<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 40-F/A
                                (AMENDMENT NO. 1)

            [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE
                         SECURITIES EXCHANGE ACT OF 1934

           [X] ANNUAL REPORT PURSUANT TO SECTION 13(A) OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004       Commission File Number 1-15142

                            ------------------------

                          NORTH AMERICAN PALLADIUM LTD.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            CANADA                                             1099
(PROVINCE OR OTHER JURISDICTION                    (PRIMARY STANDARD INDUSTRIAL
OF INCORPORATION OR ORGANIZATION)                   CLASSIFICATION CODE NUMBER)

                                 NOT APPLICABLE
                                (I.R.S. EMPLOYER
                              IDENTIFICATION NO..)

                            130 ADELAIDE STREET WEST
                          SUITE 2116, TORONTO, ONTARIO
                                     M5H 3P5
                                 (416) 360-7590
   (ADDRESS AND TELEPHONE NUMBER OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)

                              CT CORPORATION SYSTEM
                                111 EIGHTH AVENUE
                               NEW YORK, NY 10011
                                 (212) 894-8940
            (NAME, ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER
        (INCLUDING AREA CODE) OF AGENT FOR SERVICE IN THE UNITED STATES)

        ----------------------------------------------------------------

 Securities registered or to be registered pursuant to Section 12(b) of the Act.

                                                 NAME OF EACH EXCHANGE
          TITLE OF EACH CLASS                    ON WHICH REGISTERED:
    --------------------------------        --------------------------------
      COMMON SHARES, NO PAR VALUE               AMERICAN STOCK EXCHANGE

Securities registered or to be registered pursuant to Section 12(g) of the Act.

                                      NONE

        Securities for which there is a reporting obligation pursuant to
                           Section 15(d) of the Act.

                                      NONE

        For annual reports, indicate by check mark the information filed with
this Form:

 [X] Annual information form          [X] Audited annual financial statements

        Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period covered by this
annual report.

                   THE REGISTRANT HAD 51,709,075 COMMON SHARES
                       OUTSTANDING AS AT DECEMBER 31, 2004

        Indicate by check mark whether the Registrant by filing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
(the "Exchange Act"). If "Yes" is marked, indicate the filing number assigned to
the registrant in connection with such Rule.

             Yes        82-                       No    X
                -------    -------                   -------

        Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.

             Yes   X                              No
                -------                             -------

<PAGE>

                                EXPLANATORY NOTE

North American Palladium Ltd. (the "Registrant") is filing this Amendment No. 1
to Registrant's Annual Report on Form 40-F (the "2004 40-F"), dated March 29,
2005, in order to supplement the information contained therein. The 2004 40-F
inadvertently omitted the auditors' report (the "Report") of Ernst & Young LLP
("E&Y") dated February 20, 2004 with respect to the consolidated financial
statements of the Registrant as at December 31, 2003 and for each of the years
in the two-year period then ended, included therein, and the consent (the
"Consent") of E&Y to include the Report. The Report and the Consent related
thereto are included in this Amendment No. 1 to the 2004 40-F. With the
exception of including the Report, there have been no changes to the Audited
Comparative Consolidated Financial Statements for the fiscal year ended December
31, 2004. Accordingly, all information contained in the 2004 40-F, including any
forward looking statement, is as of March 29, 2005 and has not been updated to
reflect events subsequent to such date.

<PAGE>

                    DOCUMENTS FILED UNDER COVER OF THIS FORM


Document No. 1:     Renewal Annual Information Form for the fiscal year ended
                    December 31, 2004, dated March 29, 2005.

Document No. 2:     Audited Comparative Consolidated Financial Statements for
                    the fiscal year ended December 31, 2004, prepared in
                    accordance with Canadian generally accepted accounting
                    principles, and reconciled to United States generally
                    accepted accounting principles in accordance with Item 18 of
                    Form 20-F, and the notes thereto.

Document No. 3:     Management's Discussion and Analysis of Operations and
                    Financial Position for the fiscal year ended December 31,
                    2004.

<PAGE>

                                                                  DOCUMENT NO. 1


                       PREVIOUSLY FILED ON MARCH 29, 2005

<PAGE>

                                                                  DOCUMENT NO. 2

<PAGE>
<TABLE>
<CAPTION>
<S>                                                                     <C>
MANAGEMENT'S RESPONSIBILITY                                             AUDITORS' REPORT TO
FOR FINANCIAL STATEMENTS                                                THE SHAREHOLDERS OF
                                                                        NORTH AMERICAN PALLADIUM LTD.



        The accompanying consolidated financial statements
have been prepared by management in accordance with Canadian                    We have audited the consolidated balance sheet of
generally accepted accounting principles. Financial                     North American Palladium Ltd. as at December 31, 2004 and
statements are not precise since they include certain                   the consolidated statements of earnings (loss) and deficit
amounts based on estimates and judgments. When alternative              and cash flows for the year then ended. These financial
methods exist, management has chosen those it deems most                statements are the responsibility of the Company's
appropriate in the circumstances in order to ensure that the            management. Our responsibility is to express an opinion on
consolidated financial statements are presented fairly, in              these financial statements based on our audit.
all material respects, in accordance with Canadian generally
accepted accounting principles. The financial information                       We conducted our audit in accordance with Canadian
presented elsewhere in the annual report is consistent with             generally accepted auditing standards. Those standards
that in the consolidated financial statements.                          require that we plan and perform an audit to obtain
                                                                        reasonable assurance whether the financial statements are
        The Company maintains adequate systems of internal              free of material misstatement. An audit includes examining,
accounting and administrative controls. Such systems are                on a test basis, evidence supporting the amounts and
designed to provide reasonable assurance that transactions              disclosures in the financial statements. An audit also
are properly authorized and recorded, the Company's assets              includes assessing the accounting principles used and
are appropriately accounted for and adequately safeguarded              significant estimates made by management, as well as
and that the financial information is relevant and reliable.            evaluating the overall financial statement presentation.

        The Board of Directors of the Company is responsible                    In our opinion, these consolidated financial
for ensuring that management fulfills its responsibilities              statements present fairly, in all material respects, the
for financial reporting, and is ultimately responsible for              financial position of the Company as at December 31, 2004
reviewing and approving the consolidated financial                      and the results of its operations and its cash flows for the
statements and the accompanying management's discussion and             year then ended in accordance with Canadian generally
analysis. The Board of Directors carries out this                       accepted accounting principles.
responsibility principally through its Audit Committee.
                                                                                The consolidated financial statements as at December
        The Audit Committee is appointed by the Board of                31, 2003 and for the two years ended December 31, 2003 were
Directors and all of its members are non-management                     audited by another firm of chartered accountants, who
directors. The Audit Committee meets periodically with                  expressed an opinion without reservation on those statements
management and the external auditors to discuss internal                in their auditors' report dated February 20, 2004.
controls, auditing matters and financial reporting issues,
and to satisfy itself that each party is properly
discharging its responsibilities. The Audit Committee also                      /s/ KPMG LLP
reviews the consolidated financial statements, management's
discussion and analysis, the external auditors' report,                         Chartered Accountants
examines the fees and expenses for audit services, and
considers the engagement or reappointment of the external                       Toronto, Canada,
auditors. The Audit Committee reports its findings to the                       February 21, 2005
Board of Directors for its consideration when approving the
consolidated financial statements for issuance to the
shareholders. KPMG LLP, the external auditors, have full and
free access to the Audit Committee.

        Toronto, Canada
        February 21, 2005


        /s/ ANDRE J. DOUCHANE        /s/ GEORGE D. FAUGHT

        ANDRE J. DOUCHANE            GEORGE D. FAUGHT
        President and CEO            Vice President Finance,
                                     and CFO


30                                  Continued FOCUS on Operations, Growth and Financial Position
</TABLE>

<PAGE>



Auditors' Report

TO THE SHAREHOLDERS OF NORTH AMERICAN PALLADIUM LTD.

We have audited the consolidated balance sheet of North American Palladium Ltd.
as at December 31, 2003 and the consolidated statements of earnings and deficit
and cash flows for each of the years in the two-year period ended December 31,
2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 2003 and the
results of its operations and its cash flows for each of the years in the
two-year period ended December 31, 2003 in accordance with Canadian generally
accepted accounting principles.


