Trading Symbols TSX - PDL AMEX - PAL TORONTO, March 3 /PRNewswire-FirstCall/ -- North American Palladium Ltd. is pleased to announce that it has entered into an arranged private placement of convertible notes and common share purchase warrants. This offering consists of up to US$58.5 million aggregate principal amount of convertible notes (the "Notes") convertible into common shares of the Company at a premium of 13 percent to the market price (the "Conversion Price") on the date of closing (the "Closing Date"). The offering is to an institutional investor, and the Company's major shareholder, Kaiser Francis Oil Company ("KFOC"). Under the terms of the offering, the Company will issue US$35 million aggregate principal amount of Notes on the Closing Date with each investor acquiring one-half of the offered securities. The investors will have a right to acquire an additional US$10 million of the Notes on or before December 31, 2006, with each investor entitled to acquire one-half of the offered securities. If one investor does not acquire its entire allotment of the additional US$10 million in Notes, the other investor may purchase the balance. In addition, the Company, at its option, has the right to sell to KFOC up to US$13.5 million in additional Notes on or before June 30, 2006, in order to repay the then outstanding loan under the existing KFOC standby loan facility. The Company plans to use the proceeds from this offering to complete the underground development at its Lac des Iles mine, to advance the work on the Arctic Platinum Project in order to earn up to a 50% interest in the Gold Fields Limited properties (see press release dated October 18, 2005) and general corporate purposes. The Notes will be redeemed over an 18 month period commencing 12 months after the date of issuance. Investors will earn interest on the Notes at a rate of 6.5% per annum. The Notes will be redeemed at the issue price, plus accrued and unpaid interest to the date of payment, in nine equal bi-monthly (60 days) installments. The redemption amount and/or interest payments may be paid to the investor, at the investor's option, in any combination of cash and/or common shares. Common shares issued as payment for a redemption or interest payment will be issued at a 10 percent discount to the market price at the time such payment is due. Each time, after the 15 month anniversary of the date of issuance, that the weighted average trading price for any 25 consecutive trading day period is 150% or greater of the Conversion Price, the Company will have the right to force the investors to convert all or any of the outstanding principal amount of the Notes at the Conversion Price. Upon issuing the Notes to the investors, the Company shall issue warrants (the "Warrants") equal to 50% of the common shares issuable if such Notes were converted by the holders at the Conversion Price immediately following the Closing. The holder of the Warrants shall be entitled, for a period of four years following the date of issuance, to purchase one common share for each Warrant held at an exercise price equal to 125 percent of the market price. The Notes will contain customary covenants, including certain restrictions on the Company incurring debt or obligations for or involving the payment of money in excess of certain restricted amounts. The Notes and Warrants will contain full-ratchet anti-dilution protection, subject to certain restrictions pursuant to the rules of the TSX. Market price is the weighted average trading price for the five consecutive trading days immediately prior to the Closing Date. The maximum aggregate number of common shares issuable on conversion of the Notes, in satisfaction of a redemption or interest payment, and on exercise of the Warrants, shall not exceed 19.9% of the common shares currently issued and outstanding, unless the Company obtains the necessary approvals such that such restriction is no longer required. The completion of the transaction is subject to a number of conditions including, investors' due diligence, mutual agreement upon definitive documentation, no material adverse change affecting the Company prior to Closing, receipt of all necessary regulatory and third party consents and approvals, including the approval of the Toronto Stock Exchange and the AMEX. The Company anticipates the closing of this transaction will occur on or near March 15, 2006. ------------------------------------------------------------------------- North American Palladium's Lac des Iles Mine is Canada's only primary producer of platinum group metals and is one of the largest open pit bulk mineable palladium reserves in the world. The Company also earns substantial revenue from by-product nickel, platinum, gold and copper. In addition to operating Lac des Iles, the Company's mandate is to expand its production profile through an aggressive exploration campaign, designed to increase its exposure to base and precious metals. Palladium use in the auto industry continues to be an important component in controlling exhaust emissions as mandated by more stringent hydrocarbon emissions standards for cars, particularly in the United States, Europe and Japan. Palladium is also used in the dental, electronics, jewellery and chemical sectors. Forward-Looking Statements - Certain statements included in this news release are forward-looking statements which are made pursuant to the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. When used herein, words such as "expect", "plans", "anticipated", "will" and other similar expressions are intended to identify forward-looking statements. Such forward-looking statements involve inherent risks and uncertainties and are subject to factors, many of which are beyond our control that may cause actual results or performance to differ materially from those currently anticipated in such statements. See the Company's most recent Annual Information Form and Annual Report on Form 40-F on file with securities regulators for a comprehensive review of risk factors. The Company disclaims any obligation to update or revise any forward-looking statements whether as a result of new information, events or otherwise. Readers are cautioned not to put undue reliance on these forward-looking statements. DATASOURCE: North American Palladium Ltd. CONTACT: James D. Excell - President & CEO, Tel: (416) 360-2656, email: ; Ian MacNeily, Tel: (416) 360-2656, email:

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