North American Palladium Preliminary Economic Assessment Confirms Long Term Potential of Offset High Grade Zone

Market Wire, May, 2008

North American Palladium Ltd. (TSX: PDL) (TSX: PDL.WT) (AMEX: PAL) (AMEX: PAL.WS) today announced positive results from a preliminary economic assessment of its Offset High Grade Zone (OHGZ), at the Company's Lac des Iles Mine (LDI) north of Thunder Bay, Ontario. The study indicates the viability of extending the Company's underground mining operation to 2018.

Micon International Limited was engaged to examine the economic viability of several mining scenarios for the OHGZ. These included a continuation of the existing ramp system from the current underground mine, several shaft options and a conveying option. The study concludes that the deposit can be mined at a rate of 4,000 to 7,000 tonnes per day using a series of conveyors and access ramps at an initial capital cost of Cdn$37 million. The base case scenario yielded an internal rate of return of 29% before taxes and royalties, a net present value of US$31.8 million at a 10% discount rate, and a three-year payback period. The report is subject to confirmation by a definitive feasibility study including further delineation of the resources presently classified as inferred.

The Micon study proposes continuation of the longhole stoping mining method currently in use at the existing underground operation at LDI. The development scenario contemplates commencing production from the upper portion of the OHGZ by late 2010, which coincides with the resource depletion in the existing underground operation. Production from OHGZ will ramp up to 6,000 tpd by 2012. Using the conveying system to bring ore to surface is advantageous since it provides a great deal of flexibility in decision-making and with the economics of the project. It avoids the large upfront cost of a conventional shaft-hoist system and spreads the majority of capital expenditures throughout the life of the mine.

Mr. Jim Excell, President and CEO said: "The result from this preliminary economic assessment demonstrates that we could have another decade of underground mining at Lac des Iles. An advantage of this project is that we expect to fund development from 2011 onward from the positive cash flow the project will generate. In light of current favourable PGM market conditions, management is also assessing the economic viability of a southern extension of the open pit, which could prolong the mine life of the open pit by an additional two to three years."

Financial Analysis & Assumptions

Traditional Discounted Cash Flow (DCF) models were prepared to determine the Internal Rates of Return (IRR) and the Net Present Values (NPV) for different metal price assumptions on a pre-tax and pre-royalty basis. The results are summarized as follows:

- Production from the OHGZ ramps up to 6,000 tpd by 2012.

- A 6,000 tpd operation yields 250,000 oz palladium, 16,000 oz platinum, 17,000 oz gold, two million lbs nickel and 4 million lbs copper annually.

- Operating costs are estimated at Cdn$39.75 per tonne.

- Initial capital expenditure of Cdn$37 million; Cdn$188 million remaining capital expenditure funded out of cash flow for the remaining eight years of mine life.

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                        Metal Price Assumptions (US$)
                       Two Year Trailing Average(1,2)
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Palladium                                                          $356/ oz
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Platinum                                                      $   1,328/ oz
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Gold                                                               $697/ oz
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Nickel                                                        $  10.60 / lb
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Copper                                                           $3.15 / lb
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(1) Nickel based on third party estimates for 2009.
(2) On May 6, 2008 the spot prices in US$ were: Pd $425/oz, Pt $1940 and Au
    $880. LME prices on May 2, 2008 were Ni $12.52 and Cu $3.73.


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                             Sensitivity Analysis(1)
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                     Base Case         15%        25%       -15%        -25%
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Metal Prices
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 NPV @10%                $31.8   $  114.9   $  170.4     ($51.4)    ($106.9)
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 IRR                        29%        70%        93%        --          --
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Operating Cost    $39.75/tonne
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 NPV @10%                $31.8     ($16.5)    ($48.6)  $   80.0   $   112.1
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 IRR                        29%        --         --         54%         69%
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Capital Costs             $225
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 NPV @10%(1)             $31.8   $   12.5         --   $   51.0       $63.8
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 IRR                        29%        17%        10%        45%         57%
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(1) NPV expressed in US$ millions, at a Cdn$ to US$ exchange rate of 1:1.