/s/ Ernst & Young LLP


Chartered Accountants

Toronto, Canada,
February 20, 2004

<PAGE>
<TABLE>
<CAPTION>
<S>                                                                     <C>
------------------------------------------------------------------------------------------------------------------------------------
North American Palladium Ltd.
CONSOLIDATED BALANCE SHEETS
(CANADIAN FUNDS IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------------------------------------------------------------


                                                                                                              December 31
                                                                                                     2004                      2003
------------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Current Assets
Cash and cash equivalents                                                                       $  65,755                 $  11,950
Restricted cash equivalents                                                                            --                     1,813
Concentrate awaiting settlement, net - NOTE 3                                                      68,259                    94,610
Inventories - NOTE 4                                                                                8,954                     9,141
Crushed and broken ore stockpiles                                                                   9,256                     6,251
Accounts receivable and other assets                                                                1,615                     1,387
Future tax asset - NOTE 16                                                                           --                          84
                                                                                                  153,839                   125,236
Mining interests, net - NOTE 5                                                                    136,009                   247,116
Mine restoration deposit - NOTE 7                                                                   5,973                     4,733
Crushed and broken ore stockpiles                                                                   1,379                     5,983
Future tax asset - NOTE 16                                                                             --                     9,334
Deferred financing costs - NOTE 6                                                                     697                     1,290
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                $ 297,897                 $ 393,692
------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities                                                        $  20,231                 $  16,041
Taxes payable                                                                                         521                     1,311
Future tax liability - NOTE 16                                                                         --                       216
Current portion of obligations under capital leases - NOTE 8                                        1,481                     1,070
Current portion of long-term debt - NOTE 9                                                          6,815                    34,538
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   29,048                    53,176
Mine restoration obligation                                                                         7,592                     7,300
Obligations under capital leases - NOTE 8                                                           3,182                     1,015
Long-term debt - NOTE 9                                                                            24,851                     7,272
Kaiser-Francis credit facility - NOTE 10                                                           13,842                    14,866
Future mining tax liability - NOTE 16                                                               1,549                    10,108
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   80,064                    93,737
SHAREHOLDERS' EQUITY
Capital stock - NOTE 12                                                                           322,904                   313,489
Contributed surplus                                                                                   573                        --
Deficit                                                                                          (105,644)                  (13,534)
------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                                        217,833                   299,955
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                $ 297,897                 $ 393,692
------------------------------------------------------------------------------------------------------------------------------------
Commitments - NOTE 13
Contingencies - NOTE 15
See accompanying notes to the consolidated financial statements.

On Behalf of the Board:


/s/ MICHAEL P. AMSDEN                   /s/ GREG VAN STAVEREN

MICHAEL P. AMSDEN                       GREG VAN STAVEREN
Director                                Director


North American Palladium Ltd.                            2004 Annual Report                                                       31
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
<S>                                                                     <C>
------------------------------------------------------------------------------------------------------------------------------------
North American Palladium Ltd.
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND DEFICIT
(CANADIAN FUNDS IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                              Year ended December 31
                                                                               2004                    2003                    2002
------------------------------------------------------------------------------------------------------------------------------------
REVENUE FROM METAL SALES - NOTE 14                                     $    185,204            $    192,141            $    176,773
------------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Production costs, excluding amortization and
  asset retirement costs                                                    102,936                 103,654                 100,599
Smelter treatment, refining and freight costs                                23,602                  19,048                  16,909
Insurance recovery                                                           (7,148)                   --                      --
Amortization - NOTE 5(B)                                                     36,710                  28,590                  20,190
Administrative                                                                5,557                   3,788                   4,212
Exploration expense                                                           2,479                   1,942                     850
Loss on disposal of capital assets                                              277                     788                      99
Asset retirement costs                                                          905                     921                     587
Write-down of mining interests - NOTE 5(C)                                  108,000                   2,315                    --
------------------------------------------------------------------------------------------------------------------------------------
Total operating expenses                                                    273,318                 161,046                 143,446
------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM MINING OPERATIONS                                        (88,114)                 31,095                  33,327
------------------------------------------------------------------------------------------------------------------------------------
Other income (expenses)
Interest on long-term debt - NOTES 9 AND 10                                  (1,756)                 (3,158)                 (5,405)
Write-off of deferred financing costs                                          (788)                   --                      --
Foreign exchange gain (loss)                                                   (340)                 18,138                     792
Interest income                                                                 494                     474                     663
Derivative income                                                               213                    --                      --
Interest expense                                                                (29)                    (17)                   (433)
------------------------------------------------------------------------------------------------------------------------------------
Total other income (expenses)                                                (2,206)                 15,437                  (4,383)
------------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES                                           (90,320)                 46,532                  28,944
Provision for income taxes - NOTE 16                                          1,790                   8,154                  13,862
------------------------------------------------------------------------------------------------------------------------------------

NET INCOME (LOSS) FOR THE YEAR                                              (92,110)                 38,378                  15,082

Deficit, beginning of year                                                  (13,534)                (51,912)                (66,994)
------------------------------------------------------------------------------------------------------------------------------------
Deficit, end of year                                                   $   (105,644)           $    (13,534)           $    (51,912)
------------------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share
  Basic                                                                $      (1.79)           $       0.76            $       0.30
------------------------------------------------------------------------------------------------------------------------------------
  Diluted - NOTE 12(B)                                                 $      (1.79)           $       0.75            $       0.30
------------------------------------------------------------------------------------------------------------------------------------
Weighted-average number of shares outstanding - basic                    51,379,542              50,763,566              50,544,634
------------------------------------------------------------------------------------------------------------------------------------
Weighted-average number of shares outstanding - diluted
  - NOTE 12(B)                                                           51,379,542              50,832,904              50,593,508
------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.


32                                  Continued FOCUS on Operations, Growth and Financial Position
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
<S>                                                                     <C>
------------------------------------------------------------------------------------------------------------------------------------
North American Palladium Ltd.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CANADIAN FUNDS IN THOUSANDS OF DOLLARS)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                               Year ended December 31
                                                                                2004                   2003                    2002
------------------------------------------------------------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
OPERATIONS
Net income (loss) for the year                                            $ (92,110)              $  38,378               $  15,082
Operating items not involving cash
  Future income tax expense - NOTE 16                                           643                   7,392                  13,046
  Amortization                                                               36,710                  28,590                  20,190
  Accrued interest on mine closure deposit                                      (40)                    (63)                    (38)
  Write-down of mining interests                                            108,000                   2,315                      --
  Unrealized foreign exchange gain                                           (3,687)                (18,519)                 (1,494)
  Loss on disposal of capital assets                                            277                     788                      99
  Provision for asset retirement costs                                          905                     921                     587
  Write-off of deferred financing costs                                         788                      --                      --
  Stock-based compensation                                                      573                      --                      --
------------------------------------------------------------------------------------------------------------------------------------
                                                                             52,059                  59,802                  47,472

Changes in non-cash working capital - NOTE 17(A)                             29,731                  (5,235)                 (5,369)
------------------------------------------------------------------------------------------------------------------------------------
                                                                             81,790                  54,567                  42,103
------------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Repayment of long-term debt                                                 (44,290)                (45,134)                (33,233)
Increase in long-term debt                                                   36,809                      --                      --
Issuance of common shares                                                     9,415                   1,506                   1,199
Mine restoration deposit                                                     (1,200)                 (1,200)                 (1,200)
Repayment of obligations under capital leases                                (1,751)                 (1,046)                 (1,419)
Deferred financing costs                                                       (504)                     --                      --
Increase in Kaiser-Francis credit facility                                       --                      --                  10,372
------------------------------------------------------------------------------------------------------------------------------------
                                                                             (1,521)                (45,874)                (24,281)
------------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Additions to mining interests                                               (28,728)                (11,707)                 (8,446)
Proceeds on disposal of mining interests                                        451                     114                     513
Restricted cash equivalents                                                   1,813                   3,314                    (128)
------------------------------------------------------------------------------------------------------------------------------------
                                                                            (26,464)                 (8,279)                 (8,061)
------------------------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents                                        53,805                     414                   9,761
Cash and cash equivalents, beginning of year                                 11,950                  11,536                   1,775
------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                    $  65,755               $  11,950               $  11,536
------------------------------------------------------------------------------------------------------------------------------------

Supplementary information - NOTE 17(B) AND (C)

See accompanying notes to the consolidated financial statements.


