Sherritt Reports Fourth Quarter and Full Year 2024 Results; Strong Operational Performance at Metals and Power; Provides Guidance for 2025
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Sherritt Reports Fourth Quarter and Full Year 2024 Results; Strong Operational Performance at Metals and Power;
Provides Guidance for 2025
TORONTO – February 5, 2025 – Sherritt International Corporation (“Sherritt”, the “Corporation”) (TSX: S), a world leader in using hydrometallurgical processes to mine and refine nickel and cobalt – metals deemed critical for the energy transition – today reported its financial results for the three months and year ended December 31, 2024 and provided its 2025 guidance. All amounts are in Canadian dollars unless otherwise noted.
“Sherritt demonstrated exceptional performance in 2024, with Metals production, Power production and net direct cash costs all falling within their guidance ranges despite significant external challenges,” said Leon Binedell, President and CEO of Sherritt. “Our teams skillfully managed through port and rail disruptions in Canada, while successfully navigating natural disasters and power infrastructure challenges in Cuba. We implemented strategic adjustments, including optimizing our maintenance schedule and strategically building feed inventory at our refinery to ensure operational continuity. Our comprehensive risk management protocols proved highly effective, preventing any health, safety, or environmental incidents during Cuba’s natural disasters.”
Mr. Binedell continued, “We achieved strong results despite challenging nickel market conditions, with nickel sales volumes increasing 22% year-over-year. Our financial position in Canada remains solid, bolstered by the resumption of the Cobalt Swap which yielded a $30 million distribution. In our Power division, the maintenance work completed in 2024 to bring online an additional turbine and the improvements in equipment availability are leading to higher levels of electricity production. This in turn is translating into higher dividends in Canada which totaled $13 million last year and which we see significantly increasing with $25 million to $30 million expected this year. Additionally, our comprehensive organizational restructuring and cost reduction initiatives are projected to deliver approximately $17 million in annualized savings.
Looking ahead to 2025, we are focused on driving operational excellence and maximizing value from our Moa JV expansion. We continue to advance key strategic initiatives including our mixed hydroxide precipitate project targeting the North American EV market. Sherritt remains well positioned to navigate current market conditions and maintain competitiveness despite Chinesedriven supply pressures.”
FOURTH QUARTER AND FULL YEAR 2024 RESULTS AND SELECTED DEVELOPMENTS(1)
- Finished nickel and cobalt production at the Moa Joint Venture (“Moa JV”) in Q4 2024 was 3,853 tonnes and 465 tonnes, respectively, (Sherritt’s share(1)). For the full year 2024 finished nickel and cobalt production was 30,331 tonnes and 3,206 tonnes, respectively, (100% basis) both within their respective annual guidance ranges.
- Finished nickel sales totaled 4,326 tonnes in Q4 2024 and 15,678 tonnes for the full year both exceeding production. Sales in Q4 2024 were the highest in two years. Year-over-year finished nickel sales increased by 22% reflecting Sherritt’s focused effort to expand market opportunities. Finished cobalt sales were 465 tonnes in Q4 2024 and 1,638 tonnes for the full year.
- Net direct cash cost (“NDCC”)(2) was US$5.44/lb in Q4 2024. Full year 2024 NDCC(2) of US$5.94/lb was within its guidance range and was a pronounced improvement over 2023 being 18% lower year-over-year despite a 41% reduction in cobalt by-product credits due to lower average-realized prices(2). This improvement was driven by notably lower mining, processing, and refining costs per pound of nickel sold (“MPR/lb”).
- Electricity production was 171 GWh in Q4 2024 and 816 GWh for the full year, respectively. In Q4 2024, Sherritt’s Power division played a meaningful role in restoring the Cuban national grid following nationwide power outages. Despite the power outages, electricity production in 2024 reached a six-year high as a result of Sherritt’s multiyear efforts to optimize its Power division by bringing new gas wells into production, improving equipment availability and increasing utilization rates.
- Electricity unit operating cost(2) was $30.64/MWh in Q4 2024. Full year was $34.29/MWh, slightly above the upper end of the annual guidance range of $34.00/MWh, due to the power outages and frequency control measures in Cuba, as well as the weaker Canadian dollar on U.S. dollar-denominated costs for the full year 2024.
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- Organizational restructuring and cost reduction initiatives in 2024 are expected to yield annualized savings of approximately $17.0 million.
- Net loss from continuing operations was $22.5 million, or $(0.06) per share in Q4 2024 and $73.1 million, or $(0.18) per share for the full year.
- Adjusted net loss from continuing operations(2) was $10.2 million or $(0.03) per share in Q4 2024 and $56.3 million or $(0.14) per share for the full year, and primarily excludes $8.4 million non-cash impairment of intangible assets in Oil and Gas recognized in Q4 and $6.9 million and $8.2 million non-cash loss on rehabilitation provisions, respectively, as a result of updates to valuation assumptions for rehabilitation and closure costs on legacy Oil and Gas assets in Spain.
- Adjusted EBITDA(2) was $15.4 million in Q4 2024 and $32.4 million for the full year.
- Cobalt Swap distributions totaled $29.8 million in Q4 2024, including $23.7 million in cash and 223 tonnes of finished cobalt valued at $6.1 million (including both Sherritt’s share and the General Nickel Company S.A. (“GNC”) redirected share).
