Sherritt Reports Higher Production at Moa JV and Stronger
Sherritt International Corporation 1
For immediate release
Sherritt Reports Higher Production at Moa JV and Stronger
Balance Sheet for Q3 2018
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES
Toronto, Ontario – October 31, 2018 – Sherritt International Corporation (“Sherritt” or the “Corporation”) (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-month periods ended September 30, 2018. All amounts are in Canadian currency unless noted.
CEO COMMENTARY
“Our performance in the third quarter was marked by clear signs of progress,” said David Pathe, President and CEO of Sherritt
International. “We ended Q3 with a stronger balance sheet, our first dividend distribution from the Moa JV in more than three
years, and higher nickel production at Moa.
“While the momentum that nickel and cobalt prices established at the start of the year has recently been dampened by concerns
over international trade disputes and the impacts of tariffs, underlying fundamentals for physical metal remain strong and the
outlook is encouraging. Since the start of 2018, we have witnessed a decline in global Class 1 nickel inventory stocks by almost
40%. With no new nickel production coming online in the near term and demand expected to continue to grow, especially as the
electric vehicle battery market expands, we anticipate favorable market fundamentals to continue.”
Q3 2018 HIGHLIGHTS
Adjusted EBITDA was $40.6 million, up 20% from $33.8 million in Q3 2017. The increase was largely due to higher
realized nickel and cobalt prices, more than offsetting the impact of lower oil production due to the expiration of a
production sharing contract at Varadero West as well as the impact of higher mining and input costs, including increased
sulphur and energy expenses. Year-to-date adjusted EBITDA for 2018 has improved by 26% to $126.5 million.
Sherritt’s share of finished nickel production at the Moa Joint Venture (“Moa JV”) was 4,457 tonnes, up 10% from last
year, while finished cobalt was 465 tonnes, flat from Q3 2017. Nickel production in Q3 2018 improved largely due to
the arrival of new mining equipment that enabled Moa to surpass its target mixed sulphide production for the quarter.
Net direct cash cost (NDCC)(1) at the Moa JV was US$2.16 per pound of finished nickel sold, representing the sixth
consecutive quarter that the Moa JV is in the lowest cost quartile relative to other nickel producers based on annualized
information tracked by Wood Mackenzie. NDCC in Q3 2018 was impacted, however, by higher sulphur and energy
prices relative to Q3 2017 when the NDCC at the Moa JV was US$1.94 per pound of finished nickel sold.
The average-reference price for nickel improved 26% from last year to US$6.01/lb while the average-reference price
for cobalt increased 22% to US$35.21/lb.
Received $5.2 million in dividend distributions from the Moa Joint Venture. The dividend marks the first that Sherritt
has received since Q1 2015, and reflects generally improved nickel market conditions.
Sherritt ended the quarter with $207.1 million in cash, cash equivalents and short-term investments, up from $197.2
million at June 30, 2018.
Net loss was $13.3 million or $0.03 on a per share basis. In Q3 2017, Sherritt incurred a net loss of $69.5 million or
$0.24 per share.
As previously reported, Sherritt resumed drilling on Block 10 in early July. Drilling continues today. During the quarter,
the expandable casing technology imported to address the loss circulation zones in the upper reservoir was
successfully deployed. Drilling continued to a total depth of approximately 5,000 meters of the planned 5,960 meters.
Recently, wellbore instability has been encountered between the upper and lower reservoirs. To manage the wellbore
instability, a portion of the wellbore below the upper reservoir is currently being re-drilled and results are anticipated
within 90 days. Total capital spending for the oil division, including added costs for drilling on Block 10, are now
estimated at approximately US$29 million for 2018.
2018 Third Quarter Report
Press Release
2 Sherritt International Corporation
Submitted an application to the Alberta Partial Upgrading Program for a grant to advance development of Sherritt’s
proprietary process to upgrade bitumen at a lower cost. Sherritt’s process is based on 60 years of experience with
hydrometallurgical processes and the use of autoclaves.
Relocated to a new corporate office in Toronto, a move that is expected to result in cost savings of approximately $1
million per year.
