Sherritt Reports Higher Nickel Production at Moa JV and Stronger
Sherritt International Corporation 1
For immediate release
Sherritt Reports Higher Nickel Production at Moa JV and Stronger
Balance Sheet for Q4 2018
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES
Toronto, Ontario – February 13, 2019 – 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 12-month periods ended December 31, 2018. All amounts are in Canadian currency unless otherwise noted.
CEO COMMENTARY
“Sherritt ended 2018 with lower debt and more cash than we started the year with as a result of several initiatives designed to
reduce expenses, buy back $130 million of outstanding debentures and improve production reliability at our operations,” said
David Pathe, President and CEO of Sherritt International.
“Although concerns of international trade disputes and the impacts of tariffs have resulted in recent commodity price volatility,
we expect to sustain our momentum through 2019 and beyond by capitalizing on the strong market fundamentals and outlook
for Class 1 nickel, completing drilling on Block 10, and identifying opportunities where we can bring innovations developed by
our Technologies Group to market,” added Mr. Pathe.
HIGHLIGHTS FOR Q4 AND FY2018
Sherritt’s share of finished nickel production at the Moa Joint Venture (“Moa JV”) in Q4 2018 was 4,294 tonnes, up 4%
from last year, while finished cobalt was 428 tonnes, down 8% from Q4 2017. Production for Q4 2018 was impacted
by the disruption in the supply of hydrogen sulphide, a key reagent used in the production of finished nickel and cobalt
at the refinery in Fort Saskatchewan, as previously disclosed.
Q4 2018 Adjusted EBITDA(1) was $17.7 million, down from $49.6 million in Q4 2017. The decrease was due to a number
of factors, including lower contributions from the Oil and Gas business, lower cobalt sales and higher input costs,
including higher sulphur and energy prices, at the Moa JV.
Received $6.7 million in distributions from the Moa JV in Q4 2018 for a total of $11.9 million in distributions for FY2018.
Q4 2018 marks the second consecutive quarter that the Moa JV has made distributions, indicative of improved nickel
prices over the past several quarters.
Net direct cash cost (NDCC)(1) at the Moa JV for FY2018 was US$2.24 per pound of finished nickel sold, in line with
the US$1.90 - $2.40 per pound guidance that Sherritt provided for the year. NDCC for 2018 ranked the Moa JV within
the lowest cost quartile relative to other producers and ranked it as the lowest cost nickel HPAL operation according to
annualized information tracked by Wood Mackenzie.
Cash from continuing operations in FY2018 was $7.4 million compared to cash flow used of $9.6 million in FY2017.
The improvement was driven largely by the receipt of distributions from the Moa JV, lower interest payments on
debentures and increased fertilizer customer prepayments.
Sherritt ended the year with cash, cash equivalents and short-term investments of $207.0 million, up from $203.0 million
at the end of 2017. The increase was due to a combination of factors, including the receipt of distributions, working
capital and advance repayments from the Moa JV totaling $47.7 million, reduced interest payments of $6.3 million and
reduced administrative expenses of $6.1 million, excluding the reduction of share-based compensation. The lower
administrative expenses were due to various cost-savings initiatives, including lower consulting fees, reduced employee
costs and the relocation of the Toronto corporate office.
DEVELOPMENTS SUBSEQUENT TO YEAR END
Reached an agreement in principle, subject to final approvals, with Cuban partner on a payment plan to reduce overdue
receivables.
Based on a decision to prudently manage drilling and exploration costs, drilling on Block 10 has been suspended to
enable the completion of additional analysis of the geological conditions between the upper and lower target reservoir.
2018 Fourth Quarter Report
Press Release
Sherritt International Corporation
To date, third-party industry experts have completed detailed lab analysis of rock cuttings collected during previous
operations on Block 10. Results of the lab analysis, which indicated that the rock formation between the upper and
lower target reservoirs has unique characteristics, are currently being used with the assistance of other third-party
experts to adjust drilling parameters, including modifying the drilling fluid and making use of casing while drilling
technology that addresses the challenges of well-bore degradation and fractured zones experienced to date.
Drilling on Block 10 will resume at the end of March with the new drilling parameters, and is expected to be completed
in the second quarter of 2019. The adoption of new drilling parameters will not result in any increases to planned capital
spending previously disclosed for the Oil and Gas business. Any incremental capital spend at the Oil and Gas business
in 2019 will be predicated on successful drill results on Block 10 and collections on receivables. Sherritt intends to
explore partnerships for further investment in Block 10 following completion of the current drilling.
