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NEWS RELEASE TRANSMITTED BY CANADIAN CORPORATE NEWS
FOR: NORTH AMERICAN PALLADIUM LTD
TSE SYMBOL: PDL
NASDAQ SYMBOL: PDLCF
JULY 30, 1997
North American Palladium Ltd. - Company Update
THUNDER BAY, ONTARIO--North American Palladium Ltd. ("NAP")
announced today that it has entered into an agreement with
Kaiser-Francis Oil Company ("KFOC"), one of its principal
shareholders and its primary creditor, to convert accrued but
unpaid interest and principal amount of debt aggregating Cdn. $50
million presently owed by NAP and Lac des Iles Mines Ltd., its
wholly owned subsidiary (collectively, the "Company") to KFOC into
Cdn. $50 million of new Series A Preferred Shares of NAP.
Completion of the transaction is scheduled to occur on September
24, 1997 and is conditional on the receipt of various regulatory
approvals, the approval of the NAP's Board of Directors and the
approval of NAP's shareholders. NAP has formed a committee of
directors, independent of KFOC, to review and report on the
proposed transaction. Subject to the Committee's and NAP's Board
deliberations, a meeting of NAP's common shareholders is
scheduled to be held on September 17, 1997 to consider the
proposed transaction and obtain the required minority shareholder
approvals in accordance with Ontario Securities Commission Policy
9.1. The record date for such meeting is August 12, 1997.
KFOC owns approximately 17.5 percent of the outstanding common
shares of NAP and has advanced approximately Cdn. $98 million
(including Cdn. $13 million of accrued and unpaid interest) to the
Company on a demand basis to fund the development of the Company's
Lac des Iles platinum/palladium mine including a recent major
capital expansion program which has been substantially completed.
During fiscal 1996, the Company had a loss for the year of
approximately Cdn. $28.7 million resulting in large part from
increased amortization charges in respect of deferred
expenditures, mining leases and capital leases made necessary by a
reduction in proven and probable ore reserve estimates based upon
independent assessment. As a result of this significant loss in
1996, NAP had a shareholders' deficiency of approximately Cdn.
$6.9 million as at December 31, 1996 and it no longer met the
capital and surplus requirements of NASDAQ. These circumstances
prompted NAP's management to review the Company's capital and
debt structure in order to maintain NAP's NASDAQ listing.
Management believes the improved capital structure resulting from
the debt reduction and issuance of the preferred shares is
adequate to permit the Company to complete its capital expansion
program and achieve profitable operations in 1999.
Under the terms of the proposed transaction, KFOC will convert all
of the accrued and unpaid interest owing to it (approximately Cdn
$13 million ) and additional principal amount of secured, demand
debt presently owed to it into 10 million Series A Preferred
Shares to be created by the Board of Directors of NAP as the first
series of NAP's authorized class of Special Shares specifically
for purposes of the proposed transaction. The Series A Preferred
Shares will be issued at $5 per share, bear a cumulative dividend,
be redeemable at the option of NAP at a redemption price of $5
(plus any accrued and unpaid dividends), be convertible into NAP
common shares at the option of the holder thereof and have a
preference on liquidation, dissolution or winding up of $5 per
share (plus any accrued and unpaid dividends). Cumulative
dividends will be payable on the Series A Preferred Shares at a
rate equivalent to the United States national prime lending rate
plus 2 percent on or before December 31, 2002, plus 4 percent
after December 31, 2002 and on or before December 31, 2005 and
plus 6 percent after December 31, 2005. The Series A Preferred
Shares will be non-voting unless and until NAP fails for any
period aggregating two years or more to pay cumulative dividends
on the Series A Preferred Shares in which event the Series A
Preferred Shares shall be entitled to vote on the basis of one
vote for each Series A Preferred Share outstanding until all
arrears of such dividends have been paid. Each Series A Preferred
Share will be convertible into NAP common shares at a ratio equal
to Cdn. $5 (plus any accrued and unpaid dividends) divided by the
closing price of NAP's common shares on July 30, 1997.
In light of this proposed recapitalization plan, the Company will
not be proceeding with the debt restructuring and note issuance
proposal presented to and approved by the shareholders at NAP's
recent annual and special meeting of shareholders held May 22,
1997. However, the Company is negotiating with KFOC to
restructure its demand debt which would remain outstanding after
implementation of the proposed recapitalization plan into term
debt and in the event that a mutually satisfactory debt
restructuring proposal is agreed upon, would propose to also
present same to its shareholders for approval at the September 17,
1997 special shareholder's meeting.
NAP's common shares will continue to be listed on the NASDAQ
SmallCap Market via an exception from NASDAQ's capital and surplus
requirement. While, as indicated above, NAP failed to meet this
requirement as of December 31, 1996, NAP has been granted a
temporary exception from this standard by NASDAQ, subject to NAP
meeting certain conditions related to the proposed
recapitalization plan including implementation of same by
September 19, 1997. The exception will expire on September 19,
1997. In the event that NAP is deemed to have met the terms of
the exception, it shall continue to be listed on the NASDAQ
Smallcap Market. NAP believes that it can meet these conditions,
however, there can be no assurance that it will do so. If at some
future date, NAP's common shares should cease to be listed on the
NASDAQ SmallCap Market, they may continue to be listed in the
United States in the OTC-Bulletin Board. Effective July 31, 1997
and for the duration of the exception, NAP's NASDAQ symbol will be
"PDLFC".
NAP's common shares continue to be listed on The Toronto Stock
Exchange under the symbol "PDL".
Joanne MacDougall
Corporate Secretary
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FOR FURTHER INFORMATION PLEASE CONTACT:
North American Palladium Ltd
Michael P. Amsden
President
(807) 345-4479
(807) 345-7796 (FAX)
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