DEVELOPMENTS SUBSEQUENT TO QUARTER END
In early October 2018, delivery of hydrogen sulphide, a key reagent used at the Moa JV refinery in Fort Saskatchewan,
Alberta, was interrupted due to the supplier’s non-compliance with provincial regulations, resulting in a temporary
suspension of hydrogen sulphide delivery to the refinery and a reduction in production of finished nickel and cobalt.
Hydrogen sulphide supply has now resumed, and the refinery is once again operating at full capacity. As a result of
the impact of the supplier’s delivery interruption, Sherritt has lowered the range of its expected production guidance at
the Moa JV for finished nickel to 30,500 to 31,000 tonnes (100% basis) and lowered the range of finished cobalt
production to 3,250 to 3,400 tonnes (100% basis). Expected NDCC guidance at the Moa JV for 2018 has been updated
to be in the range of US$1.90 to US$2.40 per pound of nickel sold, reflecting the impact of the hydrogen sulphide
development on production as well as the recent increase in input costs and decline in cobalt prices.
Sherritt’s escrow account to cover funding requirements of the Ambatovy Joint Venture was depleted following a cash
call in October 2018. The escrow account was established as a requirement of the Ambatovy restructuring completed
in December 2017 when Sherritt’s ownership interest was reduced to 12% in exchange for the elimination of $1.4 billion
of debt. Any future cash funding requirements will be dependent on Ambatovy’s production as well as prevailing
commodity prices among other items. If additional cash funding is required, Sherritt does not anticipate providing any
such funding based on Ambatovy’s current debt structure.
(1) For additional information see the Non-GAAP measures section of this press release.
Q3 2018 FINANCIAL HIGHLIGHTS
For the three months ended For the nine months ended
2018 2017 2018 2017
$ millions, except per share amount September 30 September 30 Change September 30 September 30 Change
Revenue 29.9 63.3 (53%) $ 115.8 $ 212.5 (46%)
Combined Revenue(1) 187.8 234.7 (20%) 535.8 693.7 (23%)
Net Loss for the period (13.3) (69.5) 81% (11.1) (244.0) 95%
Adjusted EBITDA(1) 40.6 33.8 20% 126.5 100.2 26%
Cash used (provided) by continuing operations 14.1 28.7 (51%) (5.2) 24.3 (121%)
Combined free cash flow (1) (3.5) 7.3 (148%) (13.9) (20.9) 33%
Net Loss from continuing operations per share (0.03) (0.24) 88% (0.03) (0.83) 96%
(1) For additional information see the Non-GAAP measures section.
(2) The amounts for the periods ended September 30, 2018 have been prepared in accordance with IFRS 9 and IFRS 15; prior year periods amounts have not been
restated. Refer to note 4 in the condensed consolidated financial statements for the three months ended March 31, 2018 for further information.
2018 2017
$ millions, except as otherwise noted, as at September 30 December 31 Change
Cash, cash equivalents and short term investments $ 207.1 $ 203.0 2%
Loans and borrowings 696.0 824.1 (16%)
In Q3 2018, Sherritt generated $14.1 million in cash flow from operations largely as a result of higher realized prices for nickel
and cobalt and a $5.2 million dividend distribution received from the Moa JV. In addition, the Moa JV’s stronger financial position
allowed it to fully repay Sherritt $10.8 million of advances previously provided for working capital purposes. Receipt of this
repayment is reported within financing activities and, therefore, not included within Sherritt’s operating and free cash flow results.
Sherritt International Corporation 3
The dividend distribution, the first in more than three years, was possible following the final repayment on a $45 million Moa JV
working credit facility and the $10.8 million advance. Future dividend distributions from the Moa JV will vary in amount based on
available free cash generated largely as a result of production totals and prevailing nickel and cobalt prices.
Combined operating cash flow in Q3 2018 included contributions totaling $12.3 million from the Moa JV and Fort Site, $0.8
million from the Oil and Gas division and $10.0 million from the Power division.