(1) For additional information see the Non-GAAP measures section of this press release.
Q4 2018 FINANCIAL HIGHLIGHTS
For the three months ended For the years ended
2018 2017 2018 2017
$ millions, except per share amount December 31 December 31 Change December 31 December 31 Change
Revenue 37.1 54.8 (32%) $ 152.9 $ 267.3 (43%)
Combined Revenue(1) 166.1 223.8 (26%) 701.9 917.5 (23%)
Net earnings (loss) for the period (53.1) 537.8 (110%) (64.2) 293.8 (122%)
Adjusted EBITDA(1) 17.7 49.6 (64%) 144.2 149.8 (4%)
Cash provided (used) by continuing operations 12.6 (33.9) 137% 7.4 (9.6) 177%
Combined free cash flow (1) 6.4 (41.2) 116% (7.5) (62.1) 88%
Net earnings (loss) from continuing operations per share (0.17) 1.85 (109%) (0.21) 1.04 (120%)
(1) For additional information see the Non-GAAP measures section.
(2) The amounts for the periods ended December 31, 2018 have been prepared in accordance with IFRS 9 and IFRS 15; prior year periods amounts have not been
restated. Refer to note 3 in the audited consolidated financial statements for the year ended December 31, 2018 for further information.
$ millions, as at December 31 2018 2017 Change
Cash, cash equivalents and short-term investments 207.0 203.0 2%
Loans and borrowings 705.7 824.1 (14%)
Cash, cash equivalents and short-term investments at December 31, 2018 were $207.0 million, up from $203.0 million at
December 31, 2017. In Q4 2018, Sherritt generated $12.6 million in cash flow from operations largely as a result of $14.0 million
in fertilizer customer prepayments and a $6.7 million distribution received from the Moa JV.
During the year Sherritt received dividends and distributions totaling $11.9 million from the Moa JV. These amounts were
received subsequent to the Moa JV’s repayment of $25 million on a working credit facility and $10.8 million on advances
previously made. Future dividends and 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 Q4 2018 included contributions of $50.2 million from the Moa JV and Fort Site, $13.1 million
from the Oil and Gas business and $5.0 million from the Power business.
During Q4 2018, Sherritt received US$17.4 million on its Cuban overdue scheduled receivables. At December 31, 2018 total
overdue receivables were US$152.5 million, up from US$147.8 million at September 30, 2018. Sherritt has experienced
variability in its Cuban receivables over the years but has not incurred any losses related to any scheduled Cuban receivables.
Adjusted earnings (loss) from continuing operations(1)
Sherritt International Corporation 3
2018 2017
For the three months ended December 31 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations (69.1) (0.17) 552.9 1.85
Adjusting items:
Unrealized foreign exchange (gain) loss (20.7) (0.05) 24.1 0.08
Revaluation of expected credit losses under IFRS 9 44.1 0.11 - -
Gain on Ambatovy restructuring - - (629.0) (2.11)
Other 24.9 0.06 1.8 0.01
Adjusted net loss from continuing operations (20.8) (0.05) (50.2) (0.17)
2018 2017
For the year ended December 31 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations (80.2) (0.21) 308.9 1.04
Adjusting items:
Unrealized foreign exchange (gain) loss (33.3) (0.09) 7.7 0.03
Revaluation of expected credit losses under IFRS 9 47.4 0.12 - -
Gain on Ambatovy restructuring - - (629.0) (2.13)
Other 15.6 0.05 (4.7) (0.01)
Adjusted net loss from continuing operations (50.5) (0.13) (317.1) (1.07)
(1) For additional information see the Non-GAAP measures section.
Net loss from continuing operations for Q4 2018 was $69.1 million, or $0.17 per share, compared to earnings of $552.9 million,
or $1.85 per share, for the same period of last year. Sherritt incurred a net loss from continuing operations of $80.2 million, or
$0.21 per share, for FY2018 compared to earnings of $308.9 million, or $1.04 per share, for FY2017. Earnings generated in the
three- and 12-month periods ended December 31, 2017 were primarily related to the gain recognized on the Ambatovy
restructuring, which offset operating losses.