- Power division dividends in Canada were $7.0 million in Q4 2024, totaling $13.0 million for the year.
- Available liquidity in Canada as of December 31, 2024 was $62.4 million.
- Construction on phase two of the Moa JV expansion project progressed with piping installation and internal brick lining of vessels during the quarter, along with some pre-commissioning activities. With lower nickel and cobalt prices, Sherritt continues to exercise capital preservation measures and has scheduled certain expenditures for Q1 2025 when construction is expected to be completed and following which, the ramp-up is expected to commence.
(1) References to operating and financial metrics in this press release, unless otherwise indicated, are to “Sherritt’s share” which is consistent with the Corporation’s definition of reportable segments for financial statement purposes. Sherritt’s share of “Metals” includes the Corporation’s 50% interest in the Moa JV, its 100% interest in the utility and fertilizer operations in Fort Saskatchewan (“Fort Site”) and its 100% interests in subsidiaries established to buy, market and sell certain of the Moa JV’s nickel and cobalt production and the Corporation’s cobalt inventory received under the Cobalt Swap agreement (“Metals Marketing”). Sherritt’s share of Power includes the Corporation’s 33⅓% interest in Energas S.A. (“Energas”). References to Corporate and Other and Oil and Gas includes the Corporation’s 100% interest in these businesses. Corporate and Other refers to the Corporate head office and growth and market development support. References to Fort Site directly is to the Corporation’s 100% interest in the utility and fertilizer operations.
(2) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
(3) For additional information on the Cobalt Swap, see Note 12 – Advances, loans receivable and other financial assets of the consolidated financial statements for the year ended December 31, 2024.
2025 ANNUAL GUIDANCE
Metals:
- Finished nickel and cobalt production are expected to be between 31,000 to 33,000 tonnes (100% basis) and 3,300 to 3,600 tonnes (100% basis), respectively. This increase is attributed to enhanced availability of mixed sulphides from the Moa mine site to the refinery, following the completion, ramp up and debottlenecking of the phase two expansion. Production is expected to be weighted towards the latter part of the year. To maximize refinery operation efficiencies before and during the ramp-up period, third-party feed will be procured and processed as necessary, subject to market conditions.
- NDCC(1) is expected to be between US$5.75 to US$6.25 per pound of nickel sold based on a forecast negative impact from future commodity prices which are expected to result in year-over-year lower cobalt by-product credits and higher input costs as well as planned Fort Site ammonia and Moa JV acid plant maintenance offsetting the benefits of higher expected production and sales and cost optimization initiatives implemented in 2024.
- Sustaining spending on capital(1), excluding spending on the new tailings facility, is expected to be $35.0 million (Moa JV 50% basis, Fort Site 100% basis).
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- Sustaining spending on capital(1) of $40.0 million (50% basis) is related to advancing Moa JV’s tailings management project as outlined in its 2023 National Instrument 43-101 Technical Report. The new tailings facility will be engineered and built to international standards and will provide a tailings solution for the Moa mine over the entirety of its current mine life of approximately 25 years. The estimated spending in 2025 includes early works spending that was deferred from 2024. Subsequent to year end, the Moa JV secured a US$60.0 million (100% basis) equivalent loan in Cuban pesos from a Cuban financial institution with a 5-year maturity that will primarily be utilized to support capital spending on tailings management.
- Growth spending on capital(1) is expected to be $5.0 million (Moa JV 50% basis) due to planned deferral of spending from 2024 which is to be used for the completion of phase two of the Moa JV expansion as noted above.
Power:
- Electricity production is expected to be between 800 to 850 GWh (33⅓% basis) on higher gas and equipment availability and improved utilization rates despite lower production from Varadero due to planned grid frequency control.
- Electricity unit operating cost(1) is expected to be between $23.00 to $24.50 per MWh on lower maintenance and higher electricity production.
- Spending on capital(1) is expected to be $2.0 million (33⅓% basis) reflecting lower maintenance spending.
(1) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
Q4 2024 FINANCIAL HIGHLIGHTS
For the three months ended For the year ended
| 2024 | 2023 | 2024 | 2023 | |||
| $ millions, except per share amount | December 31 | December 31 | Change | December 31 | December 31 | Change |
| Revenue | $ 45.7 $ | 34.8 | 31% $ | 158.8 $ | 223.3 | (29%) |
| Combined revenue(1) | 160.3 | 140.5 | 14% | 577.6 | 652.9 | (12%) |
| Loss from operations and joint venture | (16.9) | (43.4) | 61% | (43.5) | (43.4) | - |
| Net loss from continuing operations | (22.5) | (53.4) | 58% | (73.1) | (64.3) | (14%) |
| Net loss for the period | (22.9) | (53.4) | 57% | (72.8) | (64.6) | (13%) |
| Adjusted EBITDA(1) | 15.4 | (7.0) | 320% | 32.4 | 46.2 | (30%) |
| Adjusted loss from continuing operations(1) | (10.2) | (27.9) | 63% | (56.3) | (28.1) | (100%) |
| Net loss from continuing operations ($ per share) | (0.06) | (0.13) | 54% | (0.18) | (0.16) | (13%) |
| Adjusted loss from continuing operations ($ per share)(1) | (0.03) | (0.07) | 57% | (0.14) | (0.07) | (100%) |
| Cash used by continuing operations for operating activities | (21.5) | (18.1) | (19%) | (25.9) | 28.2 | (192%) |
| Combined free cash flow(1) | (20.2) | (39.1) | (19.2) | (15.9) |
48% (21%) Average exchange rate (CAD/US$) 1.398 1.362 3% 1.370 1.350 1%
(1) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
2024 2023 $ millions, as at December 31 December 31 Change
Cash and cash equivalents
| Canada | $ 32.0 $ | 21.5 | 49% |
| Cuba(1) | 113.1 | 96.3 | 17% |
| Other | 0.6 | 1.3 | (54%) |
| 145.7 | 119.1 | 22% | |
| Loans and borrowings | 372.5 | 355.6 | 5% |
The Corporation's share of cash and cash equivalents in the Moa Joint Venture, not included in the above balances: $ 5.7 $ 5.9 (4%)
(1) As at December 31, 2024, $111.4 million of the Corporation’s cash and cash equivalents was held by Energas (December 31, 2023 - $93.9 million).
