How 2011 Buried North American Palladium

As 2011 comes to a close, it's a great time to look back at what happened to the stocks that interest you. By making sure you know the important things that a company accomplished -- as well as the setbacks it experienced -- you can make a better decision about whether it's a smart investment for your portfolio.

Today, let's take a look at North American Palladium (AMEX: PAL  ) . This small Canadian company stands out from the crowd as one of only two palladium miners on the North American continent. But after several years of strong gains for platinum-group metals, 2011 saw price declines -- and that hurt the stock's performance. Below, I'll take a closer look at the events that moved North American Palladium's shares this year.

Stats on North American Palladium

Year-to-Date Stock Return (65.4%)
Market Cap $391 million
Total Revenue, Trailing 12 Months $155 million
Net Loss, Trailing 12 Months ($3.5 million)
1-Year Revenue Growth 134.5%
CAPS Rating ****

Source: S&P Capital IQ.

Why did North American Palladium plunge this year?
North American Palladium is a small Canadian miner with two primary mine properties. Its Sleeping Giant mine in Quebec is a gold mine, but more unusual is the company's Lac des Iles mine, which produces palladium. Despite its lower price -- palladium currently trades between $600 and $700 per ounce -- palladium is a much rarer metal than gold and has significant commercial uses, such as in catalytic converters for auto production.

Moreover, there are relatively few palladium producers. Stillwater Mining (NYSE: SWC  ) has two platinum and palladium mines in Montana, while Anooraq Resources (NYSE: ANO  ) has headquarters in South Africa.

After several years of gains, palladium finally gave back ground in 2011, as one look at the bullion-tracking ETFS Physical Palladium ETF (NYSE: PALL  ) will reveal. Because of North American Palladium's fairly high cash production costs, profits took a big hit. Despite strength in the industry, automakers like Ford (NYSE: F  ) are reluctant to repeat mistakes they made the last time prices spiked upward.

Investors are undoubtedly scared of North American Palladium falling victim to the same trend that has seen rare-earth metal plays Molycorp (NYSE: MCP  ) and Rare Element Resources (AMEX: REE  ) post severe losses in 2011. But North American Palladium has both proven production and a healthy mainstream industrial demand for its products. What it needs to succeed is a better operational structure to work more efficiently and turn losses into profits.

North American Palladium has its flaws, but if you like miners, you won't want to miss our favorite. Read the Motley Fool's latest special report and find out the tiny gold stock digging up massive profits. It's free, but only available for a limited time.

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Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of and creating a synthetic long position in Ford. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


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