Raymond James Canada: Outperform rating and $2.20 target price for North American Palladium Ltd.
According to Raymond James Canada:
March 11, 2013
Target Price (6-12 mos): Old: C$2.10 New: C$2.20
Mine Tour Reaffirms 2013 Will be a Turnaround Year
We attended a tour of North American Palladium’s (PDL) LDI mine on March 7, 2013 and provide an update and summary of our observations.
We continue to rate PDL Outperform and view the current share price as an attractive entry point to take advantage of a valuation that we expect to improve over the course of 2013 and 2014. Our positive view is predicated on:
1) palladium’s strong fundamentals, which should support higher metal prices; 2) a scarcity of Pd-producing, pure play equities based in North America (safe jurisdiction); 3) a mining operation that is on track to improve production, costs, and de-risk; and, 4) our expectation that the hiring of a new CEO, when it occurs, will be a significant positive catalyst (we expect 1 – 2 months).
Shaft development appears on track. The shaft is sunk to the 650 m level, and progress in March is ahead of plan. All major equipment is on site, with critical parts in spare, and the target of 3Q13 to start commissioning reiterated.
Hiring and training will be a focus for the next few months. We are not concerned about the shaft, but will rather focus on PDL’s ability to successfully hire and train a larger workforce as it ramps up to 3,500 tpd (from ~2,600 now).
We expect more resource growth. With opportunities for growth at the Offset and Roby zones underground, a new prospect being drilled south of and adjacent to the shaft, and open pit potential in the existing pit, the Sherriff zone and North VT Rim, we believe there is no shortage of targets to look for more ounces. We expect a resource update in 3Q13.