Sherritt Outlines Moa JV Expansion Strategy and Reports Q3 Results
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TORONTO--(BUSINESS WIRE)--November 03, 2021--
Sherritt International Corporation ("Sherritt", the "Corporation", the "Company") (TSX: S), a world leader in the mining and hydrometallurgical refining of nickel and cobalt from lateritic ores, today reported its financial results for the three and nine months ended September 30, 2021, and announced it is embarking on an expansion strategy with its Cuban partners to capitalize on the growing demand for high purity nickel and cobalt being driven by the accelerated adoption of electric vehicles. The strategy, which will build on the 26-year successful track record of the Moa Joint Venture, centres on growing finished nickel and cobalt production by 15 to 20% per year from the 34,876 tonnes produced in 2020 and extending the life of mine at Moa beyond 2040 through the conversion of mineral resources into reserves using an economic cut-off grade.
"Backed by a strengthened balance sheet and a favourable outlook for nickel and cobalt, we are moving forward with a multi-pronged strategy focused on generating incremental cash flow and transformative growth," said Leon Binedell, President and CEO of Sherritt International Corporation. "In addition to commercializing projects developed by Sherritt Technologies, our growth will centre on brownfield opportunities, where working in close collaboration with our Cuban partners, we plan to increase finished nickel and cobalt production and extend Moa's mine life. Preliminary economics of the brownfield projects identified are quite encouraging and suggest a high rate of return on investment and low capital intensity.
"By taking advantage of embedded growth opportunities, Sherritt will be better positioned to capitalize on the expected strong demand for green metals in the coming years and significantly grow shareholder value."
Expansion plans for the Moa JV consist of a multi-phased approach, and includes completion of the new slurry preparation plant and other expansion circuits at Moa, installation of new equipment and upgrading existing equipment at the refinery in Fort Saskatchewan, Alberta, updating the 43-101 Technical Report published in June 2019 that reported more than 158 million tonnes of measured and indicated resources at 1% nickel and 0.13% cobalt at Moa to reflect production based on economic rather than a fixed, cut-off grade, and leveraging the expertise of Sherritt Technologies to optimize mine planning and performance.
Sherritt and its Cuban partners are currently finalizing timelines, capital estimates, and economics of the various projects, including identifying financing alternatives. Sherritt expects to provide an update on the rollout of the Moa JV expansion strategy by the end of the first quarter of 2022.
SELECTED Q3 2021 DEVELOPMENTS
-- Received US$10 million in distributions from the Moa JV representing
Sherritt's 50% share of distributions declared by the Moa JV. Through
September 30, Sherritt has received a total of US$43 million in direct
and re-directed distributions from the Moa JV and its partner.
-- Adjusted EBITDA(1) was $17.6 million, up 14% from last year. The higher
total was indicative of improved nickel and cobalt prices, but offset by
increased input costs, $3.1 million in other contractual benefits
expenses and $0.5 million of accelerated share-based compensation
expenses, both of which relate to the departure of senior executives.
-- Sherritt's share of finished nickel production at the Moa JV was 2,908
tonnes, down 22% from last year while Sherritt's share of finished cobalt
production was 334 tonnes, down 18%. Finished nickel and cobalt
production were negatively impacted by a combination of factors,
including the spread of COVID-19, timing of the full-facility shutdown at
the refinery in Fort Saskatchewan, Alberta, and unplanned maintenance
activities that temporarily disrupted production activities. All
production has since resumed to normal, and Sherritt has adjusted its
production guidance for 2021 to reflect Q3 developments and anticipated
production for the balance of the year.
-- Net Direct Cash Cost (NDCC)(1) at the Moa JV was US$4.53/lb, up 12% from
last year. Despite a 52% improvement in cobalt by-product credits, unit
costs per pound of finished nickel sold were impacted by the 126%
increase in sulphur prices, 69% increase in fuel oil prices, and 59%
increase in natural gas prices as well as by lower sales volumes. NDCC
guidance for 2021 remains unchanged at US$4.25 to $4.75 per pound of
nickel sold as the recent rise in cobalt prices partially offsets the
rise in input costs.