Adjusted net loss from continuing operations was $20.8 million, or $0.05 per share, and $50.5 million, or $0.13 per share, for Q4
2018 and FY2018, respectively. In 2017, Sherritt incurred an adjusted net loss from continuing operations of $50.2 million, or
$0.17 per share, for Q4 and $317.1 million, or $1.07 per share, on a full-year basis. Significant adjustments to earnings or losses
in the reporting periods include the gain on the Ambatovy Joint Venture (“Ambatovy JV”) restructuring in Q4 2017, a non-cash
loss on the revaluation of the Ambatovy JV subordinated loans receivable in Q4 2018 resulting from changes in expected
repayment schedule, and unrealized foreign exchange gains and losses in both FY2018 and FY2017.
2018 Fourth Quarter Report
Press Release
Sherritt International Corporation
METAL MARKETS
Nickel
Nickel prices softened in Q4 2018, slowing the momentum established over the past year when nickel reached a high of
US$7.26/lb. The average-reference price in Q4 2018 was US$5.20/lb, down from US$6.01/lb in the preceding quarter.
The downward price pressure was driven by a number of developments. The most notable being ongoing concerns that the
international trade dispute between the U.S. and China would weaken global demand for nickel. Initial market reaction to news
of a planned facility in Indonesia that is expected to produce 50,000 tonnes per year of battery-grade material also contributed
to softening nickel prices. Market reaction to the construction timelines and funding requirements to build the high pressure
acid leach facility has since become skeptical. Increased availability of nickel pig iron supply was another contributing factor
in weakening nickel prices.
The softening of prices belied the strong underlying nickel fundamentals. Combined nickel inventories on the London Metals
Exchange and the Shanghai Futures Exchange at the end of Q4 2018 totaled 219,804 tonnes, down 8% from the combined
total of 240,066 tonnes at the end of Q3 2018. The Class 1 nickel inventory decline in 2018 was even more dramatic at 55%.
As demand continues to exceed available supply, the nickel market is anticipated to be in a structural deficit in the coming
years. Since the start of Q1 2019, nickel prices have risen approximately 12%.
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 approximately 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 Q4 2018. Consistent with developments earlier in the year, the price decline
was driven by increased supply of intermediate product from the Democratic Republic of Congo as well as by the destocking
of inventory by Chinese consumers. The average-reference price for Q4 2018 was US$32.23/lb, down from US$35.21/lb in the
preceding quarter.
Low physical demand and current cobalt oversupply is likely to keep market conditions relatively volatile in the near term. 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.
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 years ended
2018 2017 2018 2017
$ millions, except as otherwise noted December 31 December 31 Change December 31 December 31 Change
FINANCIAL HIGHLIGHTS
Revenue $ 120.0 $ 122.9 (2%) $ 498.1 $ 417.0 19%
Earnings from operations 5.4 19.9 (73%) 78.9 31.3 152%
Adjusted EBITDA(1) 17.4 32.1 (46%) 128.4 80.5 60%
CASH FLOW
Cash provided by operations $ 50.2 $ 32.5 54% $ 90.7 $ 58.3 56%
Adjusted operating cash flow(1) 13.4 32.4 (59%) 106.3 72.9 46%
Free cash flow(1) 39.3 24.9 58% 57.8 37.4 55%
Distributions and repayments to Sherritt from the Moa JV 6.7 19.9 (66%) 47.7 31.7 50%
PRODUCTION VOLUMES (tonnes)
Mixed Sulphides 4,594 4,090 12% 17,563 17,297 2%
Finished Nickel 4,294 4,134 4% 15,354 15,762 (3%)
Finished Cobalt 428 465 (8%) 1,617 1,801 (10%)
Fertilizer 64,573 61,923 4% 226,989 243,682 (7%)
NICKEL RECOVERY (%) 84% 79% 6% 83% 85% (2%)
SALES VOLUMES (tonnes)
Finished Nickel 4,291 4,129 4% 15,273 15,679 (3%)
Finished Cobalt 392 480 (18%) 1,572 1,783 (12%)
Fertilizer 46,924 51,141 (8%) 163,698 178,491 (8%)
AVERAGE-REFERENCE PRICES (US$ per pound)
Nickel $ 5.20 $ 5.25 (1%) $ 5.95 $ 4.72 26%
Cobalt(2) 32.23 31.60 2% 37.35 26.53 41%
AVERAGE REALIZED PRICE
Nickel ($ per pound) $ 6.84 $ 6.72 2% $ 7.75 $ 6.14 26%
Cobalt ($ per pound) 38.43 38.78 (1%) 46.23 32.98 40%
Fertilizer ($ per tonne) 384 348 11% 388 361 7%
UNIT OPERATING COSTS(1) (US$ per pound)
Nickel - net direct cash cost $ 2.94 $ 1.80 63% $ 2.24 $ 2.35 (5%)
SPENDING ON CAPITAL
Sustaining $ 10.5 $ 7.7 36% $ 37.0 $ 20.9 77%
$ 10.5 $ 7.7 36% $ 37.0 $ 20.9 77%
(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 4,294 tonnes of finished nickel in Q4 2018, up 4% from 4,134 tonnes produced in Q4 2017. Growth was
largely driven by the deployment of new mining equipment completed in Q3 2018 that resulted in improved ore access and
reduced equipment downtime compared to the same period of last year. The increase in nickel production in Q4 2018 was offset,
however, by the negative impact of a disruption in the supply of hydrogen sulphide, a key reagent used by the refinery in Fort
Saskatchewan to produce finished nickel. The supply disruption resulted in a temporary reduction in production.
