North American Palladium Ltd (New) PALDF

Coverage starts with 14$ target!

[longbond]

I thought U/W have to wait 25 days but Nesbit starts with an outperform and a 14$ target. here is the summary: SUMMARY AND RECOMMENDATION: We are initiating coverage on North American Palladium with an Outperform rating and target price of $14 per share. In 1998, a change of management at North American Palladium led to a 50,000 m drilling program that increased resources from 1.3 to 5.2 million ounces of contained palladium. The resource increase provided the basis for a successful feasibility study that recommended a $210 million (US$140 million) expansion from 2,400 tpd to 15,000 tpd processing rates. The expansion is scheduled for commissioning during Q2/01 and should result in production growing to over 300,000 ounces annually and life-of-mine total cash costs of $180/oz. This success led to a re-capitalization and restructuring of the balance sheet, resulting in a company with an attractive forecast D/(D+E) of approximately 35% and a market capitalization of almost $500 million. The company remains 57% owned by Kaiser Francis Oil and Gas, which participated fully in the $220 million issue. The company has excellent exploration and reserve growth potential and we anticipate a decision to investigate the feasibility of a 30,000 tpd expansion soon after the commissioning of the 15,000 tpd plant. This should ultimately see North American Palladium grow to produce over 500,000 ounces of palladium annually. Even using our conservative $400/oz long-term palladium price assumptions, we forecast strong ($1.60 to $2.00 pershare) earnings and cash flow ($2.00 to $2.50 per share), a 2.5-year payback of the debt facility, and very robust net free cash flow.