-- Received US$6.4 million in Cuban energy payments. Sherritt anticipates
continued variability in the timing of collections through the remainder
of 2021, and is working with its Cuban partners to ensure timely
receipts.
-- Sherritt released its 2020 Sustainability Report that featured a number
of upgraded environmental, social, and governance (ESG) targets,
including achieving net zero greenhouse emissions by 2050, obtaining 15%
of overall energy from renewable sources by 2030, reducing nitrogen oxide
emission intensity by 10% by 2024, and increasing the number of women in
the workforce to 36% by 2030.
-- Named Yasmin Gabriel as Chief Financial Officer, Greg Honig as Chief
Commercial Officer, and Chad Ross as Chief Human Resources Officer as
part of senior leadership changes. The appointments underscore Sherritt's
two-pronged growth strategy focused on capitalizing on the accelerating
demand for high-purity nickel and cobalt from the electric vehicle
industry and commercializing innovative process technology solutions for
resources companies looking to improve their environmental performance
and increase economic value.
DEVELOPMENTS SUBSEQUENT TO THE QUARTER END
-- Sherritt amended its syndicated revolving-term credit facility with its
lenders, increasing the maximum amount of credit available to $100
million from $70 million and extending the maturity to April 2024. Under
the new terms, borrowings on the credit facility are available to fund
capital as well as for working capital purposes. Spending on capital
expenditures cannot exceed $75 million in a fiscal year. Capital
expenditure restrictions do not apply to planned spending of Moa Nickel
S.A. The increase in credit facility is indicative of Sherritt's
strengthened financial position and favorable outlook in light of
improved nickel market fundamentals.
-- Environmental rehabilitation obligations (ERO) held by Sherritt's Spanish
Oil and Gas operations were secured by a parent company guarantee of
EUR31.5 million ($46.7 million) until December 31, 2023. Unlike the $47
million letter of credit issued previously to support the ERO and backed
by Sherritt's credit facility, the new guarantee has no impact on the
Corporation's available liquidity.
-- Planned capital spending at the Moa JV for 2021 has been reduced to US$35
million from US$44 million (Moa JV 50% basis Fort Site 100% basis). The
reduction in planned capital spending reflects operational challenges
experienced through September 30, including freight and order delays
caused by COVID-19.
(1) For additional information see the Non-GAAP and other financial
measures section of this press release.
Q3 2021 FINANCIAL HIGHLIGHTS
For the three months For the nine months
ended ended
2021 2020 2021 2020
$ millions,
except per September September
share amount September 30 30 Change September 30 30 Change
-------------- ------------ ----------- ------ ------------- ----------- ------
Revenue 20.7 24.9 (17%) $ 73.6 $ 91.6 (20%)
Combined
revenue(1) 120.2 115.3 4% 414.2 361.1 15%
Loss from
operations and
joint venture (10.8) (124.7) 91% (12.0) (163.2) 93%
Net (loss)
earnings from
continuing
operations (15.5) 11.4 (236%) (27.8) (36.4) 24%
Net (loss)
earnings for
the period (16.2) 228.5 (107%) (32.5) 71.8 (145%)
Adjusted
EBITDA(1) 17.6 15.5 14% 65.8 28.2 133%
Cash provided by
continuing
operations for
operating
activities 16.2 25.3 (36%) 14.7 35.3 (58%)
Combined free
cash flow(1) 19.3 27.1 (29%) 40.9 29.5 39%
Average exchange
rate (CAD/US$) 1.260 1.332 (5%) 1.251 1.354 (8%)
Net (loss)
earnings from
continuing
operations ($
per share) (0.04) 0.03 (233%) (0.07) (0.09) 22%
---------------- ------ ------- ------ ----- ------ ------
(1) For additional information see the Non-GAAP and other financial
measures section.
2021 2020
$ millions, as at September 30 December 31 Change
-------------------- -------------- ------------- ------
Cash, cash equivalents
and short term
investments $ 163.4 $ 167.4 (2%)
Loans and borrowings 444.7 441.4 1%