Finished nickel production for FY2018 was 15,354 tonnes, down 3% from FY2017. The decline was largely due to the negative
effects that the highest level of rainfall in more than 20 years had on the production of mixed sulphides at Moa and transportation
delays by the railway service provider to the refinery in Fort Saskatchewan in Q1. Year-over-year production decline was also
attributable to the disruption of hydrogen sulphide supply in Q4 previously referenced.
The Moa JV has taken measures over the past year to mitigate the production challenges experienced in 2018 by building its
inventory of mixed sulphides and ore stockpiles, deploying new mining equipment and developing contingency plans for alternative
supply deliveries.
2018 Fourth Quarter Report
Press Release
Sherritt International Corporation
Finished cobalt production for Q4 2018 was 428 tonnes, down 8% from last year. Total finished cobalt for 2018 was 1,617
tonnes, down 10% from 2017. In addition to factors already cited, cobalt production was also negatively impacted by a higher
nickel-to-cobalt ratio in mixed sulphides produced at Moa and in third-party feed procured by the refinery in Fort Saskatchewan.
Revenue for Q4 2018 totaled $120.0 million, down 2% from last year. The decline was largely due to lower cobalt sales volume
of 18% from Q4 2017, which offset the impact of higher nickel sales volume.
Revenue for FY2018 was $498.1 million, up 19% from $417.0 million generated in FY2017. The increase was driven by higher
average realized prices for nickel (+26%), cobalt (+40%) and fertilizer (+7%), which offset lower sales volumes.
Mining, processing and refining (MPR) costs for Q4 2018 were US$5.34/lb, up 9% from US$4.89/lb for Q4 2017. MPR costs for
FY2018 increased 12% over FY2017 to US$5.37/lb. The increases in both periods were primarily due to higher input costs,
largely as a result of increased sulphur and energy prices. The Moa JV was required to buy sulphuric acid in Q3 during the first
bi-annual maintenance shutdown of the new acid plant, adding costs to the full-year period.
NDCC in Q4 2018 was US$2.94/lb, compared to US$1.80/lb for the same period last year. The increase was due to the impact
of higher sulphur and energy costs and a lower cobalt credit as a result of reduced sales volume when compared to the same
period of last year.
NDCC for FY2018 was US$2.24/lb, compared to US$2.35/lb in FY2017 as higher cobalt credits in the first months in 2018 more
than offset higher sulphur, fuel oil, and third-party feed prices. NDCC for FY2018 ranked the Moa JV within the lowest cost quartile
relative to other nickel producers and ranked it as the lowest cost nickel HPAL operation according to annualized information
tracked by Wood Mackenzie.
The Moa JV generated operating cash flow of $50.2 million in Q4 2018, up 54% from $32.5 million in the same period of 2017.
Operating cash flow for FY2018 was $90.7 million in FY2018, up 56% compared to FY2017. The increase was largely due to
the year-over-year improvement in realized prices for nickel and cobalt that offset higher input commodity prices.
Sustaining capital spending in Q4 2018 was $10.5 million, up from $7.7 million in Q4 2017. The increase was due to planned
spending, including the construction of the new slurry preparation plant dump pocket at Moa, which was commissioned in January
2019.
Total capital spend for FY2018 was $37.0 million, up 77%, consistent with planned higher spending, and included the purchase
of new mining equipment aimed at reducing ore haulage distance and reducing equipment downtime.