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Cash and cash equivalents were $145.7 million as at December 31, 2024 compared to $148.6 million as at September 30, 2024.
As at December 31, 2024, total available liquidity in Canada, which is composed of cash and cash equivalents in Canada of $32.0 million and available credit facilities of $30.4 million was $62.4 million compared to $71.4 million as at September 30, 2024. During the quarter, Sherritt received $23.7 million of Cobalt Swap cash distributions, $7.0 million of dividends from Energas and $4.7 million on the settlement of in-the-money nickel put options. These receipts were offset by cash used for operating activities primarily reflecting timing of working capital receipts and payments, $9.4 million for interest on the Corporation’s 8.5% secured second lien notes (“Second Lien Notes”), and $3.6 million on contractually obligated rehabilitation and closure costs related to legacy Oil and Gas assets in Spain.
On a full year basis, total available liquidity in Canada was in line with the $63.0 million as at December 31, 2023. During 2024, Sherritt received $23.7 million of cash Cobalt Swap distributions and $13.0 million of dividends from Energas, $36.2 million of proceeds from operating activities at Fort Site on higher operating earnings and timing of working capital receipts and payments, $30.0 million as full repayment of short-term working capital advances made to the Moa JV in 2023 and $5.9 million net proceeds from nickel put options. These receipts were offset by cash used for operating activities primarily on timing of working capital receipts and to support planned maintenance activities at Power, $18.8 million for interest on the Second Lien Notes, $6.6 million for property, plant and equipment and $27.2 million on contractually obligated rehabilitation and closure costs related to legacy Oil and Gas assets in Spain.
At current spot nickel prices, the Corporation expects that cobalt dividends and cash distributions under the Cobalt Swap agreement will commence in the second half of the year and will not meet the annual minimum amount in 2025. The Moa JV’s cash and cobalt distributions to the Corporation are determined based on available cash in excess of liquidity requirements. Determinants of liquidity include anticipated nickel and cobalt prices and sales volumes, planned spending on capital at the Moa JV including growth capital, capital committed toward the new tailings facility net of financing, working capital needs, expected financing and other expected liquidity requirements. Available cash is also impacted by changes in working capital primarily related to changes in inventory, and timing of receipts and payments, including receipts on nickel and cobalt sales subsequent to shipment.
With the completion of maintenance work in 2024 to bring online an additional turbine and to improve equipment availability to process gas from the recently completed wells and based on 2025 guidance estimates for production volumes, unit operating costs(1) and spending on capital(1) disclosed in the Outlook section, total dividends in Canada from Energas in 2025 are expected to be between $25.0 million and $30.0 million.
As at December 31, 2024, the Corporation was in compliance with all its debt covenants.
At the Second Lien Notes interest payment date in October 2024, the Corporation was not required to make a mandatory redemption of Second Lien Notes as it did not have Excess Cash Flow as defined in the Second Lien Notes indenture agreement for the two-quarter period ended June 30, 2024. For the two-quarter period ended December 31, 2024, Excess Cash Flow was $5.5 million. Subject to the minimum liquidity threshold of $75.0 million pursuant to the Second Lien Notes Indenture at the interest payment date in April 2025, the Corporation will be required to redeem, at par, total Second Lien Notes equal to 50% of Excess Cash Flow, or $2.8 million.
Subsequent to the quarter end, consistent with its prudent approach to managing liquidity, Sherritt elected not to pay cash interest due in January 2025 of $3.6 million and added the payment-in-kind interest to the principal amount owed to noteholders in its 10.75% unsecured PIK option notes (“PIK notes”).
