Why North American Palladium (PAL) Is Up Today

NEW YORK (TheStreet) -- North American Palladium (PAL) is gaining after providing an update on its mineral reserve and resource estimates for its Ontario-based Lac des Iles mine.

By midafternoon, shares had gained 19.2% to 58.4 cents.

Trading volume of 17.8 million was more than double its three-month daily average.

"We are pleased with the overall increase in contained palladium ounces in our reserves and resources and the improved economics of our updated life of mine plan for LDI," said president and CEO Phil du Toit in a statement.

"Our operations are performing well year to date and the fundamentals for the palladium market remain favorable. As we continue through 2014 we will focus on continued operational improvements, lowering unit costs and further diamond drilling to potentially convert our large mineral resource to reserves," he continued.

The Toronto-based miner said total reserves and resources increased 24% above the January 2013 technical report to 5.2 million ounces of contained Pd. Total reserves increased by 140,000 of contained Pd to 1.3 million ounces. This is an increase of 12% compared to the previous technical report.

The company also said it plans to continue investing in surface and underground exploration and conversion drilling. Its 2014 campaign is scheduled to begin at the end of March.

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TheStreet Ratings team rates NORTH AMERICAN PALLADIUM as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate NORTH AMERICAN PALLADIUM (PAL) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio of 1.07 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with this, the company manages to maintain a quick ratio of 0.22, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, NORTH AMERICAN PALLADIUM's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for NORTH AMERICAN PALLADIUM is currently extremely low, coming in at 10.51%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -29.67% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to $4.19 million or 88.67% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • NORTH AMERICAN PALLADIUM has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has suffered a declining pattern earnings per share over the past two years. During the past fiscal year, NORTH AMERICAN PALLADIUM reported poor results of -$0.27 versus -$0.07 in the prior year.

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