As a result of a combination of exploration costs for Block 10 drilling and other capital expenditures totaling $21 million, Sherritt
generated negative free cash flow of $3.5 million on a combined basis in Q3 2018. This total was also impacted by reduced
Cuban energy payments in the period. Cuban overdue scheduled receivables at September 30, 2018 totaled US$147.8 million,
up from US$136.9 million at June 30, 2018. In Q3 2018, Sherritt received US$14.0 million of Cuban energy payments. Sherritt
has experienced variability in its Cuban receivables over the years but has not incurred any losses related to any scheduled
Cuban receivables.
Cash, cash equivalents and short-term investments at September 30, 2018 were $207.1 million, up from $197.2 million at June
30, 2018. The increase was due to a number of items, including the $5.2 million dividend distribution from the Moa JV, $7.1
million in fertilizer prepayments and the receipt of a $10.8 million advance previously provided to the Moa JV for working capital
purposes.
Adjusted earnings (loss) from continuing operations(1)
2018 2017
For the three months ended September 30 $ millions $/share $ millions $/share
Net loss from continuing operations (13.3) (0.03) (69.5) (0.24)
Adjusting items, net of tax:
Unrealized foreign exchange (gain) loss 6.1 0.01 (13.5) (0.05)
Other (3.0) (0.01) (1.4) -
Adjusted net loss from continuing operations (10.2) (0.03) (84.4) (0.29)
2018 2017
For the nine months ended September 30 $ millions $/share $ millions $/share
Net loss from continuing operations (11.1) (0.03) (244.0) (0.83)
Adjusting items, net of tax:
Unrealized foreign exchange (gain) loss (12.6) (0.03) (16.4) (0.06)
Other (10.0) (0.03) (6.5) (0.02)
Adjusted net loss from continuing operations (33.7) (0.09) (266.9) (0.91)
(1) For additional information see the Non-GAAP measures section.
Sherritt incurred a net loss from continuing operations of $13.3 million, or $0.03 per share outstanding, in Q3 2018. These
compare to a net loss from operations of $69.5 million, or $0.24 per share, in Q3 2017.
On an adjusted basis, Sherritt incurred a net loss from operations of $10.2 million, or $0.03 per share outstanding, in Q3 2018
before the effect of an unrealized foreign exchange loss of $6.1 million. These compare to an adjusted net loss of $84.4 million,
or $0.29 per share, for the same period of 2017 when Sherritt recorded an unrealized foreign exchange gain of $13.5 million.
2018 Third Quarter Report
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4 Sherritt International Corporation
METAL MARKETS
Nickel
Nickel prices softened in Q3 2018 due largely to concerns of the potential negative impacts that escalating international trade
disputes and the imposition of new tariffs will have on future demand. These concerns, which became heightened in
September, slowed the momentum that nickel prices developed starting in the second half of 2017. The average reference
price in Q3 2018 was US$6.01/lb, up 26% from US$4.78/lb in the third quarter of 2017.
Combined nickel inventories on the London Metals Exchange and the Shanghai Futures Exchange at the end of Q3 2018
totaled 240,066 tonnes, down 20% from 298,803 tonnes at the end of Q2 2018. Total Class 1 nickel inventories since the start
of the year have declined by almost 40%. As demand continues to exceed available supply, the nickel market is anticipated to
be in a structural deficit in the coming years.
Demand for nickel will continue to be driven by the stainless steel sector. According to market research by CRU, stainless
steel demand is expected to grow at an average annual rate of 4% through 2022 with production emanating largely from China
and Indonesia. Demand for nickel – particularly Class 1 nickel – from non-stainless steel sectors is also expected to accelerate
given the growth of the electric vehicle battery market. Class I nickel, along with cobalt, are key metals needed to manufacture
electric vehicle batteries.
Beyond 2018, a shortage of Class 1 nickel is anticipated over the coming years since current market prices are below incentive
levels needed to develop new nickel projects. As a result, no new Class 1 nickel supply is expected to come on stream in the
near term.
