(By Balaseshan) CIBC World Markets Inc. analyst Leon Esterhuizen downgraded North American Palladium Ltd. (TSE: PDL) (NYSEAMEX: PAL) to "Sector Performer" from "Sector Outperformer" and lowered price target to $1.70 from $2.40.
North American Palladium announced on Thursday that Jeffrey Swinoga had resigned as Vice President Finance and Chief Financial Officer. This follows the resignation of former Chief Executive Bill Biggar in early September, Esterhuizen noted. The CEO position remains vacant, with interviews currently taking place.
Another change in management suggests to the analyst that the risk of an operational disappointment at the company is mounting. As a result, he has adjusted model to account for this, forecasting lowering production and higher costs over forthcoming years.
Esterhuizen said PDL remains the most palladium dominated miner globally and as such should benefit from a rising metal price. However, while operational and management opaqueness continues to cloud the outlook, the stock is likely to maintain its loss of correlation with an improved spot palladium price.
The analyst said the price target is based on a price-to-cash flow ratio multiple of 10 times one-year forward, a discount to peers recognizing the increasing risks. As a result of his price target reduction, he reduced rating, as of December 14.
The brokerage widened its 2012 loss per share estimate to $0.06 from $0.04, while lowering its 2013 EPS estimate to $0.02 from $0.05.
PDL is trading up 0.77% at $1.31 on Monday, while PAL trades down 0.75% at $1.33.