North American Palladium Ltd.                            2004 Annual Report                                                       33
</TABLE>

<PAGE>

--------------------------------------------------------------------------------
North American Palladium Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years ended December 31, 2004, 2003 and 2002
(CANADIAN FUNDS IN THOUSANDS OF DOLLARS)
--------------------------------------------------------------------------------




1.      NATURE OF OPERATIONS AND BASIS OF PRESENTATION

        North American Palladium Ltd. ("NAP" or "the Company") is a Canadian
company in the business of exploring and mining Platinum Group Metals ("PGMs")
and certain base and precious metals. Its principal asset is the Lac des Iles
mine located in the Thunder Bay District in Ontario. The Company operates in one
geographical area, Canada, and in one operating segment, mining.

        The Company's financial position and operating results are directly
affected by the market price of the PGMs in relation to the Company's production
costs. The prices of PGMs (palladium, platinum) and by-product metals (gold,
copper and nickel) fluctuate widely and are affected by numerous factors beyond
the Company's control. The Company is under long-term contracts with two
smelting firms for the sale of its concentrates. During 2000, the Company
entered into a long-term palladium sales agreement with a major automotive
manufacturer for the sale of all of its palladium production for deliveries of
metal up to June 30, 2005 (NOTE 13(A)). Commencing with the first quarter of
2005, palladium production which will be available for delivery after June 30,
2005 will not be subject to the palladium sales agreement.


2.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        These consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles and, except as discussed
in note 18, conform in all material respects with United States generally
accepted accounting principles. The more significant accounting policies are
summarized as follows:

        BASIS OF CONSOLIDATION

        These consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary, Lac des Iles Mines Ltd. ("LDI"). All
intercompany balances and tranactions have been eliminated.

        REVENUE AND CONCENTRATE AWAITING SETTLEMENT

        Revenue from the sale of palladium and by-product metals is recognized
net of royalties upon the delivery of concentrate to the smelter, which is when
title transfers and the rights and obligations of ownership pass. The Company's
metals are sold under contracts that provide for final prices that are
determined by quoted market prices in a period subsequent to the date of sale.
Variations from the provisionally priced sales are recognized as revenue
adjustments as they occur until the price is finalized. The effect of hedging
instruments is also included in revenue. Concentrate awaiting settlement at the
smelter is net of estimated treatment and refining costs.

        Although the Company sold its metals during 2004 to a limited number of
customers, the Company is not economically dependent upon them as there are
other markets throughout the world for the Company's metals.

        DERIVATIVE FINANCIAL INSTRUMENTS

        The Company enters into forward commodity sales contracts from time to
time to hedge the effect of changes in the prices of metals it produces on the
Company's revenues (NOTES 13(A), (C), (D) (E) AND (F)). Gains and losses on
derivative financial instruments used to mitigate metal price risk are
recognized in revenue from metal sales (NOTE 14) over the term of the hedging
contract.

        From time to time the Company enters into foreign exchange forward sales
contracts to manage the effect of fluctuations in the value of committed US
dollar denominated revenues. For those forward exchange contracts designated by
the Company as hedges, the related revenue is recorded at the forward contract
rate. Those foreign exchange forward sales contracts not designated by the
Company as hedges are marked-to-market as at the balance sheet date and the
resultant gains or losses are included in earnings for the period. The fair
value of the Company's derivative financial instruments is determined based on
forward prices supplied by knowledgeable, independent third parties.

        The Company used electricity swap contracts to hedge the effects of
price fluctuations in its electricity purchase requirements in Ontario. The net
swap settlements are recognized in the same period as the hedge transaction.

        The Company does not hold financial instruments or derivative financial
instruments for trading purposes. Cash flows arising in respect of hedging
transactions are recognized under cash flows from operating activities.

        The Company does not consider the credit risk associated with its
financial instruments to be significant. Foreign currency contracts and
commodity hedge contracts are maintained with high-quality counter-parties, and
the Company does not anticipate that any counter-party will fail to meet its
obligations.


34        Continued FOCUS on Operations, Growth and Financial Position

<PAGE>

        CONCENTRATE, CRUSHED AND BROKEN ORE STOCKPILES AND SUPPLIES INVENTORIES

        Concentrate and crushed and broken ore stockpiles are valued at the
lower of average production cost and net realizable value. Average production
cost does not include an allocation of the amortization of production related
assets. Crushed and broken ore stockpiles represent course ore that has been
extracted from the mine and is available for further processing. Stockpile
tonnages are verified by periodic surveys. The amount of stockpiled ore that is
not expected to be processed within one year is shown as a long-term asset.
Supplies inventory is valued at the lower of average direct acquisition cost and
replacement cost.

        MINING INTERESTS

        Plant and equipment are recorded at cost with amortization generally
provided either on the unit-of-production method over the proven and probable
reserves to which they relate or on a straight-line method over their estimated
useful lives ranging from three to seven years. The Company capitalizes interest
on major projects where direct indebtedness has occurred.

        The Company leases certain equipment under capital leases. These leases
are capitalized based on the lower of fair market value and the present value of
future minimum lease payments. The corresponding liabilities are recorded as
obligations under capital leases. This equipment is being amortized on the same
basis as described above.

        Mining leases and claims and royalty interests are recorded at cost and
are amortized on the unit-of-production method over the proven and probable
reserves.

        Exploration costs relating to properties are charged to earnings in the
year in which they are incurred. When it is determined that a mining property
can be economically developed as a result of established proven and probable
reserves, future development and exploration expenditures are capitalized.
Determination as to reserve potential is based on the results of feasibility
studies, which indicate whether production from a property is economically
feasible. Initial feasibility studies are optimized once drilling has confirmed
the shape, grades and continuity of the mineralization. Upon commencement of the
commercial production of a development project these costs are amortized using
the unit-of-production method over the proven and probable reserves. Deferred
expenditures, net of salvage values, relating to a property that is abandoned or
considered uneconomic for the foreseeable future, are written off.

        Each year, the Company reviews mining plans for the remaining life of
each property. Significant changes in the mine plan can occur as a result of
mining experience, new discoveries, changes in mining methods and rates, process
changes, investments in new equipment and technology and other factors. Based on
year-end ore reserves and the current mine plan, the Company reviews annually
its accounting estimates and makes adjustments accordingly.

        The Company assesses long-lived assets for recoverability whenever
indicators of impairment exist. When the carrying value of a long-lived asset is
less than its net recoverable value as determined on an undiscounted basis, an
impairment loss is recognized to the extent that its fair value, measured as the
discounted cash flows over the life of the asset is less than the carrying
value. Future cash flows are estimated based on quantities of recoverable
minerals, expected palladium and other commodity prices and expected foreign
exchange rates (considering current, historical and expected future prices and
foreign exchange rates and related factors), production levels and cash costs of
production and capital and reclamation expenditures, all based on detailed
life-of-mine plans and projections. The term "recoverable minerals" refers to
the estimated amount of palladium and other commodities that will be obtained
from proven and probable reserves after taking into account losses during
mining, ore processing and concentrate treatment. Assumptions underlying future
cash flow estimates are subject to risk and uncertainty. Any differences between
significant assumptions and market conditions such as metal prices, exchange
rates, recoverable metal, and/or the Company's operating performance could have
a material effect on the Company's ability to recover the carrying amounts of
its long-lived assets resulting in possible additional impairment changes (NOTE
5(C)).

        ASSET RETIREMENT OBLIGATIONS

        Asset retirement obligations are recognized when incurred and recorded
as liabilities at fair value. The amount of the liability is subject to
re-measurement at each reporting period. The liability is accreted over time
through periodic charges to earnings. In addition, the asset retirement
obligation is capitalized as part of mining interests and amortized over the
estimated life of the mine. Total undiscounted cash flows required to settle the
obligations are estimated to be approximately $7.8 million, the majority of
which is to be paid at the end of the mine life, which is currently expected to
end in 2010. A credit adjusted risk-free rate of 5% has been utilized to
determine the obligation recorded on the balance sheet. The estimated asset
retirement obligation may change materially based on future changes in
operations, costs of reclamation and closure activities, and regulatory
requirements.