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REVIEW OF OPERATIONS
Metals
For the three months ended For the year ended 2024 2023 2024 2023 $ millions (Sherritt's share), except as otherwise noted December 31 December 31 Change December 31 December 31 Change
FINANCIAL HIGHLIGHTS(1)
| Revenue | $ 148.3 $ | 125.9 | 18% $ | 526.6 $ | 603.7 | (13%) |
| Cost of sales | 146.6 | 146.6 | - | 532.3 | 601.4 | (11%) |
| Loss from operations | (1.0) | (22.0) | 95% | (18.5) | (2.1) (781%) | |
| Adjusted EBITDA(2) | 14.6 | (8.7) | 268% | 40.0 | 53.6 | (25%) |
CASH FLOW(1)
Cash provided by continuing operations for operating activities(2) $ 5.9 $ 3.4 74% $ 93.1 $ 115.9 (20%) Free cash flow(2) (0.3) (14.2) 98% 59.1 58.9 -
PRODUCTION VOLUMES (tonnes)
3,552 3,514 1% 15,847 15,084 5% Mixed Sulphides
| Finished Nickel | 3,853 | 3,744 | 3% | 15,166 | 14,336 | 6% |
| Finished Cobalt | 465 | 330 | 41% | 1,603 | 1,438 | 11% |
| Fertilizer | 67,648 | 61,092 | 11% | 250,272 | 219,707 | 14% |
| NICKEL RECOVERY(3)(%) | 84% | 89% | (6%) | 86% | 88% | (2%) |
SALES VOLUMES (tonnes)
| Finished Nickel | 4,326 | 3,511 | 23% | 15,678 | 12,888 | 22% |
| Finished Cobalt | 465 | 399 | 17% | 1,638 | 2,720 | (40%) |
| Fertilizer | 63,299 | 55,509 | 14% | 179,135 | 170,161 | 5% |
AVERAGE-REFERENCE PRICE(4) (US$ per pound)
Nickel $ 7.27 $ 7.82 (7%) $ 7.63 $ 9.74 (22%) Cobalt 11.59 15.69 (26%) 12.77 16.30 (22%)
AVERAGE-REALIZED PRICE(2) (CAD)
| Nickel ($ per pound) | $ 9.98 $ | 10.87 | (8%) $ | 10.30 $ | 13.36 | (23%) |
| Cobalt ($ per pound) | 12.30 | 17.23 | (29%) | 13.30 | 17.47 | (24%) |
| Fertilizer ($ per tonne) | 502.93 | 414.80 | 21% | 503.19 | 548.16 | (8%) |
UNIT OPERATING COST(2) (US$)
Nickel - net direct cash cost (US$ per pound) $ 5.44 $ 7.87 (31%) $ 5.94 $ 7.22 (18%)
SPENDING ON CAPITAL(2)(CAD)
| Sustaining | $ | 6.0 $ | 19.0 | (68%) $ | 28.3 $ | 51.3 | (45%) |
| Growth | 5.3 | 2.3 | 130% | 11.4 | 11.4 | - | |
| $ | 11.3 $ | 21.3 | (47%) $ | 39.7 $ | 62.7 | (37%) |
(1) The amounts included in the Financial Highlights, and cash flow sections for Metals above include the combined results of the Moa JV, Fort Site and Metals Marketing. Breakdowns of revenue, Adjusted EBITDA, and the components of free cash flow (cash provided (used) by continuing operations for operating activities and Property, plant and equipment expenditures) for each of these operations are included in the Combined Revenue, Adjusted EBITDA and Free cash flow reconciliations, respectively, in the Non-GAAP and other financial measures section of this press release.
(2) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
(3) The nickel recovery rate measures the amount of finished nickel that is produced compared to the original nickel content of the ore that was mined.
(4) Reference sources: Nickel – London Metal Exchange (“LME”). Cobalt - Average chemical-grade cobalt price published per Argus.
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Revenue
Metals revenue for the three months and year ended December 31, 2024 was $148.3 million and $526.6 million compared to $125.9 million and $603.7 million, respectively, in the same periods in 2023.
Nickel revenue for the three months and year ended December 31, 2024 was $95.3 million and $355.9 million compared to $84.1 million and $379.6 million, respectively, in the same periods in 2023. In Q4 2024, the 23% increase in nickel sales volume offset the 8% lower average-realized price(1). For the year ended December 31, 2024, the 22% increase in nickel sales volume was more than offset by the 23% decrease in average-realized price(1) in 2024. Sales volumes were higher in line with higher production in each quarter in 2024, except in Q3 where demand is typically softer and as a result of the Canadian rail lock-out that temporarily disrupted logistics. In Q4 2024, sales volume was above production due to strong spot sales and the realization of sales deferred as a result of the Canadian rail lock-out in the third quarter.
Cobalt revenue for the three months and year ended December 31, 2024 was $12.6 million and $48.0 million compared to $15.2 million and $104.8 million, respectively, in the same periods in 2023. Lower revenue in the current year periods was primarily due to the timing of receipts and sales of cobalt by Sherritt under the Cobalt Swap agreement and lower averagerealized prices(1). The average-realized prices(1) for cobalt were 29% and 24% lower in the current year periods, respectively, compared to the same periods in 2023. For more information regarding the timing of Cobalt Swap receipts, sales and distributions in 2024, refer to the Cobalt Swap section below.
Sherritt will continue to leverage its marketing strategy in developing new avenues for sales which, concurrent with implementing strategic costs reductions, is expected to effectively weather the unabated oversupply strategy from China, Indonesia and the Democratic Republic of the Congo. Sherritt is actively pursuing spot sales opportunities, new customer development and market opportunities to counter dependance on supply from these countries.