Cobalt
Cobalt prices experienced continued softness in Q3 2018 over the prior quarter. The price decline was driven by a number of
developments, including increased supply of physical metal from the Democratic Republic of Congo as well as tightening
liquidity conditions for traders and buyers based in China that reduced demand. The average-reference price for Q3 2018 was
US$35.21/lb, up 22% from US$28.84/lb for Q3 2017.
Low physical demand and current cobalt oversupply is likely to keep market conditions subdued through the end of 2018.The
recent softening of prices is expected to be temporary due to the growing demand from the electric vehicle battery market and
persistent supply risk concerns linked to the Democratic Republic of Congo, which is currently the world’s largest source of
cobalt supply. Cobalt prices since the start of Q4 2018 have experienced some recovery and have stabilized in the US$33-
$34/lb range.
High cobalt prices are not expected to cause supply-chain disruptions or delay the growth of the electric vehicle market given
that cobalt prices represent a relatively small percentage of the overall battery pack costs. As a result, the potential for removing
cobalt from electric vehicle battery production in the near term is relatively low especially since cobalt’s unique properties give
batteries energy stability. While battery manufacturers continue to explore alternatives to existing electric vehicle battery
chemistry, particularly to increase the battery’s energy density, the likely beneficiary of any changes is expected to be Class I
nickel.
Sherritt International Corporation 5
REVIEW OF OPERATIONS
Moa Joint Venture (50% interest) and Fort Site (100%)
For the three months ended For the nine months ended
2018 2017 2018 2017
$ millions, except as otherwise noted September 30 September 30 Change September 30 September 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 136.3 $ 100.7 35% $ 378.1 $ 294.1 29%
Earnings from operations 25.1 12.8 96% 73.5 11.4 545%
Adjusted EBITDA(1) 39.5 23.9 65% 111.0 48.4 129%
CASH FLOW
Cash provided by operations $ 12.3 $ 17.6 (30%) $ 40.5 $ 25.8 57%
Adjusted operating cash flow(1) 29.2 21.5 36% 92.9 40.5 129%
Free cash flow(1) 3.8 14.5 (74%) 18.5 12.5 48%
PRODUCTION VOLUMES (tonnes)
Mixed Sulphides 4,861 4,555 7% 12,969 13,207 (2%)
Finished Nickel 4,457 4,049 10% 11,060 11,628 (5%)
Finished Cobalt 465 464 - 1,189 1,336 (11%)
Fertilizer 57,235 60,033 (5%) 162,416 181,759 (11%)
NICKEL RECOVERY (%) 89% 87% 2% 83% 87% (5%)
SALES VOLUMES (tonnes)
Finished Nickel 4,404 4,018 10% 10,982 11,550 (5%)
Finished Cobalt 467 447 4% 1,180 1,303 (9%)
Fertilizer 27,567 32,080 (14%) 116,774 127,350 (8%)
AVERAGE-REFERENCE PRICES (US$ per pound)
Nickel $ 6.01 $ 4.78 26% $ 6.20 $ 4.55 36%
Cobalt(2) 35.21 28.84 22% 39.05 24.84 57%
AVERAGE REALIZED PRICE
Nickel ($ per pound) $ 7.96 $ 6.02 32% $ 8.10 $ 5.94 36%
Cobalt ($ per pound) 44.75 34.89 28% 48.82 30.85 58%
Fertilizer ($ per tonne) 333 309 8% 390 367 6%
UNIT OPERATING COSTS(1) (US$ per pound)
Nickel - net direct cash cost $ 2.16 $ 1.94 11% $ 1.96 $ 2.53 (23%)
SPENDING ON CAPITAL
Sustaining $ 8.9 $ 3.0 197% $ 26.5 $ 13.2 101%
$ 8.9 $ 3.0 197% $ 26.5 $ 13.2 101%
(1) For additional information see the Non-GAAP measures section.
(2) Average low-grade cobalt published price per Fastmarkets MB (formerly Metals Bulletin).
The Moa JV produced 4,457 tonnes of finished nickel in Q3 2018, up 10% from 4,049 tonnes produced in Q3 2017. Growth
was largely driven by the deployment of new mining equipment that provided access to higher grade ore for processing. The
new equipment also contributed to significantly improved equipment availability when compared to the same period of 2017.