North American Palladium Ltd.  2004 Annual Report                             35

<PAGE>

        The following is a reconciliation of the changes in the asset retirement
obligation during the year:

                                                        2004         2003
        -----------------------------------------------------------------
        Balance, beginning of the year             $   7,300    $   7,019
        Accretion expense                                292          281
        -----------------------------------------------------------------
        Balance at the end of year                 $   7,592    $   7,300
        -----------------------------------------------------------------

        STOCK-BASED COMPENSATION PLAN

        The Company has a stock-based compensation plan which is described in
note 12(a). Effective January 1, 2003, the Company changed its method of
accounting for stock options from the intrinsic value method to one that
recognizes as an expense the cost of stock-based compensation based on the
estimated fair value of new stock options granted to employees and directors.
The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option pricing model. For options granted from January
1, 2002 to December 31, 2002, the Company elected to not recognize compensation
expense when stock options were issued to employees and directors. Any
consideration paid by employees and directors on exercise of stock options or
purchase of stock is credited to share capital.

        TRANSLATION OF FOREIGN CURRENCY

        Transactions recorded in United States dollars have been translated into
Canadian dollars as follows:

        1.      Monetary items at the rate prevailing at the consolidated
                balance sheet dates;
        2.      Non-monetary items at the historical exchange rate; and
        3.      Revenue and expenses at the actual rate in effect during the
                applicable accounting period.

        All resulting foreign exchange gains and losses are recorded in the
consolidated statements of earnings and deficit.

        INCOME TAXES

        The Company follows the asset and liability method of tax allocation for
accounting for income taxes. Under the asset and liability method of tax
allocation, future tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the substantively enacted tax rates and laws
that will be in effect when the differences are expected to reverse. The effect
on future tax liabilities and assets of a change in tax rates is recognized in
income in the period that the change occurs.

        CASH AND CASH EQUIVALENTS/RESTRICTED CASH EQUIVALENTS

        Cash and cash equivalents include cash on account, demand deposits and
short-term investments with original maturities of three months or less and are
stated at cost.

        Short-term investments with maturities of three months or less that are
subject to security arrangements are included in restricted cash equivalents.

        DEFERRED FINANCING COSTS

        Deferred financing costs represents the costs of negotiating and
securing the Company's long-term debt facilities and share issue costs in
connection with the filing of a shelf prospectus. The amortization of the costs
of securing the long-term debt facilities is included in amortization expense on
a straight-line basis over the term of the debt facility. The share issue costs
will be offset against share proceeds at the time an equity financing is
completed and if an equity financing is not completed before the expiration of
the shelf prospectus, the share issue costs will be written off.

        FAIR VALUE OF FINANCIAL INSTRUMENTS

        The carrying amounts of all financial instruments on the balance sheet
approximate fair value due to their short-term maturities or variable interest
rates.

        USE OF ESTIMATES

        The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and that also affect the reported amounts of revenues and expenses
during the reported year. Actual results could differ from those estimates.


36        Continued FOCUS on Operations, Growth and Financial Position

<PAGE>

3.      CONCENTRATE AWAITING SETTLEMENT

        Concentrate awaiting settlement is comprised of:

                                                          2004          2003
        --------------------------------------------------------------------
        Concentrate awaiting settlement, gross      $   76,491    $  104,880
        Refining and smelter treatment charges          (8,232)      (10,270)
        --------------------------------------------------------------------
        Concentrate awaiting settlement, net        $   68,259    $   94,610
        --------------------------------------------------------------------

        The gross value of concentrate awaiting settlement represents the value
of all PGMs and base metals from production shipped to and received by the
third-party smelters between June and December 2004, including 114,186 ounces of
palladium (2003 - between June and December 2003, including 147,570 ounces of
palladium).

        All of the concentrate awaiting settlement is from two domestic
customers at December 31, 2004 (2003 - two domestic customers). No reserves for
doubtful accounts have been established. In the opinion of management, full
realization will occur on all such receivables.

4.      INVENTORIES

        Inventories consist of the following:

                                                          2004          2003
        --------------------------------------------------------------------
        Concentrate                                 $      587    $    1,669
        Supplies                                         8,367         7,472
        --------------------------------------------------------------------
                                                    $    8,954    $    9,141
        --------------------------------------------------------------------

5.      MINING INTERESTS

        (A)     Mining interests are comprised of the following:

                                                          2004          2003
        --------------------------------------------------------------------

        Plant and equipment, at cost                $  345,588    $  322,966
        Underground mine development, at cost            6,920             -
        Accumulated amortization                       140,413       108,972
        --------------------------------------------------------------------
                                                       212,065       213,994
        --------------------------------------------------------------------
        Equipment under capital lease, at cost           6,346         3,758
        Accumulated amortization                           859         1,056
        --------------------------------------------------------------------
                                                         5,487         2,702
        --------------------------------------------------------------------
        Mining leases and claims, royalty interest,
          exploration and development, at cost          82,537        82,353
        Accumulated amortization                        56,080        51,933
        --------------------------------------------------------------------
                                                        26,457        30,420
        --------------------------------------------------------------------
        Mining interests before impairment charge      244,009       247,116
        Impairment charge                              108,000             -
        --------------------------------------------------------------------
        Mining interests, net                       $  136,009    $  247,116
        --------------------------------------------------------------------


North American Palladium Ltd.  2004 Annual Report                             37

<PAGE>

        (B)     Amortization expense is comprised of:

<TABLE>
<CAPTION>
                                                              2004         2003        2002
        -----------------------------------------------------------------------------------
<S>                                                      <C>          <C>         <C>
        Capital assets (including plant and equipment,
          and equipment under capital lease)             $  32,149    $  24,746   $  17,505
        Mining leases and claims, royalty interest,
          exploration and development costs                  4,147        3,054       1,895
        Deferred financing costs                               414          790         790
        -----------------------------------------------------------------------------------
                                                         $  36,710    $  28,590   $  20,190
        -----------------------------------------------------------------------------------
</TABLE>

        (C)     During the fourth quarter of 2004 the Company performed an
annual impairment test which resulted in a non-cash charge of $108,000 to
write-down the carrying value of mining interests. An assessment of impairment
was required as a result of changes in certain key assumptions which were
affected by a continuation of low palladium prices.

        In 2003, the Company recorded a write-down of $2,315 pertaining to the
retirement of a damaged primary crusher.

6.      DEFERRED FINANCING COSTS

                                                          2004          2003
        --------------------------------------------------------------------
        Financing costs                              $     716     $   3,265
        Accumulated amortization                            19         1,975
        --------------------------------------------------------------------
                                                     $     697     $   1,290
        --------------------------------------------------------------------

7.      MINE RESTORATION PLAN

        The Company, in conjunction with the Ontario Ministry of Northern
Development and Mines (the "Ministry"), has established a trust fund (the
"Fund") pursuant to the Company's mine closure plan for eventual clean-up and
restoration of the mine site. The mine closure plan calls for a total amount of
$7,802 to be accumulated in the Fund.

        Commencing in February 2001, the Fund, controlled by the Ministry,
started to accumulate through monthly deposits of $100. At December 31, 2004,
the Company had $5,973 (2003 - $4,733) on deposit with the Ministry including
accrued interest of $243. The funds on deposit bear interest at current
short-term deposit rates and will be returned to the Company once the mine
closure is completed.

