North American Palladium (PDL.TO)

This is a hole in the ground, not a mine. They tried to make it a large mine, but it is a small one.

Extremely troublesome story in the Canadian mining space. Palladium is a good theme. Automobile catalysts, precious metal. Have a lot of things going for it. The problem with palladium is to find a producer that can produce at a predictable level. Having seen what the company has gone through and the hopes and the dreams that it has had in turning its operations around, he would not put any money in on the hope that it is going to happen. If you like palladium, the one easy way to do it is to just buy the palladium ETF (PPLT-N).

This industry does not earn its cost of capital so he does not own it.

Palladium is a commodity that is mostly used for catalysts for certain types of automobile engines. Prospects look very good with a global recovery in auto sales. He is quite bullish on palladium. There are not a lot of ways to play this metal except through this company. Company hasn’t executed very well in terms of the mining plan and costs and are in a little bit of a perpetual financial squeeze right now in terms of financing the next major expansion, which will bring the costs down. Risky investment at this stage.

This has been a horrible, horrible investment for a long period of time. They are constantly coming back to the market in terms of trying to raise money. It has been about 10 years of the mine having issues. Shareholder value has not been created.

There is a seasonality to platinum in January. (Market Call Tonight has Jon Vialoux coming on. He is a Seasonality expert and you might want to check with him.) Chart looks like it may have made a bottom. However, even though it is coming into its season, it doesn’t mean it is going to get its day. If it gets above $1, he would look for it to shoot up to $1.30 pretty quickly. MACD is turning up, which is positive. Relative Strength (RSI) is moving up and ideally you want to buy it at its lowest. Wait for it to get above $1 when more people would get interested.

Seasonal strength for palladium and for specifically North American palladium runs from about the middle of December, all the way through to the end of February. Average gains through that period is a whopping 20% but very erratic and only ahead about 58% of the time. A phenomenal trade. However, technically looking at the chart, there is not too much good to say. Showing lower lows and lower highs and is below its significant moving averages.

Loves platinum and palladium. Supply fundamentals are spectacular. Used in Catalytic convertors. China is ramping up car production, talking about increasing emissions standards. There are not many ways to play this. But PDL’s costs have been rather high and execution of their mine has not yielded profits for the average investor. If we get a spike in resource prices it could suddenly turn a profit.

Great investment. 4.5% yield. Scratch lottery tickets globally. Management team owns 75% of stock. Record quarter last quarter, expects record year. Half decent yield. Somewhat illiquid because of management ownership. He wants to meet with management before buying because no analyst owns it.

One of the few ways to play palladium. Palladium in general is on an upswing. Linked a lot to gold and other precious metals. Has been a lot of ETF buying into palladium, which is used a lot in catalytic converters for cars. Also, considered as a poor man’s platinum. Uptick in auto sales is driving the exposure into this. (He owns some of the bonds.)