Finished cobalt production in Q3 2018 was 465 tonnes, flat from 464 tonnes produced in Q3 2017. Finished cobalt production
in Q3 2018 was impacted by a higher nickel to cobalt ratio in supplemental third-party feeds supplied to the Fort Saskatchewan
refinery when compared to Q3 2017. The nickel to cobalt ratio in Moa’s mixed sulphide in Q3 2018 was within range of historic
norm.
Q3 2018 revenue for the Moa JV and the Fort Site totaled $136.3 million, up 35% from $100.7 million for the comparable period
of 2017. The increase was driven by higher realized prices in 2018 for nickel (+32%), cobalt (+28%) and fertilizer (+8%) and a
weaker Canadian dollar relative to the U.S. dollar.
2018 Third Quarter Report
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6 Sherritt International Corporation
Nickel sales represented 57% of the Moa JV’s total Q3 2018 revenue while cobalt sales represented 34%. Fertilizer sales in Q3
2018 were down 7% from last year, reflecting weaker demand leading up to the fall fertilizer application season. The impact of
weaker sales was partially offset, however, by higher realized prices of 8%.
Mining, processing and refining (MPR) costs for Q3 2018 were US$5.25/lb, up 15% from US$4.57/lb for Q3 2017. The increase
was primarily due to higher input costs, largely from increased sulphur and energy prices as well as the impact of planned
maintenance activities at an acid plant at Moa that contributed to higher maintenance and purchased sulphuric acid costs relative
to the comparable period of 2017.
After taking into account a cobalt credit of US$3.63/lb, NDCC at Moa in Q3 2018 was US$2.16/lb, up 11% from US$1.94/lb for
the same period last year. NDCC in Q3 2018 was, nevertheless, ranked in the lowest cost quartile relative to other nickel
producers based on annualized information tracked by Wood Mackenzie. NDCC at the Moa JV has now ranked in the lowest
cost quartile for six consecutive quarters.
The Moa JV generated adjusted operating cash flow of $29.2 million in Q3 2018, up 36% from $21.5 million in the same period
of 2017. The increase was largely due to the year-over-year improvement in realized prices for nickel and cobalt.
The Moa JV’s sustaining capital spending in Q3 2018 was $8.9 million, up from $3.0 million in Q3 2017. The increase was due
to higher planned spending, including the construction of the new slurry preparation plant dump pocket at Moa, which is expected
to be commissioned in Q4 2018. Following an internal equipment inspection, a significant capital project at the Fort Site has
been reassessed and is able to be reduced and deferred until future years. As a result, when combined with certain other
opportunities to defer some maintenance projects to 2019, sustaining capital spending for 2018 at the Moa JV has been lowered
to $40 million (US$31 million). The Moa JV is expected to continue to operate and fund capital expenditures without shareholder
funding.
Subsequent to quarter end, delivery of hydrogen sulphide, a key reagent used at the Moa JV refinery in Fort Saskatchewan,
Alberta, was interrupted due to the supplier’s non-compliance with provincial regulations, resulting in a temporary suspension of
hydrogen sulphide delivery to the refinery and a reduction in production of finished nickel and cobalt. Hydrogen sulphide supply
has now resumed, and the refinery is once again operating at full capacity. As a result of the impact of the supplier’s delivery
interruption, Sherritt has lowered the range of its expected production guidance at the Moa JV for finished nickel to 30,500 to
31,000 tonnes (100% basis) and lowered the range of finished cobalt production to 3,250 to 3,400 tonnes (100% basis).
Expected NDCC guidance at the Moa JV for 2018 has been updated to be in the range of US$1.90 to US$2.40 per pound of
nickel sold, reflecting the impact of the hydrogen sulphide development on production as well as the recent increase in input
costs and decline in cobalt prices.