8.      LEASE OBLIGATIONS

        The following is a schedule of future minimum lease payments under
capital leases together with the present value of the net minimum lease
payments:

<TABLE>
<CAPTION>
<S>                                                            <C>          <C>
                                                                    2004         2003
        -----------------------------------------------------------------------------
        2004                                                   $       -    $   1,098
        2005                                                       1,632          620
        2006                                                       1,223          257
        2007                                                         951          171
        2008                                                         763            -
        2009                                                         452            -
        -----------------------------------------------------------------------------
        Total minimum lease payments                               5,021        2,146
        Amounts representing interest rates from 3.5% - 8.3%         358           61
        -----------------------------------------------------------------------------
        Present value of minimum lease payments                $   4,663    $   2,085
        Less current portion                                   $   1,481    $   1,070
        -----------------------------------------------------------------------------
        Long-term liabilities                                  $   3,182    $   1,015
        -----------------------------------------------------------------------------
</TABLE>


38        Continued FOCUS on Operations, Growth and Financial Position

<PAGE>

9.      LONG-TERM DEBT

        (A)     PROJECT TERM LOAN

        The project term loan was a non-revolving credit facility with an
interest margin of 1.75% over LIBOR or Bankers Acceptance. In return for
granting the loan the lender received a security in all of the Company's
existing and future assets. In addition, the lender received an assignment of
all material agreements including the palladium sales contract (NOTE 13(A)) and
a pledge of the shares of LDI.

        Amounts drawn under the credit facility were required to be repaid in
quarterly installments, with the final maturity date of the credit facility
being March 31, 2005.

        In June 2004, the Company entered into a new senior credit facility and
used a portion of this new facility to repay the Company's project term loan
totalling approximately US$19,000.

        (B)     SENIOR CREDIT FACILITY

        On June 28, 2004, the Company entered into a new US$20,000 and C$10,000
senior credit facility with a leading equipment finance company which were fully
drawn. The US$20,000 credit facility is repayable in equal quarterly
installments of US$1,000 commencing on September 30, 2004 and has a final
maturity on June 30, 2009. The C$10,000 credit facility is repayable in equal
quarterly installments of C$500 commencing February 24, 2005 and has a final
maturity of November 24, 2009. The credit facility has an interest margin of
2.5% over LIBOR or Bankers Acceptances. In return for granting the loan the
lender received a first priority security in all of the Company's existing and
future assets excluding its production leases and claims. The credit facility
allows in certain circumstances, full repayment of outstanding loans at any time
during the term of the facility.

10.     KAISER-FRANCIS CREDIT FACILITY

        At the time the Company entered into the new senior credit facility,
certain terms under the US$20,000 non-revolving credit facility with
Kaiser-Francis Oil Company ("Kaiser-Francis") were amended. The final maturity
date was extended to June 30, 2006 from May 31, 2005 and the interest rate was
reset based upon the 30 day LIBOR rate plus 2.50%. Amounts not drawn under the
loan are subject to a standby fee payable quarterly at 0.125% per annum. The
Company paid on closing a commitment fee of 0.75% of the total commitment
(US$150). In connection with the loan, the Company has granted Kaiser-Francis a
security interest in all of the assets of the Company and a pledge of the LDI
shares. The security interests in all of the assets of the Company are
subordinated to the security interests of the senior credit facility. As at
December 31, 2004, the outstanding loan was US$11,500 (2003 - US$11,500).

        The loan agreement includes customary representations, warranties and
covenants, including a covenant by the Company not to pay dividends or make any
other payment to shareholders while the loan is outstanding. The loan agreement
also provides for customary events of default.

11.     RELATED PARTY TRANSACTIONS AND COMMITMENTS

        Kaiser-Francis is the controlling shareholder of the Company. In
addition to the related party transactions with Kaiser-Francis disclosed in note
10, the Company has completed the following related party transactions:

        (A)     On January 1, 1999, the Company entered into a farm-in agreement
with a mining company of which one of the Company's directors is an officer and
director. Under the agreement, the Company earned the right to a 100% interest
in six mining claims in the vicinity of the Lac des Iles property by making
payments to the optionor totaling $260 and by conducting exploration work in the
amount of $135 by December 31, 2000. The optionor retained a 2% net smelter
royalty on the farm-in claim property.

        (B)     In 2004, a director of the Company received a fee of $581 (2003
- $400; 2002 - $412) in connection with the negotiations related to the
Palladium Sales Contract entered into by the Company in 2000 (NOTE 13(A)). The
contract was made prior to such person becoming a director of the Company.


North American Palladium Ltd.  2004 Annual Report                             39

<PAGE>

12.     CAPITAL STOCK

        The authorized capital stock of the Company consists of an unlimited
number of common shares and an unlimited number of special shares, issuable in
series, including 10,000,000 Series "A" preferred shares.

        (a)     COMMON SHARES:

                The changes in issued common share capital for the year are
summarized below:

<TABLE>
<CAPTION>
                                                                     2004                       2003
        ----------------------------------------------------------------------------------------------------
                                                             SHARES        AMOUNT       Shares        Amount
<S>                                                      <C>            <C>         <C>           <C>
        Common shares issued, beginning of year          50,895,338     $ 313,489   50,647,955    $  311,983
        Common shares issued
                Pursuant to stock options exercised         459,380         4,637       13,450           101
                To Group Registered Retirement
                  Savings Plan participants                  84,357           956      190,605           905
                Private placement                           270,000         3,822       43,328           500
        ----------------------------------------------------------------------------------------------------
        Common shares issued, end of year                51,709,075     $ 322,904   50,895,338    $  313,489
        ----------------------------------------------------------------------------------------------------
</TABLE>

        GROUP REGISTERED RETIREMENT SAVINGS PLAN

        The Company has a group registered retirement savings plan, which all
employees can participate in at their option. The Company is required to make
matching contributions to a maximum of $5 per employee per annum. The Company
matching contribution can be made either in cash or treasury shares of the
company. During 2004 the Company contributed 84,357 shares at a stated capital
of $956, being fair value (2003 - 190,605 shares at a stated capital of $905).

        PRIVATE PLACEMENT

        On July 9, 2004, the Company completed a private placement of 270,000
flow through common shares. The gross proceeds of $4,050 must be spent on
Canadian exploration expenses as defined in Section 66 of the Income Tax Act
(Canada) by December 31, 2005. In 2003, the Company completed a private
placement of 43,328 flow through common shares. The gross proceeds of $500 were
spent on Canadian exploration expenses by December 31, 2004. Under the terms of
the flow through common share issue, the tax attributes of the related
expenditures will be renounced to investors and the share capital will be
reduced and future income tax liabilities will be increased by the estimated
income tax benefits renounced by the Company to the investors.

        CORPORATE STOCK OPTION PLAN

        The Company has adopted, and the shareholders have approved, the ongoing
1995 Corporate Stock Option Plan (the "Plan"), under which eligible directors,
officers, employees and consultants of the Company are entitled to receive
options to acquire common shares. The Plan is administered by the Compensation
Committee, a subcommittee of the Board of Directors, which will determine the
number of options to be issued, the exercise price (which may not be lower than
the closing price of the Company's common shares on the Toronto Stock Exchange
("TSX") on the day prior to the date of grant) and expiration dates of each
option, the extent to which each option is exercisable provided that the term of
an option shall not exceed 10 years from the date of grant, as well as
establishing a limited time period should the optionee cease to be an "Eligible
Person" as set forth in the conditions of the Plan. Options granted since
December 2001 vest as to 1/3 on each of the first three anniversary dates of the
date of grant. Prior to December 2001, options granted under the Plan vested as
to 1/3 on the date of grant and 1/3 on each of the first two anniversary dates.

        The maximum number of common shares subject to option shall not exceed
2,700,000, being approximately 5.2% of the outstanding common shares or such
greater number of common shares as may be determined by the Board of Directors,
and approved if required, by the shareholders of the Company and by any relevant
stock exchange or other regulatory authority. As at December 31, 2004, 318,094
options were available to be granted under the Plan.


