Mr. Phil du Toit reports

NORTH AMERICAN PALLADIUM RELEASES A POSITIVE PRELIMINARY ECONOMIC ASSESSMENT FOR ITS LAC DES ILES MINE

North American Palladium Ltd. has released the positive results of the technical report for the Lac des Iles mine, Ontario, incorporating a preliminary economic assessment of the mine expansion plan.

North American Palladium commissioned the 2015 PEA in mid-2014 to evaluate the results of a continuing diamond drilling program and to update and rescope the economic potential of the large mineral resource at LDI. The change in the exchange rate between the Canadian and U.S. dollars and improved palladium prices have increased the potential for exploitation of the mineral resource that, as of February, 2015, consists of 71.5 million tonnes of measured and indicated resources at 1.98 grams per tonne palladium and 15 million tonnes of inferred resource at 2.7 grams per tonne palladium. Please refer to North American Palladium's Feb. 25, 2015, news release that provides additional details of the company's estimated mineral reserves and mineral resources.

                         MINERAL RESERVES AND RESOURCES

                                                                          Pd
                          Tonnes     Pd     Pt     Au    Ni    Cu  contained
Category                  (000s)  (g/t)  (g/t)  (g/t)   (%)   (%)  (000s oz)

Total proven reserves     16,259   1.76   0.16   0.13  0.07  0.04        918
Total probable reserves    4,108   3.61   0.26   0.25  0.10  0.09        477
                          ------   ----   ----   ----  ----  ----      -----
Total proven and probable
reserves                  20,367   2.13   0.18   0.16  0.08  0.05      1,395
Total measured resources  43,080   1.83   0.20   0.13  0.07  0.05      2,532
Total indicated
resources                 28,388   2.20   0.21   0.16  0.08  0.06      2,011
                          ------   ----   ----   ----  ----  ----      -----
Total measured and
indicated resources       71,468   1.98   0.20   0.14  0.07  0.06      4,543

Total reserves and
measured and indicated
resources                 91,835   2.01   0.20   0.14  0.07  0.05      5,938
Total inferred resources  15,039   2.67   0.20   0.17  0.08  0.07

Work on the 2015 PEA was carried out pursuant to the requirements of National Instrument 43-101 -- Standards of Disclosure for Mineral Projects, and was conducted by the independent engineering firm Hatch Ltd., under the direction of Jim Gallagher, PEng, chief operating officer of North American Palladium.

The work completed in the 2015 PEA supports the following conclusions:

• The base case is current operations with the addition of an open-pit expansion. The base case extends the life of mine to 2029 and results in an after-tax net present value of $593-million at a 5-per-cent discount rate.
• The base case scenario indicates the following:
  • The current operations contribute 23 million tonnes at an average grade of 2.1 grams per tonne palladium to the production plan and results in an after-tax NPV of $457-million at a 5-per-cent discount rate.
  • The open-pit expansion, with additional underground footwall material mined, requires project capital of $58.6-million, contributes 39 million tonnes at an average grade of 1.3 grams per tonne palladium to the production plan and results in an after-tax NPV of $136-million at a 5-per-cent discount rate, representing an after-tax internal rate of return of 30 per cent.
  • The base case consists of 62 million tonnes of mineralized material at an average grade of 1.6 grams per tonne palladium.
  • Using the base case economic assumptions, there is no negative cash flow throughout the mine life.

"The strong rate of return for the base case plan, a mine life of approximately 15 years and a NPV of almost $600-million is a very positive development for the company," said Phil du Toit, president and chief executive officer. "Given that nearly all of the mineral resources for the pit expansion project are measured or indicated, we will be able to move quickly to evaluate the base case at a prefeasibility level."

Opportunities to enhance the base case:

• A potential phase 2 shaft deepening project currently includes 10.9 million tonnes of 3.3 grams per tonne palladium mineralized material below the 1065 level.
• Project capital for phase 2 is estimated to be $242.2-million generating an after-tax internal rate of return of 7 per cent and a $22-million NPV at a 5-per-cent discount rate using the base case economic assumptions.
• These preliminary positive results indicate that further exploration and definition drilling is warranted as the addition of mineralized material will greatly improve phase 2 economics.

"We are encouraged by the opportunities to enhance the base case with the phase 2 expansion of the Lower Offset zone," added Mr. du Toit. "In parallel with our ongoing drilling program at depth, we will continue to optimize engineering for phase 2 to help ensure the best business case is developed as and when the resource is better defined."

"The exploration program for phase 2 is only partially complete and we already have a potential project with a positive rate of return," said Jim Gallagher, chief operating officer. "We continue to drill to expand and upgrade the resource below the 1065 level."

Economic evaluation

The economics for the LDI expansion options were evaluated through an after-tax discounted cash flow model. The open-pit and phase 2 expansion scenarios were evaluated independent of each other in order to assess the individual potential economic benefits. The key model assumptions and financial results, project returns, and cash flows are presented here.