Sherritt International Corporation 7
Investment in Ambatovy Joint Venture (12% interest effective December 11, 2017)(1)
For the three months ended For the nine months ended
2018 2017 2018 2017
$ millions, except as otherwise noted September 30 September 30 Change September 30 September 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 28.6 $ 78.0 (63%) $ 77.7 $ 221.1 (65%)
Loss from operations (7.7) (34.2) 77% (18.2) (101.8) 82%
Adjusted EBITDA(2) 2.9 1.3 123% 12.7 7.9 61%
CASH FLOW
Cash provided (used) by operations $ 2.6 $ (8.9) 129% $ 1.0 $ (23.3) 104%
Adjusted operating cash flow(2) 2.8 0.9 211% 5.7 (10.6) 154%
Free cash flow(2) (1.0) (13.8) 93% (8.1) (34.9) 77%
PRODUCTION VOLUMES (tonnes)(3)
Mixed Sulphides 1,070 1,022 5% 3,015 3,452 (13%)
Finished Nickel 914 974 (6%) 2,729 3,152 (13%)
Finished Cobalt 88 100 (12%) 236 278 (15%)
Fertilizer 2,383 3,122 (24%) 8,134 9,932 (18%)
NICKEL RECOVERY (%) 86% 77% 12% 87% 82% 6%
SALES VOLUMES (tonnes)(3)
Finished Nickel 1,069 1,145 (7%) 2,918 3,328 (12%)
Finished Cobalt 103 103 - 251 298 (16%)
Fertilizer 3,274 3,336 (2%) 7,411 10,171 (27%)
AVERAGE-REFERENCE PRICES (US$ per pound)
Nickel $ 6.01 $ 4.78 26% $ 6.20 $ 4.55 36%
Cobalt(4) 35.21 28.84 22% 39.05 24.84 57%
AVERAGE-REALIZED PRICE
Nickel ($ per pound) $ 8.03 $ 5.77 39% $ 7.96 $ 5.92 34%
Cobalt ($ per pound) 41.36 36.16 14% 47.42 31.89 49%
Fertilizer ($ per tonne) 195.00 160 22% 193.92 166 17%
UNIT OPERATING COSTS(2) (US$ per pound)
Nickel - net direct cash cost $ 3.91 $ 4.27 (8%) $ 4.07 $ 3.96 3%
SPENDING ON CAPITAL
Sustaining $ 4.6 $ 13.0 (65%) $ 10.2 $ 34.2 (70%)
$ 4.6 $ 13.0 (65%) $ 10.2 $ 34.2 (70%)
(1) Sherritt’s share for Ambatovy Joint Venture reflects its interest at 40% through December 10, 2017 and 12% thereafter.
(2) For additional information, see the Non-GAAP measures section of this release.
(3) To allow for easier comparison, Ambatovy production volume information for the periods ended September 30, 2017 are presented on a 12% basis.
(4) Average low-grade cobalt published price per Fastmarkets MB (formerly Metals Bulletin).
Sherritt’s financial results at Ambatovy are presented on a 12% basis for Q3 2018 and on a 40% basis for Q3 2017. Production
totals are presented on a 12% for both periods for better comparison purposes. Along with its partners, Sherritt completed the
restructuring of the Ambatovy Joint Venture on December 11, 2017. The restructuring led to Sherritt’s ownership interest being
reduced to 12% in exchange for the elimination of $1.4 billion of debt. Sherritt will continue to serve as operator of Ambatovy at
least through 2024, however, as a result of the reduction in its ownership interest, Sherritt’s ability to direct local decision-making
at Ambatovy has diminished.
Finished nickel production at Ambatovy in Q3 2018 was 914 tonnes, down 6% from 974 tonnes produced in Q3 2017. Finished
cobalt production in Q3 2018 was 88 tonnes, down 12% from 100 tonnes for Q3 2017. Production in Q3 2018 was impacted
by a number of developments, including bottlenecks in the pressure acid leach (PAL) circuit caused by ore that was highly
oxidizing and constrained throughput. The bottleneck issues experienced in Q3 2018 have since been resolved. Production in
Q3 2018 was also impacted by a longer than expected planned shutdown that lasted 10 days and included the replacement of
an economizer as well as related maintenance and inspection activities.
