to "bring it to a small profit"; "trying hard to divest"; "find it a distraction". When ask if it might be sold by YE, the answer was possibly, though not likely, due to holiday season. It would be sold in the "next while", whatever that means. More concerning, when ask what the production plans would be if Vezza was not sold by YE, there was no clear answer and that they would "decide as part of the budgeting process". All and all, not encouraging."

    So, we may have been hoping or wishing, but I for one have not been expecting much near term success from Vezza, per the Q3 CC.

    Regarding the poor communications, I am actually appreciative that NAP did not come out with a press release in late December, when prices were below $1.20 saying ,"Interest in Vezza is no longer significant", "We are planning another asset write down in a few months and will likely require more financing." At least I got an opportunity to sell some between $1.70 and $1.95, rather than feeling compelled to sell at some absurdly low price.

    I share the frustration of the BoD gambling poorly with our money. I would love to see some new blood nominated to the board with significant vested interest in the company. Maybe they would require more thorough scrutiny before approving reckless, gold-buggy, gambling ventures on the shareholders dime.

    On the positive side, the more that Pd increases, the less important that Vezza becomes.

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    • I've got a question. If NAP has to write down the gold assets to the extent book is higher than presumed value, then what happen if the tables turn. What happens if gold climbs to $2200 and suddenly the assets are worth more than book? Is it just a one way street which exchanges a one time earnings hit for lowered ongoing depreciation savings. If so, maybe it's not such a bad thing if that's what it takes to tip the scale to future profitability -- assuming that it isn't another Sleeping Giant debacle.

      • 2 Replies to bigsee4c
      • I have an analyst report dated 1/16/13 that esitmates PAL's NAV at CAD $1.2, FWIW

        "Investment Thesis
        In 2010, PDL restarted both the Lac des Iles (LDI)
        mine in Q2. PDL is working to develop the LDI
        Offset Zone (key asset) and build a shaft at the
        mine, with the aim of increasing production and
        lowering operating costs. PDL is also working to
        sell the Vezza gold project. By our estimates, PDL
        is in need of raising about $30 million over the six
        months to be fully funded to develop the Offset
        Zone. Once the Offset Zone shaft is complete in the
        a verage total cash costs should drop significantly."

      • Once written down, the assets have a new BV.

        A higher gold price would have no bearing on book value.

        One potential fly in the ointment might be if the IRS/Tax dept in Canada disagreed with the writedown and maybe thought a way to avoid taxes but I think in most cases a shut down of operations would more than justify a writedown if one were taken.

        Bell, you still got ears on the ground at Vezza? Trucks still rolling into the SG mill?