Precious metals producer North American Palladium Ltd said it expects commercial production at its Vezza gold mine in Quebec to be delayed and is exploring options to sell the mine.

Commercial production at the Vezza mine in the Abitibi region of Quebec has been pushed to the year-end from the planned second quarter due to revised development plans.

The company has encountered higher-than-anticipated grade dilution and the daily mining rate is ramping up more slowly, North American Palladium said.

While we continue to believe in Vezza's cash generation potential, we believe we can build better shareholder value by focusing on palladium, Chief Executive William Biggar said.

The company is also reviewing its capital expenditure plans.

North American Palladium said it expects to meet or exceed the higher end of its 2012 outlook of producing 150,000 to 160,000 ounces of palladium.

The company, which has been operating its Lac des Iles palladium mine in Thunder Bay, Ontario since 1993, said the mine produced 40,017 ounces of payable palladium in the second quarter.

Shares of the company closed at C$2.11 on Friday on the Toronto Stock Exchange.