Pedal to the (not-so-heavy) metal [palladium] – by Lisa Wright (Toronto Star – July 9, 2011)

Lisa Wright is a business reporter with the Toronto Star, which has the largest circulation in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion.

What does a junior Toronto mining company have in common with avant-garde fashion designer Vivienne Westwood? They both dig palladium.

The rare precious metal has always flown under the radar compared to its more glamorous cousins gold and platinum, but lately it’s a lot hotter. Palladium quietly became the best performing metal last year, nearly doubling in value amid a scorching hot resources market.

Yet it’s still just half the price of traditional trinket ingredients gold and platinum, which is helping to push the relatively unknown white metal into the mainstream.

The fact that it’s also eco-friendly – think emission-reducing catalytic converters in cars – prompted Westwood to launch her first-ever jewelry line. The oversized yet lightweight palladium baubles debuted this spring in an effort to offer more affordable designer bling to the masses.

“It’s the rarest of the precious metals, and there’s no real substitute for it” as there are for most other metals, says Bill Biggar, chief executive of North American Palladium Ltd. in Toronto.

He isn’t much for red carpets and runways but he is thankful the fashion world and the jewelry industry are taking a shine to the obscure resource that is his bread and butter.

His Toronto firm hosts the only mine in Canada whose primary metal is palladium, and it’s one of just two such mines in the world. (The other is run by Stillwater Mining Co. in Montana). Normally the metal is found among the six Platinum Group Metals (PGMs) or as a byproduct of nickel mining rather than as a stand-alone mine.

The Lac des Iles mine and mill is located about 85 kilometres northwest of Thunder Bay and has been cranking out palladium since 1993. (The company had to shut down the mine in the downturn of 2008 when prices slid along with many other struggling projects in the area, but it re-opened last year.)

The property consists of a depleted open pit, an operating underground mine and a large mill.

The company is now spending $270 million in a major expansion to their 30,000-acre land position, which Biggar notes is timely considering the increasing popularity of the metal and investor demand that is driving up the price and interest in palladium ETFs (Exchange Traded Funds).

“Everywhere we drill we find palladium and we’re pretty optimistic that we will find more ore bodies on this property,” says Biggar.

The miner has already identified three new mineralized areas in the vicinity of the main deposit: the cowboy zone, the outlaw zone and the sheriff zone, lightheartedly named after a company geologist nicknamed Cowboy.

“The deposit is one of a kind in the world. There’s nothing quite like it as our mineralization is broadly disseminated throughout the rock, unlike all the other PGM producers who follow the mineralization in narrow vein trends, which are harder to mine,” he says.

For instance, the largest production of palladium comes from South Africa and Russia, where supply continues to slide because the metal is getting more difficult to access in their ever-deepening underground mines.

Meanwhile North America accounts for about 11 per cent of the total global output of palladium and it’s growing. (South Africa is the world’s primary producer of platinum with palladium as a by-product whereas Russia produces palladium as a by-product of nickel.)

The Lac des Iles mine is a completely different operation today from its former life as a high-tonnage, low-grade open pit. Today it mines higher grade ore from underground. After restarting production in April 2010, the mine produced 95,000 ounces of palladium last year.

Total global mine production rose 3 per cent to 6.8 million ounces of palladium in 2010 and is projected to rise 5.9 per cent this year to 7.1 million ounces, says precious metals consultants CPM Group in their annual report released in June.

Demand for palladium rose 7 per cent to nearly 7.5 million ounces in 2010, reflecting increased demand from auto catalysts and electronics sectors. Palladium demand is projected to rise to a record 7.9 million ounces this year, up 5.2 per cent from 2010.

As a result, RBC Capital Markets forecasts an average price of $900 U.S. an ounce this year and $1,000 next year. Gold trades at $1,540 an ounce while platinum hovers just over $1,700.

“The palladium market is still seen as being in deficit and should thus still be expected to show strong price appreciation at some point over the course of the next year. This trigger point could well be reached if Chinese auto production growth starts accelerating again but will naturally be helped in the interim by Japanese auto producers ramping back up to full production towards the end of 2011 and beginning of 2012,” says RBC analyst Leon Esterhutzen.

For the rest of this article, please go to the Toronto Star website:–pedal-to-the-not-so-heavy-metal