Fertilizer revenue for the three months and year ended December 31, 2024 was $31.8 million and $90.1 million compared to $23.1 million and $93.3 million, respectively, in the same periods in 2023. Fertilizer sales volumes were 14% and 5% higher while average-realized prices(1) were 21% higher and 8% lower for the three months and year ended December 31, 2024, respectively, compared to the same periods in 2023. Higher fertilizer sales volumes in 2024 reflect better available production for sale compared to 2023 consistent with higher nickel production and better equipment availability.
Cobalt Swap
In Q4 2024, Sherritt focused efforts to maximize distributions under the Cobalt Swap agreement. In Q3 2024, Sherritt had indicated the Cobalt Swap distribution in Q4 could be up to a maximum of $50.0 million (including both Sherritt’s share and GNC’s redirected share) assuming midpoint guidance for annual nickel production and first half 2024 average nickel and cobalt reference prices of US$8.00/lb and US$13.50/lb continued in the second half of the year. Despite average nickel and cobalt reference prices in the second half of 2024 being US$7.32/lb and US$11.92/lb, respectively, well below their first half averages, Sherritt’s focused efforts to prudently manage and maximize its cash flows in the Moa JV led to significant distributions of $23.7 million in cash and 223 tonnes of finished cobalt with an in-kind value of $6.1 million (including both Sherritt’s share and GNC’s redirected share) for a total of $29.8 million.
In Q4 2024, Sherritt sold 50 tonnes of the 223 tonnes of finished cobalt that it received under the Cobalt Swap agreement recognizing revenue of $1.5 million. In 2023, Sherritt had received 100% of the annual maximum amount of cobalt (2,082 tonnes) by the end of the second quarter and had sold virtually all of that cobalt by the end of the year, including 49 tonnes in Q4 2023. Sales of cobalt from the Cobalt Swap in full year 2024 were 73 tonnes, or $2.4 million, compared to 2,059 tonnes, or $80.1 million, in 2023.
At current spot nickel prices, the Corporation expects that cobalt dividends and cash distributions under the Cobalt Swap agreement will commence in the second half of the year and will not meet the annual minimum amount in 2025. The Moa JV’s cash and cobalt distributions to the Corporation are determined based on available cash in excess of liquidity requirements. Determinants of liquidity include anticipated nickel and cobalt prices and sales volumes, planned spending on capital at the Moa JV including growth capital, capital committed toward the new tailings facility net of financing, working capital needs, expected financing and other expected liquidity requirements. Available cash is also impacted by changes in working capital primarily related to changes in inventory, and timing of receipts and payments, including receipts on nickel and cobalt sales subsequent to shipment.
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While the timing of receipts and sales of cobalt under the Cobalt Swap results in variances in cobalt sales volume, revenue and cost of sales for Sherritt, they do not have a material impact on earnings from operations, average-realized prices(1), cobalt byproduct credits, or NDCC(1). This is because the variance in revenue and costs of Sherritt’s share of cobalt under the Cobalt Swap is offset by Sherritt’s share of revenue and costs of the Moa JV and the cost of cobalt sold on volumes of cobalt redirected from GNC is determined based on the in-kind value of cobalt calculated as the cobalt reference price from the month preceding distribution less a mutually agreed selling cost adjustment.
Production
Mixed sulphides production at the Moa JV for the three months and year ended December 31, 2024 was 3,552 tonnes and 15,847 tonnes, 1% and 5% higher, respectively, compared to the same periods in 2023. Lower maintenance and improved feed to the processing plant following the completion of the new Slurry Preparation Plant (“SPP”) in the first quarter of 2024 contributed to higher production throughout the year. During Q4 2024 a number of external factors in Cuba occurred including an earthquake, hurricanes and nationwide power outages that individually did not materially impact mixed sulphide precipitate (“MSP”) production but in aggregate and when combined with heavy rains which required the processing of lower grade stockpiles, resulted in MSP production being lower than it would have been otherwise.
Finished nickel production for the three months and year ended December 31, 2024 was 3,853 tonnes and 15,166 tonnes, 3% and 6% higher, respectively, compared to the same periods in 2023 primarily as a result of higher mixed sulphides feed availability at the refinery partly offset by lower third-party feed purchases in 2024.
Finished cobalt production for the three months and year ended December 31, 2024 was 465 tonnes and 1,603 tonnes, 41% and 11% higher, respectively, compared to the same periods in 2023 for the same reasons as finished nickel. Third-party feed processed in Q4 2024 had higher cobalt content compared to feed processed in Q4 2023.
Finished nickel and cobalt production for full year 2024, on a 100% basis, was within the annual guidance ranges.
Fertilizer production for the three months and year ended December 31, 2024 was 67,648 tonnes and 250,272 tonnes, 11% and 14% higher, respectively, compared to the same periods in 2023 in line with higher metals production and the implementation of operational improvements during 2024.
NDCC(1)
NDCC(1) per pound of nickel sold for the three months and year ended December 31, 2024 was US$5.44/lb and US$5.94/lb, respectively, compared to US$7.87/lb and US$7.22/lb in the same periods in 2023. In each of the current year periods, NDCC(1) significantly improved as a result of lower MPR/lb and third-party feed costs and higher net fertilizer by-product credits, partly offset by lower cobalt by-product credits. NDCC(1) was also positively impacted by higher nickel sales volume in each of the current year periods compared to the same periods in the prior year. NDCC(1) for 2024 was within the annual guidance range.
