If you’ve ever been stuck in traffic behind a car without a catalytic converter, which debuted in 1975, you know the difference that stricter EPA emissions standards have made. Government agencies continue to rein in hydrocarbon and carbon monoxide pollutants in the U.S., Europe, and even China as it develops economically with an eye toward meeting western environmental standards.
The indispensable contribution of the catalytic converter in internal combustion engines comes only through the use of precious metals such as palladium and platinum mined by North American Palladium. The company’s Lac des Iles mine in northwestern Ontario, Canada, is one of only two palladium mines in North America (other supplies come from Russia and South Africa). The company is publicly traded on the TSX: PDL and the AMEX: PAL.
Palladium is a precious metal, like platinum, that is not only beautiful but also extraordinary in its industrial properties. It is strong, durable and doesn’t corrode, and has high conductivity and ductility combined with a high melting point. When used to coat parts in a catalytic converter, palladium has a remarkable cleansing effect, acting as a catalyst in the process that converts pollutants into clean water, nitrogen and carbon dioxide.
“When catalytic converters were first designed and built, it was recognized that the platinum group metals including palladium, when put upon a honeycomb of ceramic, could effectively break down some of the more harmful emissions from oil in engines,” explains President and CEO André J. Douchane. Specifically, carbon monoxide can be neutralized with either platinum or palladium. In addition, a precious metal called rhodium, a by-product of palladium mining, removes nitrogen compounds.
Although palladium is used in electronics, jewelery making and dentistry, about two-thirds of the world’s palladium goes into automotive catalytic converters. The stage is set for continued global demand for palladium and other precious metals as regulatory standards stiffen and we become more keenly aware of the negative health effects of air pollutants.
Metals of Honor
Now for the hard part: It takes about 20 pick-up trucks full of rock to unearth one ounce of palladium. North American Palladium expanded the large processing facility in 2000 after the significant ore deposit was found at Lac des Iles. The new mill can process in excess of 15,000 tons of rock per day using 190-ton trucks to mine the ore and a new crusher to supply the mill.
“We are in the process of expanding and developing an underground portion to our mining operations to be operated concurrently with the surface, open pit portion,” says Douchane. “We are also adding crushing capacity to our milling circuit, which we expect to lower our costs, and further increase our process capacity.”
Extracting palladium is performed in what’s known as a mining and mineral beneficiation process. Once the rock is mined, it must be concentrated through crushing and grinding into a very fine powder the consistency of talcum powder. The powdered rock is put through a series of hydraulic mechanical floatation cells, which stir and chemically treat the slurry mixture so that the rock falls to the bottom of the cell while the metals rise to the top on air bubbles to be collected in a concentrate. The concentrate is filtered, dried, then smelted and refined to separate the precious and base metals from each other. North American Palladium uses a refinery in Europe, which finishes the metals into either bars for jewelry and other uses in the precious metals markets or into the sponge-like consistency preferred by catalytic converter manufacturers.
Valuable by-products include platinum, gold, cobalt; and copper and nickel, which are in demand for various applications, particularly in China.
Last year, North American Palladium produced just under 290,000 ounces of palladium, about 24,000 ounces each of gold, and platinum. The metals are as volatile on the markets as they are rare, with palladium selling anywhere from $200 to well over $300 per ounce in 2004. Platinum sells for $800-plus per ounce.
In addition to stricter emissions standards in North America and Europe, several factors suggest significant demand for palladium in the short and long term.
“The fundamentals for palladium are good and we believe the market will continue to grow,” says Doug Bache, a corporate development executive. “It’s a relatively young market in terms of the application of palladium in catalytic converters and we are well positioned because of the recent expansion in our operations and how effective we are in producing our various metal products.”
Recent technological developments increase the demand for palladium, Bache adds. These include new technologies that will make use of palladium in diesel engine catalysts. In the past, the high sulfur content of diesel fuel contaminated palladium elements in converters, rendering the palladium useless as an oxidizer, he explains. “The new technologies, combined with relatively low amounts of sulfur in the latest generation of diesel fuels, will allow palladium to be used in catalysts for diesel engines. And because diesel engines are usually larger for commercial vehicles, there will be a greater proportion of palladium needed. That’s encouraging.”
Diesel engines are also widely used in passenger vehicles in Europe, which is a big market for the company. Another growing market is China.
“China is turning to the automobile as a key mode of transportation and this will mean more catalytic converters and more use of platinum and palladium in converters,” Bache says, noting China’s adoption of western standards for environmental compliance of combustion engines.
“We have a very attractive profile in terms of our metal production and we will continue to focus on this profile to satisfy the global need for these important metals,” he says.
Palladium also plays a role in fuel cell technology because the metal can hold large amounts of hydrogen. Platinum is already used in fuel cells.
“Both metals have quite a future in energy storage, along with clean air,” says Douchane. And it won’t hurt business that U.S. and European emissions standards will get even stricter in the near future with regulatory reforms already on the books.
Of course environmental protection begins at home and, in its production processes, North American Palladium is also a guardian of the environment. “We are in full compliance with all the Canadian regulations and any in the world,” Douchane stresses. “Yes, we do make a hole in the ground, but what we take out is a very innocuous sand that is not acid producing. We are friendly to the environment in our operations in addition to our ‘green’ metals contributing to a tremendous cleanup of the air due to those catalytic converters.”
The company also has a clear corporate outlook.
“We don’t necessarily manage quarter to quarter. We have a long-term view,” Douchane says. “We are a company that is trying to add value on several fronts. We continue to maximize our current mining asset by adding the new underground portion and the crusher, which will add real value for customers, shareholders and the communities in which we do business. We continue to explore for more palladium in and around our Ontario based operations. We continue to look throughout North America for additional opportunities.”
We could all breathe easier if more companies had that philosophy.