40        Continued FOCUS on Operations, Growth and Financial Position

<PAGE>

The following summary sets out the activity in outstanding common share purchase
options:

<TABLE>
<CAPTION>
                                                        2004                       2003
        -----------------------------------------------------------------------------------------
                                                            WEIGHTED-                   Weighted-
                                                              AVERAGE                     Average
                                                             EXERCISE                    Exercise
                                                 SHARES         PRICE       Shares          Price
        -----------------------------------------------------------------------------------------
<S>                                           <C>              <C>       <C>              <C>
        Outstanding, beginning of year        1,038,857        $ 9.24    1,066,939        $ 11.04
        Granted                                 316,800         11.87      258,000           3.71
        Exercised                              (459,380)        10.10      (13,450)          7.50
        Cancelled                               (70,667)         7.96     (272,632)         11.15
        -----------------------------------------------------------------------------------------
        Total                                   825,610        $ 9.88    1,038,857        $  9.24
        -----------------------------------------------------------------------------------------
        Options exercisable at end of year      389,265        $10.08      685,057        $ 11.27
        -----------------------------------------------------------------------------------------
</TABLE>

        The following table summarizes information about the Company's stock
options outstanding at December 31, 2004 (SEE ALSO NOTE 15(A)):

<TABLE>
<CAPTION>
        EXERCISE PRICE            EXPIRY DATES                   OPTIONS                   OPTIONS
                                                          OUTSTANDING AT            EXERCISABLE AT
                                                           DEC. 31, 2004             DEC. 31, 2004
        ------------------------------------------------------------------------------------------
<S>                         <C>                           <C>                        <C>
        $     3.42               April 7, 2011                   103,334                    34,445
        $     3.70               April 1, 2011                    33,400                    11,133
        $     4.75           February 27, 2011                     7,500                     2,500
        $     5.92           September 2, 2011                    20,000                     6,667
        $     7.89           December 12, 2009                    51,900                    51,900
        $     8.40               March 3, 2005                    35,000                    35,000
        $     9.30               July 27, 2005                    34,499                    34,499
        $     9.40              March 15, 2005                    14,760                    14,760
        $     9.76            November 1, 2012                    15,000                         -
        $     10.01               June 6, 2010                    73,667                    49,111
        $     11.90              June 23, 2012                   287,300                         -
        $     13.55               June 6, 2006                    90,750                    90,750
        $     13.90          December 14, 2005                    25,500                    25,500
        $     14.44          February 13, 2006                    33,000                    33,000
        ------------------------------------------------------------------------------------------
                                                                 825,610                   389,265
        ------------------------------------------------------------------------------------------
</TABLE>

        Prior to January 1, 2003, the Company did not recognize compensation
expense for stock options. Had compensation expense for options granted in 2002
under the Company's stock option plan been determined based on the fair value at
the grant dates consistent with the fair value based method of accounting for
stock-based compensation, the Company's net income and earnings per share would
have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                    2004         2003         2002
        ------------------------------------------------------------------------------------------
<S>                                                           <C>          <C>          <C>
        Net income (loss) as reported                         $  (92,110)  $   38,378   $   15,082
        Stock-based compensation                                     160          160          160
        ------------------------------------------------------------------------------------------
        Pro forma net income (loss)                           $  (92,270)  $   38,218   $   14,922
        ------------------------------------------------------------------------------------------
        Pro forma basic and diluted income (loss) per share   $    (1.80)  $     0.75   $     0.30
        ------------------------------------------------------------------------------------------
</TABLE>

        The fair value of options granted in 2004 has been estimated at the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions: risk free interest rate of 3.7% (2003 - 4%; 2002 -
4%), expected dividend yield of nil (2003 - nil; 2002 - nil), expected
volatility of 55% (2003 - 48%; 2002 - 60%), and expected option life of 4 years
(2003 - 3 years; 2002 - 3 years). The estimated fair value of the options is
expensed over the option's vesting period, which is 3 years. The weighted
average fair market value of options granted in 2004 was $5.43 (2003 - $2.13;
2002 - $4.33).


North American Palladium Ltd.  2004 Annual Report                             41

<PAGE>

        (B)     Reconciliation of the diluted number of shares outstanding:

<TABLE>
<CAPTION>
                                                                     2004            2003           2002
        ------------------------------------------------------------------------------------------------
<S>                                                          <C>             <C>            <C>
        Net income (loss) available to common shareholders   $    (92,110)   $     38,378   $     15,082
        ------------------------------------------------------------------------------------------------
        Weighted average number of shares outstanding          51,379,542      50,763,566     50,544,634
        Effect of dilutive securities stock options                     -          69,338         48,874
        ------------------------------------------------------------------------------------------------
        Weighted average diluted number of
          shares outstanding                                   51,379,542      50,832,904     50,593,508
        ------------------------------------------------------------------------------------------------
        Diluted net income (loss) per share                  $      (1.79)   $       0.75   $       0.30
        ------------------------------------------------------------------------------------------------
</TABLE>

        The effect of stock options has not been included in the determination
of diluted loss per share for 2004 because to do so would be antidilutive.

13.     COMMITMENTS

        (A)     PALLADIUM SALES CONTRACT

        During 2000, the Company entered into a contract (the "Palladium Sales
Contract") whereby the Company hedged the price of 100% of its palladium
production. Under the Palladium Sales Contract the sales price is based on the
monthly average spot price for palladium, as determined by the London Metal
Exchange P.M. Fix, for the month prior to the month that the metal is received
by the customer, but the price will be no less than US$325 per ounce for 100% of
the metal received and no more than US$550 per ounce for 50% of the metal
received. For the remaining 50% of the metal received, there is no maximum
price. The Palladium Sales Contract's term commenced effective July 1, 2000 and
expires on June 30, 2005.

        (B)     SHERIDAN PLATINUM GROUP OF COMPANIES ("SPG") COMMITMENT

        The Company is required to pay a royalty to SPG equal to 5% of the Net
Cash Proceeds, as defined in the agreement from mining operations until the
expiration of the Lac des Iles leases.

        (C)     PLATINUM FORWARD CONTRACTS

        At December 31, 2004, the Company had forward sales contracts for 10,500
ounces of platinum at an average price of US$831 per ounce maturing at various
dates through December 2005. The fair value of these forward sales contracts was
below their carrying value by $313 as at December 31, 2004.

        (D)     NICKEL SWAP CONTRACTS

        At December 31, 2004, the Company had swap contracts for 1,190,000 lbs.
of nickel at an average fixed price of US$6.58 per lb. maturing at various dates
through June 2005. The fair value of these swap contracts was below their
carrying value by $123 as at December 31, 2004.

        (E)     COPPER SWAP CONTRACTS

        At December 31, 2004, the Company had swap contracts for 1,984,000 lbs.
of copper at an average fixed price of US$1.25 per lb. maturing at various dates
through December 2005. The fair value of these swap contracts was below their
carrying value by $176 as at December 31, 2004.

        (F)     GOLD FORWARD CONTRACTS

        At December 31, 2004, the Company had forward sales contracts for 12,000
ounces of gold at an average price of US$435 per ounce maturing at various dates
through December 2005. The fair value of these forward sales contracts was below
their carrying value by $140 as at December 31, 2004.


42        Continued FOCUS on Operations, Growth and Financial Position

<PAGE>

14.     REVENUE FROM METAL SALES

<TABLE>
<CAPTION>
                                                 2004          2003           2002
        --------------------------------------------------------------------------
<S>                                       <C>            <C>            <C>
        Palladium (A)                     $   112,879    $  109,443     $  101,317
        Palladium forward contracts (B)             -        20,437         46,033
        Adjustments for mark-to-market            909        (1,163)        (9,243)
        Nickel                                 25,735        26,010         12,111
        Platinum                               21,476        18,847         14,069
        Gold                                   10,665         9,826          7,094
        Copper                                 10,945         7,722          4,723
        Other metals                            2,595         1,019            669
        --------------------------------------------------------------------------
                                          $   185,204    $  192,141     $  176,773
        --------------------------------------------------------------------------
</TABLE>

        (A)     Palladium revenues include the effect of the Palladium Sales
Contract (NOTE 13(A)).

        (B)     The Company entered into palladium forward contracts in 2001 for
100,800 ounces of palladium at an average price of US$922 per ounce, the revenue
from which was fully recognized by June 30, 2003. The effect of palladium
forward contracts represents the difference between the fixed price realized
under the palladium forward contracts and the palladium price at the time of
revenue recognition.