Overall, finished nickel and cobalt production significantly benefitted from the Corporation’s multiyear production optimization and expansion programs that have resulted in improved mining production and refining process flows which provided operational stability and improved operational efficiencies and have been instrumental in driving NDCC(1) down in this volatile commodities market.
MPR/lb was 14% and 15% lower in Q4 and full year 2024, respectively, compared to the same periods in 2023. In Q4 2024, the average price for natural gas and diesel were 44% and 22% lower, respectively, while sulphur was 3% higher, compared those in Q4 2023. For the full year 2024, average prices for sulphur, natural gas and diesel were 22%, 45% and 13% lower, respectively, compared to those in 2023. Full year MPR was also positively impacted by lower maintenance costs, operational improvements and lower purchases of sulphuric acid.
Third-party feed costs were 45% and 35% lower in Q4 and full year 2024 compared to in the same periods in 2023 on lower feed availability.
Net fertilizer by-product credits were significantly higher in Q4 2024 compared to Q4 2023 as a result of higher sales volumes and average-realized prices(1) as well as lower maintenance costs. For the full year 2024, net fertilizer by-product credits were higher, however, lower fertilizer maintenance costs were partly offset by lower average-realized prices(1) in full year 2024 compared to 2023.
Cobalt by-product credits(2) were 34% and 41% lower in Q4 and full year 2024, respectively, primarily as a result of lower average-realized prices(1).
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Spending on capital(1)
During the fourth quarter, in response to market conditions, Sherritt took a prudent approach and reduced its spending on capital(1) to conserve liquidity. As a result, total spending on capital for sustaining and growth activities for the year were both lower than 2024 guidance.
Sustaining spending on capital for the three months and year ended December 31, 2024 was $6.0 million and $28.3 million compared to $19.0 million and $51.3 million in the same periods in 2023, respectively.
Growth spending on capital for the three months and year ended December 31, 2024 was $5.3 million and $11.4 million compared to $2.3 million and $11.4 million in the same periods in 2023, respectively. Spending on capital in 2024 was primarily related to the second phase of the Moa JV expansion program.
(1) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
(2) Cobalt by-product credits include Sherritt’s share of cobalt revenue per pound of nickel sold only.
Expansion program and strategic developments
Moa JV expansion program and tailings update
Sherritt’s low cost and low capital intensity Moa JV expansion program continues to advance. Phase one, the SPP, was completed in early 2024 reducing ore haulage distances, lowering carbon intensity from mining and increasing throughput over the life of mine.
Construction on phase two progressed with piping installation and internal brick lining of vessels along with some precommissioning activities. With lower nickel and cobalt prices, Sherritt continues to exercise capital preservation measures and has scheduled certain expenditures for Q1 2025 when construction is expected to be completed and following which, the rampup is expected to commence.
Concurrent with the phase two completion and ramp up, the Moa JV is undertaking a series of measures to remove minor processing bottlenecks to support the expected 20% increase in annual MSP production. The additional MSP is expected to fill the refinery to nameplate capacity to maximize profitability from the joint venture’s own mine feed, displacing lower margin thirdparty feeds and increasing overall finished nickel and cobalt production.
In line with its life of mine plan and in consideration of growing international focus on tailings risks, the Moa JV is advancing a tailings management project as outlined in its 2023 National Instrument 43-101 Technical Report. The new tailings facility will be engineered and built to international standards and will provide a tailings solution for the Moa mine over the entirety of its current mine life of approximately 25 years. The Corporation expects the new tailings facility to be commissioned in 2026. Spending on capital(1) in 2024 was $13.1 million for initial engineering and infrastructure work and the expected remaining capital cost is estimated to be approximately $40.0 million (50% basis) in each of 2025 and 2026. The tailings management project is a capital efficient and robust tailings solution driven to meet expected production needs, international standards, and Moa JV’s strategic environmental priorities.
Strategic developments
Sherritt, through its mixed hydroxide precipitate processing project (“MHP Project”), is advancing a flowsheet to convert nickel intermediates via midstream processing to produce high-purity nickel and cobalt sulphates, two fundamental feedstock materials for the electric vehicle supply chain.
During the quarter, Sherritt continued to advance and derisk the MHP Project. The refinery flow sheet was validated through the completion of process development batch testing and continuous solvent extraction (“SX”) pilot work programs which yielded highpurity nickel and cobalt products, meeting battery grade specifications. Initial engineering and capital cost estimates were completed, and site assessment activities identified four potential refinery locations in Canada. Sherritt continued to engage with federal and provincial governments, potential customers and funding partners, including offtake partners for refinery products and by-products. These engagement activities will continue in 2025 with a focus on securing external partners and funding support.
Additionally, Sherritt continues to selectively advance metallurgy research and flowsheet development programs on potential future sources of nickel and cobalt, in cooperation with third parties and via external technical services, towards ensuring sufficient future critical mineral processing capacity and supply in North America.