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8 Sherritt International Corporation
Throughout 2018, the Ambatovy JV has been implementing a number of initiatives aimed at improving production and increasing
the reliability of acid production and PAL circuits. These initiatives have included the replacement of two acid plant economizers,
replacement of equipment damaged by Cyclone Ava, and efforts to improve autoclave reliability.
Based on the progress of the initiatives to strengthen asset reliability, Sherritt continues to expect that its nickel and cobalt
production at Ambatovy in the second half of 2018 will be greater than production through the first six months of the year, and
also expects to reach the lower range of its production guidance for the year.
MPR costs for Q3 2018 were US$7.28/lb, up 11% from US$6.58/lb in Q3 2017. The year-over-year increase was largely due to
the impact of higher input costs, including sulphur and energy expenses.
NDCC for finished nickel at Ambatovy in Q3 2018 was US$3.91/lb, down 8% from US$4.27/lb for Q3 2017. The decrease was
due to a higher cobalt by-product credit, partially offset by higher energy and sulphur input costs. As a result of the recent decline
in cobalt prices and increase in sulphur and energy costs, Sherritt expects that NDCC at the Ambatovy JV will be in the range
of US$3.75 to US$4.25 per pound of nickel sold for 2018.
Spending on sustaining capital at Ambatovy on a 100% basis was relatively unchanged in Q3 2018 from the same period last
year. Capital spend in Q3 2018 was approximately $33 million (100% basis) and was largely allocated towards the replacement
of the economizer at Acid Plant 2, restoring the conditions of the acid plants, repairing corroded equipment and improving plant
reliability.
OIL AND GAS
For the three months ended For the nine months ended
2018 2017 2018 2017
$ millions, except as otherwise noted September 30 September 30 Change September 30 September 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 8.7 $ 29.9 (71%) $ 36.4 $ 99.3 (63%)
(Loss) earnings from operations (5.2) 5.8 (190%) (6.6) 25.7 (126%)
Adjusted EBITDA(1) (2.7) 14.0 (119%) 1.3 51.4 (97%)
CASH FLOW
Cash provided by operations 0.8 7.9 (90%) 18.6 33.1 (44%)
Adjusted operating cash flow(1) (3.5) 10.4 (134%) (14.5) 39.7 (137%)
Free cash flow(1) (7.3) 0.7 (1143%) 0.6 18.8 (97%)
PRODUCTION AND SALES (bopd)
Gross working-interest (GWI) - Cuba 4,668 13,831 (66%) 4,973 14,524 (66%)
Total net working-interest (NWI) 1,536 7,658 (80%) 2,414 8,446 (71%)
AVERAGE EXCHANGE RATE (CAD/USD) 1.307 1.253 4% 1.288 1.307 (2%)
AVERAGE REFERENCE PRICE (US$ per barrel)
West Texas Intermediate (WTI) $ 69.56 $ 48.21 44% $ 66.90 $ 49.29 36%
U.S. Gulf Coast High Sulpher Fuel Oil (USGC HSFO)(2) 65.72 46.39 42% 61.16 45.03 36%
Brent 74.95 52.51 43% 72.18 51.66 40%
AVERAGE-REALIZED PRICE(1) (NWI)
Cuba ($ per barrel) $ 63.55 $ 42.10 51% $ 55.25 $ 42.63 30%
UNIT OPERATING COSTS(1) (GWI)
Cuba ($ per barrel) $ 18.84 $ 8.98 110% $ 18.72 $ 9.19 104%
SPENDING ON CAPITAL
Development, facilities and other $ 1.4 $ 0.9 56% $ 1.4 $ (0.3) 567%
Exploration 7.1 6.6 8% 16.6 12.5 33%
$ 8.5 $ 7.5 13% $ 18.0 $ 12.2 48%
(1) For additional information see the Non-GAAP measures section.
(2) Starting in 2018, the Oil and Gas division uses U.S. Gulf Coast High Sulphur Fuel Oil for pricing purposes, replacing U.S. Gulf Coast Fuel Oil #6 used previously. The
comparative period has been adjusted accordingly.