15.     CONTINGENCIES

        (A)     The Company is a defendant in an action by another mining
company claiming damages in the amount of $20,000, punitive and exemplary
damages in the amount of $5,000 and a declaration that the Company held the
Compania Minerales de Copan, S.A. de C.V. ("Copan") property in trust for the
plaintiff. No provision has been made in the accounts as at December 31, 2004 or
2003 for any possible loss from this action as management of the Company
believes it has a valid defense and it has been indemnified by SPG regarding
this action. In addition, certain stock options are claimed to be held by
employees of Copan. These options have not been included in note 12(A) as the
Company has been indemnified by SPG regarding such matters.

        (B)     The Company has filed a claim with its insurance company
relating to losses incurred in connection with the failure of the primary
crusher in 2002. During 2004, the Company received $7,148 as an interim payment
against this claim and has included this amount in income from mining
operations. The Company is pursuing the balance of its insurance claim and will
record any additional recovery in income if and when received.

        (C)     From time to time, the Company is involved in other litigation,
investigations, or proceedings related to claims arising out of its operations
in the ordinary course of business. In the opinion of the Company's management,
these claims and lawsuits in the aggregate, even if adversely settled, will not
have a material effect on the consolidated financial statements.


North American Palladium Ltd.  2004 Annual Report                             43

<PAGE>

16.     INCOME TAXES

        The provision for income and mining taxes differs from the amount that
would have resulted by applying the combined Canadian Federal and Ontario
statutory income tax rates of approximately 39%.

<TABLE>
<CAPTION>
                                                                  2004           2003           2002
        --------------------------------------------------------------------------------------------
<S>                                                        <C>            <C>            <C>
        Income tax provision using statutory income
          tax rates                                        $   (35,406)   $    18,147    $    11,888
        Increase (decrease) in taxes resulting from:
        Write-down of mining interests not tax benefited        35,694              -              -
        Resource allowance                                       6,439         (3,342)        (5,320)
        Non-taxable portion of capital gains                        (2)        (2,908)             -
        Increase in valuation allowance on assets
          previously recognized                                  2,525              -              -
        Changes in income tax rates and laws                         -         (3,546)             -
        Benefit of income tax losses not previously
          recognized                                              (437)          (811)             -
        Federal large corporations taxes                           465            837            817
        Ontario mining taxes                                    (7,979)           983          4,357
        Other                                                      491         (1,206)         2,120
        --------------------------------------------------------------------------------------------
        Income tax expense                                 $     1,790    $     8,154    $    13,862
        --------------------------------------------------------------------------------------------
</TABLE>

        The details of the Company's income tax expense are as follows:

<TABLE>
<CAPTION>
                                                                  2004           2003           2002
        --------------------------------------------------------------------------------------------
<S>                                                        <C>            <C>             <C>
        Current income tax expense:
        Income taxes                                       $       102    $      (550)    $        -
        Mining taxes                                               580            475              -
        Federal large corporations tax                             465            837            816
        --------------------------------------------------------------------------------------------
                                                           $     1,147    $       762     $      816
        --------------------------------------------------------------------------------------------
        Future income tax expense:
        Income taxes                                       $     9,202    $     6,884     $    8,546
        Mining taxes                                            (8,559)           508          4,500
        --------------------------------------------------------------------------------------------
                                                           $       643    $     7,392     $   13,046
        --------------------------------------------------------------------------------------------
                                                           $     1,790    $     8,154     $   13,862
        --------------------------------------------------------------------------------------------
</TABLE>


44        Continued FOCUS on Operations, Growth and Financial Position

<PAGE>

        Future tax assets (liabilities) consist of the following temporary
differences:

                                                         2004          2003
        -------------------------------------------------------------------
        Current future income tax asset:
        Cash and cash equivalents                    $    389      $      -
        Non-capital loss carry-forwards                     -            84
        Valuation allowance                              (389)            -
        -------------------------------------------------------------------
        Net future income tax asset, current         $      -      $     84
        -------------------------------------------------------------------

        Long-term future income tax asset:
        Mining interests, net                        $ 34,630      $  7,472
        Deferred financing costs                          (11)        1,022
        Mine restoration obligation                     3,495             -
        Future mining tax liability                       343         2,157
        Other assets                                      174           231
        Ontario corporate minimum tax credits             327           257
        Capital loss carry-forwards                       927         1,308
        Valuation allowance                           (38,728)       (1,308)
        -------------------------------------------------------------------
        Net future income tax asset, long-term          1,157        11,139
        -------------------------------------------------------------------
        Future income tax liability, long-term:
        Long-term debt                                   (420)       (1,243)
        Kaiser-Francis credit facility                   (737)         (562)
        -------------------------------------------------------------------
                                                       (1,157)       (1,805)
        -------------------------------------------------------------------
        Net future income tax asset, long-term       $      -      $  9,334
        -------------------------------------------------------------------
        Current future tax liability:
        Deferred financing costs                     $      -      $    216
        -------------------------------------------------------------------
        Future tax liability, current                $      -      $    216
        -------------------------------------------------------------------
        Future mining tax liability, long-term:
        Mining interests, net                        $  1,549      $ 10,108
        -------------------------------------------------------------------
        Future mining tax liability, long-term       $  1,549      $ 10,108
        -------------------------------------------------------------------

        At December 31, 2004, the Company had net capital loss carry-forwards of
approximately $5,100 (2003 - $3,700), which are available to reduce net capital
gains of future years.

17.     STATEMENT OF CASH FLOWS

        (A)     The net changes in non-cash working capital balances related to
operations are as follows:

<TABLE>
<CAPTION>
                                                         2004           2003         2002
        ---------------------------------------------------------------------------------
<S>                                                <C>            <C>          <C>
        Cash provided by (used in):
        Concentrate awaiting settlement            $   26,351     $   (9,298)  $   (2,778)
        Inventories and stockpiles                      1,786          3,179          507
        Accounts receivable and other assets             (229)           296          943
        Accounts payable and accrued liabilities        2,613          1,218       (2,442)
        Taxes payable                                    (790)          (630)      (1,599)
        ---------------------------------------------------------------------------------
                                                   $   29,731     $   (5,235)  $   (5,369)
        ---------------------------------------------------------------------------------
</TABLE>

        (B)     Cash outflows during the year for interest and income taxes were
as follows:

<TABLE>
<CAPTION>
                                                         2004           2003         2002
        ---------------------------------------------------------------------------------
<S>                                                <C>            <C>          <C>
        Interest paid on long-term debt            $    1,929     $    3,433   $    5,842
        Income and mining taxes paid               $      436     $        -   $        -
</TABLE>


North American Palladium Ltd.  2004 Annual Report                             45

<PAGE>

        (C)     During 2004, mining interests were acquired at an aggregate cost
of $33,058 (2003 - $12,687; 2002 - $9,960) of which $4,330 (2003 - $980; 2002 -
$1,514) were acquired by means of capital leases.

18.     RECONCILIATION TO ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE U.S.

        These consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles, which differ in some
respects from those in the United States. The following table presents amounts
that would have been reported had the Company's consolidated financial
statements been prepared on the basis of United States generally accepted
accounting principles ("U.S. GAAP"):

<TABLE>
<CAPTION>

        (CANADIAN FUNDS IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

                                                                  2004           2003          2002
        --------------------------------------------------------------------------------------------
<S>                                                       <C>              <C>           <C>

        Statements of earnings (loss) and deficit:
        Net income (loss) under Canadian GAAP              $   (92,110)    $   38,378    $   15,082
        Amortization of capitalized interest (A)                   (95)           (39)          (20)
        Concentrates and crushed and broken ore
          stockpiles (B)                                           295         (1,702)         (404)
        Derivative financial instruments (C)                     2,041         (2,867)           74
        Reversal of asset retirement obligation under
          Canadian GAAP (E)                                          -              -            53
        Tax effect of differences                                    -          1,459           112
        --------------------------------------------------------------------------------------------
        Net income (loss) and comprehensive income
          under U.S. GAAP before cumulative impact
          of change in accounting policy                   $   (89,869)    $   35,229    $   14,897
        Cumulative impact of change in accounting
          policy for asset retirement obligations (E)                -           (375)            -
        --------------------------------------------------------------------------------------------
        Net income (loss) and comprehensive income
          under U.S. GAAP                                  $   (89,869)    $   34,854    $   14,897

        Basic and diluted income (loss) per share
          under U.S. GAAP before cumulative impact
          of change in accounting policy                   $     (1.75)    $     0.69    $     0.29
        --------------------------------------------------------------------------------------------
        Basic and diluted income (loss) per share under
          U.S. GAAP                                        $     (1.75)    $     0.69    $     0.29
        --------------------------------------------------------------------------------------------
        Balance sheets:
        Current assets (B) and (C)                         $   155,842     $  124,186
        Mining interests (A)                               $   136,567     $  247,769
        Crushed and broken ore stockpiles - long-term
          (B)                                              $     1,568     $    6,889
        Future tax asset, long-term                        $         -     $    9,124
        Capital stock (D)                                  $   329,002     $  319,587
        Deficit                                            $  (108,992)    $  (19,333)
</TABLE>

        (A)     The Company capitalizes interest on major projects where direct
indebtedness has occurred. Under U.S. GAAP, interest is capitalized as it arises
from indebtedness incurred, directly or indirectly, to finance development and
construction activities on assets that are not yet subject to amortization or
depletion. The current year adjustment relates entirely to the amortization of
these amounts under U.S. GAAP.