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Power
For the three months ended For the year ended 2024 2023 2024 2023 $ millions (33 ⅓% basis), except as otherwise noted December 31 December 31 Change December 31 December 31 Change
FINANCIAL HIGHLIGHTS
| Revenue | $ 11.1 $ | 14.0 | (21%) $ | 47.8 $ | 47.1 | 1% |
| Cost of sales | 5.9 | 7.1 | (17%) | 30.1 | 22.7 | 33% |
| Earnings from operations | 4.8 | 5.9 | (19%) | 13.5 | 20.7 | (35%) |
| Adjusted EBITDA(1) | 5.5 | 6.6 | (17%) | 16.0 | 23.2 | (31%) |
CASH FLOW
Cash (used) provided by continuing operations for operating activities(1) $ (1.1) $ 7.4 (115%) $ (9.8) $ 16.9 (158%) Free cash flow(1) (1.6) 6.1 (126%) (12.7) 13.7 (193%)
PRODUCTION AND SALES
Electricity (GWh(2)) 171 225 (24%) 816 745 10%
AVERAGE-REALIZED PRICE(1)
Electricity ($/MWh(2)) $ 53.19 $ 57.96 (8%) $ 52.01 $ 57.45 (9%)
UNIT OPERATING COSTS(1)
Electricity ($/MWh) 30.64 29.16 5% 34.29 27.70 24%
SPENDING ON CAPITAL(1)
Sustaining $ 0.3 $ 1.3 (77%) $ 2.9 $ 3.2 (9%)
(1) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
(2) Gigawatt hours (“GWh”), Megawatt hours (“MWh”).
During Q4 2024, as a result of the nationwide power outages in Cuba and challenges facing the national power grid, the government agency Unión Eléctrica (“UNE”) required Energas to operate the Varadero facility in frequency control to help support the stability of the power grid, which reduced the power generation volume by approximately 25 GWh (Sherritt’s share). Energas was fully compensated for this reduction under the same terms and conditions outlined in its contract. Energas expects that the Varadero facility will operate in frequency control throughout 2025 with an estimated reduction in electricity volume of approximately 150 GWh. Energas expects to continue to be fully compensated for this reduction and therefore Sherritt expects there will be no impact to Power’s Adjusted EBITDA(1), earnings from operations or dividends from Energas to Sherritt in Canada. Energas’ other facilities are expected to continue operating as usual.
Revenue
Revenue for the three months and year ended December 31, 2024 was $11.1 million and $47.8 million down 21% and up 1%, respectively, compared to the same periods in the prior year primarily due the impact of the nationwide power outages in Cuba in Q4 2024 partly offset by higher production related to additional gas and equipment availability and $1.1 million of Varadero frequency control revenue in compensation for lost electricity generation.
Production
Production volume for the three months and year ended December 31, 2024 was 171 GWh and 816 GWh, respectively. Production in Q4 2024 was 24% lower than in Q4 2023 due to the national electricity grid outage that occurred in October 2024 and the absence of production in November and December at the Varadero facility operating in frequency control. Full year 2024, production was 10% higher than in 2023 on better equipment availability and additional gas from new wells brought online in Q2 2023 and Q4 2024. Production for the full year 2024 was within the annual guidance range.
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Unit operating cost(1)
Unit operating costs(1) for the three months and year ended December 31, 2024 were $30.64/MWh, and $34.29/MWh, compared to $29.16/MWh, and $27.70/MWh, respectively, for the same periods in 2023. Operating costs were higher in full year 2024 compared 2023 reflecting higher planned maintenance work at Puerto Escondido on three gas turbines in Q2 and Q3 completed in part to bring online an additional turbine to process gas being received from the new well that Power brought into production during the year. This maintenance work and related spend was successfully funded by Energas through the Moa Swap and was incorporated into Sherritt’s 2024 Power division guidance range. The impact of a weaker Canadian dollar on U.S. dollardenominated costs and lower electricity volumes as a result of the nationwide power outages in Cuba and subsequent implementation of frequency control at Varadero in the fourth quarter of 2024 contributed to unit operating costs(1) for the full year 2024 being slightly above the upper end of the annual guidance range of $34.00/MWh.
During Q3 2024, a new gas well was drilled and was put into production in early October. This new well was the third well to go into production since the second quarter of 2023, contributing to the improved utilization rates in the Power division and is expected to provide significantly higher levels of electricity production and increased levels of dividends in Canada going forward.
Spending on capital(1)
Spending on capital(1) for the three months and year ended December 31, 2024 was $0.3 million and $2.9 million, respectively primarily driven by planned maintenance activities completed in the year. Sustaining spending on capital(1) for the full year 2024 was lower than annual guidance as a result of the deferral of some of non-essential spending.
Dividends from Energas
Sherritt received $7.0 million of dividends in Canada from Energas in Q4 2024, bringing the total dividends in Canada to $13.0 million for the year, which was higher than previously estimated due to timing of dividend approvals at Energas, the impact of a weaker Canadian dollar and the deferral on non-essential capital expenditures.
With the completion of maintenance work in 2024 to bring online an additional turbine and to improve equipment availability to process gas from the recently completed wells and based on 2025 guidance estimates for production volumes, unit operating costs(1) and spending on capital(1) disclosed in the Outlook section total dividends in Canada from Energas in 2025 are expected to be between $25.0 million and $30.0 million in 2025.