Given the large lower-grade resource at the LDI site and the potential to convert this mineralized material into a life of mine plan of 15 years or greater, North American Palladium concluded that using long-term consensus pricing was appropriate. North American Palladium compiled a commodity price and exchange rate forecast from a variety of banks and market analysts.

         CONSENSUS PRICES USED IN THE BASE CASE AND PHASE 2 ANALYSIS

Price                    Unit        2016        2017        2018       2019+

Palladium            U.S.$/oz         901         935         948         855
Platinum             U.S.$/oz       1,440       1,543       1,600       1,611
Gold                 U.S.$/oz       1,265       1,253       1,246       1,275
Nickel               U.S.$/lb        9.31        9.53       10.11        8.87
Copper               U.S.$/lb        3.11        3.29        3.39        3.01
Exchange rate  Cdn$ per U.S.$        1.15        1.12        1.11        1.11

The strong palladium market is supported primarily by a robust global automotive industry that is anticipated to continue its growth profile for years to come. This strong market outlook supports the use of long-term consensus pricing in the economic evaluation of the base case and phase 2.

Financial results

                         SUMMARY OF FINANCIAL RESULTS 

                                                        Base case
LOM totals           Units     Current    Open-pit  (current plan   Phase 2
(2016 and beyond)                 plan   expansion  and open pit)

Production              kt      23,022      38,959         61,981    10,857
Pd (g/t)               g/t        2.11        1.28           1.59      3.27
Pd recovery              %       81.2%       75.9%          78.5%     84.6%
Pd recovered            oz   1,267,661   1,220,638      2,488,299   963,822
Pd payable              oz   1,147,233   1,104,677      2,251,911   872,259
Net smelter return      $M       1,398       1,467          2,865       981
Total opex              $M        (815)       (987)        (1,801)     (533)
EBITDA                  $M         584         480          1,064       448
Capex                   $M         (94)       (196)          (289)     (285)
Pretax cash flow        $M         545         284            830       164
Taxes                   $M         (24)        (36)           (60)      (45)
After-tax cash flow     $M         521         249            770       119
After-tax NPV at 5%     $M         457         136            593        22
After-tax IRR            %                     30%                       7%

Low risk relative to other PGM expansion projects

The execution risk for the development of the proposed base case mining plan is much lower than that of a greenfield project for a number of reasons, including:

• LDI is located in one of the world's most mining friendly jurisdictions near established regional infrastructure.
• The expansion is an extension of an existing mine that has been operating for more than two decades and has fully developed infrastructure in place.
• LDI has an existing shaft and an operating mill with excess capacity, known recoveries and a permitted tailings facility with long-term expansion capability.
• The operating team and senior management are experienced and have successfully managed projects of similar size and complexity in the past.
• The company has long-established and positive relations with the regional first nations communities.
• As in any mining project there are risks associated with geological interpretation and geo-mechanics. Since LDI is an operating mine, many of these risks are understood but will require further analysis at the next level of study.

Moving forward

Based on the 2015 PEA study, next steps for the company include:

• Commence a prefeasibility study on the base case, that includes the open-pit expansion and selective mining of the footwall zones;
• Investigate opportunities of accelerating certain of the higher-grade open-pit areas that exist within the shell of the open-pit expansion;
• Conduct exploration and definition drilling at depth to upgrade and expand the Offset zone resource to improve the business case for a phase 2 shaft deepening;
• Perform engineering optimization studies for phase 2.

The National Instrument 43-101 technical report for the Lac des Iles mine, Ontario, incorporating a preliminary economic assessment of the mine expansion plan, will be filed on SEDAR and on the company's website on or before March 31, 2015.

Technical information and qualified persons

The content of this news release has been reviewed and approved by Dave Peck, PGeo, the company's vice-president, exploration, an employee of North American Palladium. Robert Duinker, PEng, senior consultant at Hatch, has reviewed and approved the disclosure of the economic evaluation and cash flow estimates. Brian Young, PEng, senior mining consultant at Hatch, has reviewed and approved the disclosure of the life of mine plan and associated production data for the base case and phase 2 scenarios. Mr. Peck, Mr. Duinker and Mr. Young are qualified persons as defined in National Instrument 43-101.

Additional information can be found in North American Palladium's Form 40-F/annual information form on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities, available on the SEC website and SEDAR, respectively. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

A preliminary economic assessment is at a scoping level and is therefore preliminary in nature. It includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the conclusions in a PEA will be realized. All economic assessments are calculated at the Lac des Iles mine level and therefore do not include certain costs, including, but not limited to, corporate office, interest, financing and exploration expenses.

2015 PEA conference call and webcast details

Date:  Thursday, Feb. 26, 2015

Time:  10 a.m. ET

Live call:  1-866-229-4144 or 1-416-216-4169 (PIN: 8162691, followed by the pound sign)

Replay:  1-888-843-7419 or 1-630-652-3042 (PIN: 8162691, followed by the pound sign)

The conference call replay will be available for 90 days after the live event. An archived audio webcast of the call will also be posted to North American Palladium's website.

We seek Safe Harbor.