        (B)     Under Canadian GAAP, the cost of the Company's concentrate and
crushed and broken ore stockpiles is determined on the average production cost
and does not include an allocation of the amortization of production related
assets, whereas under U.S. GAAP the cost of these assets should include this
allocation.

        (C)     Under U.S. GAAP, the Company has chosen not to designate its
derivative financial instruments as hedging instruments and thus they are
carried on the balance sheet at their fair value and any changes in fair value
are being recorded to earnings in the period of the change.


46        Continued FOCUS on Operations, Growth and Financial Position

<PAGE>

        (D)     Canadian GAAP allows for the reduction of the stated capital of
outstanding common shares with a corresponding offset to deficit. This
reclassification, which the Company made in 1991, is not permitted by U.S. GAAP
and would result in an increase in both capital stock and deficit of $6,098 at
December 31, 2004 and 2003.

        (E)     Effective January 1, 2003, the Company adopted FAS 143,
"Accounting for Asset Retirement Obligations" which requires that the fair value
of liabilities for asset retirement obligations be recognized in the period in
which they occur. A corresponding increase to the carrying amount of the related
asset is generally recorded and depreciated over the life of the asset. The
amount of the liability is subject to re-measurement at each reporting period.
The cumulative effect of the change through January 1, 2003 was to increase
mining assets by $6,489, increase the mine closure obligation to $7,019 and a
one time after-tax charge to net earnings of $375.

        (F)     U.S. GAAP requires that amounts totaling 5% or more of accounts
payable and accrued liabilities be identified separately. As at December 31,
2004, these amounts were as follows: trade payables and accruals - $15,235 (2003
- $13,756); other accruals - $4,996 (2003 - $2,285).

        (G)     U.S. GAAP does not permit the disclosure of subtotal of cash
from operations before changes in non-cash working capital.

        (H)     Effective January 1, 2003, the Company prospectively adopted FAS
No. 123 "Accounting for Stock-based Compensation" as amended by FAS No. 148,
whereby compensation expense for options granted after January 1, 2003 is
measured at fair value at the grant date using the Black-Scholes valuation model
and recognized over the remaining vesting period of the options granted.
Previously, the Company, for purposes of preparing financial information in
accordance with U.S. GAAP, accounted for its stock-based compensation plan under
Accounting Principles Board Opinion 25 "Accounting for Stock Issued to
Employees" (APB No. 25) which did not result in the recognition of compensation
expense. Under FAS 148, pro forma disclosure is still required for those options
granted prior to January 1, 2003 as follows:

<TABLE>
<CAPTION>
                                                                       2004          2003           2002
        ------------------------------------------------------------------------------------------------
<S>                                                             <C>            <C>            <C>
        Net income (loss) as reported under U.S. GAAP           $   (89,869)   $   34,854     $   14,897
        Stock-based compensation                                        168        (1,000)         2,648
        ------------------------------------------------------------------------------------------------
        Pro forma net income (loss) under U.S. GAAP             $   (90,037)   $   35,854     $   12,249
        ------------------------------------------------------------------------------------------------
        Pro forma basic and diluted income (loss) per share     $     (1.75)   $     0.71     $     0.24
        ------------------------------------------------------------------------------------------------
</TABLE>

19.     COMPARATIVE FIGURES

        Certain of the prior years' figures have been reclassified to conform to
the presentation adopted in 2004.


        ------------------------------------------------------------------------
        Forward-Looking Statements

        The Company's annual report 2004, consolidated balance sheets as at
December 31, 2004 and the consolidated statements of earnings and deficit and
cash flows for each of the years in the three year period ended December 31,
2004 (collectively the "Financial Statements") and management's discussion and
analysis of operations and financial position ("MD&A") for the Financial
Statements, contain certain that are forward-looking statements which are made
pursuant to the "safe harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995. They include estimates and statements that
describe the Company's future plans, objectives and goals, including words to
the effect that the Company or management expects a stated condition or result
to occur. When used herein, words such as "estimate", "expect", "believe",
"intend", "budget", "projection", "strategy", "will", "continue" and other
similar expressions are intended to identify forward-looking statements. In
particular statements relating to the impairment charge and the estimated future
metal prices, cash flows, expenses, capital costs, ore production, mine life,
financing, construction and commissioning are forward-looking statements. Such
forward-looking statements involve inherent risks and uncertainties and are
subject to factors, many of which are beyond our control, that may cause actual
results or performance to differ materially from those currently anticipated in
such statements. Important factors that could cause actual results to differ
materially from those expressed or implied by such forward-looking statements
include among others metal price volatility, changes in the US/CDN dollar
exchange rate, the salvage value of equipment, economic and political events
affecting metal supply and demand, fluctuations in ore grade, ore tonnes milled,
geological, technical, mining or processing problems, recoverability of metals,
future profitability and production, availability of financing on acceptable
terms and unexpected problems during the development, construction and start-up
phases of the underground mine, exploration programs may not result in increased
reserves and competition for acquisition of new properties. For a more
comprehensive review of risk factors, please refer to the Company's MD&A and
Annual Information Form under "Risk Factors" on file with the U.S. Securities
and Exchange Commission and Canadian provincial securities regulatory
authorities. The Company disclaims any obligation to update or revise any
forward-looking statements whether as a result of new information, events or
otherwise. Readers are cautioned not to put undue reliance on these
forward-looking statements.


North American Palladium Ltd.  2004 Annual Report                             47

<PAGE>

                                                                  DOCUMENT NO. 3


                       PREVIOUSLY FILED ON MARCH 29, 2005


<PAGE>

                  UNDERTAKING AND CONSENT TO SERVICE OF PROCESS

A.      UNDERTAKING

The Registrant undertakes to make available, in person or by telephone,
representatives to respond to inquiries made by the Commission staff, and to
furnish promptly, when requested to do so by the Commission staff, information
relating to: the securities registered pursuant to Form 40-F; the securities in
relation to which the obligation to file an annual report on Form 40-F arises;
or transactions in said securities.

B.      CONSENT TO SERVICE OF PROCESS

The Registrant has previously filed with the Commission a Form F-X in connection
with its Common Shares, no par value.

<PAGE>

                                    SIGNATURE

        Pursuant to the requirements of the Exchange Act, the Registrant
certifies that it meets all of the requirements for filing on Form 40-F and has
duly caused this amendment to its annual report to be signed on its behalf by
the undersigned, thereto duly authorized.


                                          NORTH AMERICAN PALLADIUM LTD.


Dated: April 5, 2006                      By: /s/ Ian M. MacNeily
                                             -----------------------------------
                                          By:    Ian M. MacNeily
                                          Title: Vice President, Finance and
                                                 Chief Financial Officer

<PAGE>

                                  EXHIBIT INDEX


NUMBER        DOCUMENT

   1.         Consent of KPMG LLP
   1.         Consent of Ernst & Young LLP
  31.         Certification of CEO and CFO pursuant to Section 302 of the
              Sarbanes-Oxley Act of 2002
  32.         Certification of CEO and CFO pursuant to Section 906 of the
              Sarbanes-Oxley Act of 2002