(1) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
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OUTLOOK
2024 and 2025 production volumes, unit operating costs(1) and spending on capital(1) guidance
Year-to-date 2024 actual to 2025 Production volumes, unit operating costs(1) and spending on capital(1) Guidance December 31, 2024 Guidance
Production volumes
Moa Joint Venture (tonnes, 100% basis)
| Nickel, finished | 30,000 - 32,000 | 30,331 | 31,000 - 33,000 |
| Cobalt, finished | 3,100 - 3,400 | 3,206 | 3,300 - 3,600 |
| Electricity (GWh, 33⅓% basis) | 775 - 825 | 816 | 800 - 850 |
Unit operating costs(1)
Metals - NDCC (US$ per pound) $5.50 - $6.00 $5.94 $5.75 - $6.25 Electricity - unit operating cost ($ per MWh) $32.50 - $34.00 $34.29 $23.00 - $24.50
Spending on capital(1)($ millions)
Sustaining
| Moa Joint Venture (50% basis), Fort Site (100% basis) | $15.0 | $15.2 | $35.0 |
| Moa Joint Venture - Tailings facility (50% basis) | $25.0 | $13.1 | $40.0 |
| Power (33⅓% basis) | $5.5 | $2.9 | $2.0 |
Growth Moa Joint Venture (50% basis) $15.0 $11.4 $5.0 Spending on capital(2) $60.5 $42.6 $82.0
(1) Non-GAAP financial measures. For additional information, see the Non-GAAP and other financial measures section.
(2) Excludes negligible spending on capital of the Metals Marketing, Oil and Gas and Corporate and Other segments.
Metals
Nickel and cobalt production are both expected to increase in 2025 compared to 2024 primarily due to the enhanced availability of mixed sulphides from the Moa mine site to the refinery, following the completion, ramp up and debottlenecking of the phase two expansion. To maximize refinery operation efficiencies before and during the ramp-up period, third-party feed will be procured and processed as necessary, subject to market conditions. With the completion of the ramp up and as a result of the external challenges during the fourth quarter of 2024 which has resulted in lower beginning MSP inventory at the refinery, production is expected to be weighted towards the latter part of the year. Increased MSP production is expected to be delivered to the refinery in the second half of the year, especially in the fourth quarter of 2025, and finished nickel and cobalt production is expected to increase further in 2026.
NDCC(1) for 2025 is expected to be relatively consistent with 2024 and is expected to benefit from higher expected production and sales volumes and from previously implemented and continued cost optimization initiatives. Offsetting these benefits is the forecast negative impact from future commodity prices including lower cobalt prices, which are expected to result in year-overyear lower cobalt by-product credits, and higher sulphur prices, which are expected to result in higher input costs. In addition, guidance for 2025 includes the impact of the bi-annual Fort Site ammonia plant turnaround, and higher purchases of sulphuric acid required during planned acid plant maintenance at Moa.
By-product credits and input commodities included in NDCC(1) are subject to considerable change given the volatility of cobalt, fertilizer, sulphur, diesel and fuel prices. NDCC(1) guidance for 2025 is based on a forecast cobalt reference price of US$11.70 per pound and forecast sulphur price of US$215.00 per tonne including freight and handling.
Sustaining spending on capital(1), excluding spending on the new tailings facility, is expected to be $35.0 million (Moa JV 50% basis, Fort Site 100% basis).
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Sustaining spending on capital(1) of $40.0 million (50% basis) is related to advancing Moa JV’s tailings management project as outlined in its 2023 National Instrument 43-101 Technical Report. The new tailings facility will provide a tailings solution for the Moa mine over the entirety of its current mine life of approximately 25 years. The Corporation expects the new tailings facility to be commissioned in 2026. Spending on capital(1) in 2024 was $13.1 million for initial engineering and infrastructure work and the remaining expected capital cost which includes early works spending that was deferred from 2024 is estimated to be approximately $40.0 million (50% basis) in each of 2025 and 2026. The tailings management project is a capital efficient and robust tailings solution driven to meet expected production needs, international standards, and Moa JV’s strategic environmental priorities. Subsequent to year end, the Moa JV secured a US$60.0 million (100% basis) equivalent loan in Cuban pesos from a Cuban financial institution with a 5-year maturity that will primarily be utilized to support capital spend on tailings management.
Growth spending on capital(1) is primarily related to deferred spending from 2024 which is to be used for the completion of construction of phase two of the expansion program at the Moa JV which remains on budget and is expected to be completed in the first half of 2025.
Power
Electricity production is expected to be higher in 2025 compared to 2024 despite the lower production at the Varadero facility due to the requirement to operate in frequency control as noted above. Production at Power’s other facilities are expected to be higher as a result of the full year receipt of additional gas from the gas well that went into production in Q4 2024, better equipment availability and improved utilization rates with the completion of the maintenance in 2024.
The 2025 production guidance reflects a reduction of approximately 150 GWh associated with frequency control at the Varadero facility. Enegas expects to continue to be fully compensated for this reduction under the same terms and conditions outlined in its contract and the Corporation expects there will be no negative impact to Power’s Adjusted EBITDA(1), earnings from operations or dividends from Energas to Sherritt in Canada as a result.
Unit operating cost(1) for electricity in 2025 reflects lower planned maintenance activities related to gas turbines and the impact of higher electricity production and sales.
Spending on capital(1) for sustaining activities is primarily for maintenance and equipment purchases.
(1) Non-GAAP and other financial measures. For additional information, see the Non-GAAP and other financial measures section.
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