Sherritt International Corporation 7
Investment in Ambatovy Joint Venture (12% interest effective December 11, 2017)(1)
For the three months ended For the years ended
2018 2017 2018 2017
$ millions, except as otherwise noted December 31 December 31 Change December 31 December 31 Change
FINANCIAL HIGHLIGHTS
Revenue $ 23.5 $ 58.1 (60%) $ 101.2 $ 279.2 (64%)
Loss from operations (22.6) (7.7) (194%) (40.8) (109.5) 63%
Adjusted EBITDA(2) 5.3 18.1 (71%) 18.0 26.0 (31%)
CASH FLOW
Cash used by operations $ (1.8) $ (3.4) 47% $ (0.8) $ (26.7) 97%
Adjusted operating cash flow(2) (2.8) 4.7 (160%) 2.9 (5.9) 149%
Free cash flow(2) (6.0) (20.7) 71% (14.1) (55.6) 75%
PRODUCTION VOLUMES (tonnes)(3)
Mixed Sulphides 1,316 1,171 12% 4,331 4,623 (6%)
Finished Nickel 1,253 1,105 13% 3,982 4,257 (6%)
Finished Cobalt 106 88 21% 342 366 (7%)
Fertilizer 3,187 3,504 (9%) 11,321 13,436 (16%)
NICKEL RECOVERY (%) 86% 84% 2% 86% 85% 1%
SALES VOLUMES (tonnes)(3)
Finished Nickel 1,026 897 14% 3,944 4,224 (7%)
Finished Cobalt 74 77 (4%) 324 375 (14%)
Fertilizer 2,411 2,790 (14%) 9,822 12,961 (24%)
AVERAGE-REFERENCE PRICES(2) (US$ per pound)
Nickel $ 5.20 $ 5.25 (1%) $ 5.95 $ 4.72 26%
Cobalt(4) 32.23 31.60 2% 37.35 26.53 41%
AVERAGE-REALIZED PRICE
Nickel ($ per pound) $ 7.59 $ 6.56 16% $ 7.87 $ 6.05 30%
Cobalt ($ per pound) 38.07 39.03 (2%) 45.30 33.35 36%
Fertilizer ($ per tonne) 189.00 173 9% 192.64 168 15%
UNIT OPERATING COSTS(2) (US$ per pound)
Nickel - net direct cash cost $ 3.66 $ 3.27 12% $ 3.91 $ 3.83 2%
SPENDING ON CAPITAL
Sustaining $ 5.1 $ 10.0 (49%) $ 15.3 $ 44.2 (65%)
$ 5.1 $ 10.0 (49%) $ 15.3 $ 44.2 (65%)
(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 and sales volume information for the periods ended December 31, 2017 are presented on a 12% basis.
(4) Average low-grade cobalt published price per Fastmarkets MB (formerly Metals Bulletin).
On December 11, 2017, Sherritt, along with its joint venture partners, completed a restructuring of the Ambatovy JV which reduced
Sherritt’s ownership interest in the joint venture from 40% to 12%. In exchange for its reduced interest, Sherritt eliminated $1.4
billion in Ambatovy related debt. Sherritt will continue to serve as operator of the joint venture at least through 2024. As a result
of the reduction in its ownership interest, Sherritt’s ability to direct local decision-making at Ambatovy has diminished, however.
Sherritt’s financial results at Ambatovy are presented on a 12% basis after December 10, 2017 and on a 40% basis prior to
December 11, 2018. For periods ending after December 11, 2017, Sherritt’s share of financial and operating results reflect the
impact of its reduced ownership interest. Production and sales totals in this press release are presented on a 12% for both periods
for better comparison purposes.
Consistent with previous disclosure, finished nickel production at Ambatovy in the second half of 2018 was 19% higher than the
first half of the year while finished cobalt production was up 35% over the comparable period. The production increases were the
result of efforts aimed at improving production and increasing reliability of acid production and PAL circuits. Specific initiatives
included the replacement of two acid plant economizers, replacement of equipment damaged by Cyclone Ava, and efforts to
improve autoclave reliability.
2018 Fourth Quarter Report
Press Release
Sherritt International Corporation
Finished nickel production in Q4 2018 was 1,253 tonnes and finished cobalt production was 106 tonnes, up 13% and 21%,
respectively, from Q4 2017.
NDCC in Q4 2018 was US$3.66/lb, 12% higher than in Q4 2017. NDCC for FY2018 was US$3.91/lb, up 2% from FY2017. The
increase for both periods was attributable to lower cobalt sales volume and higher input costs.
Asset write-downs of $15.7 million based on Sherritt’s ownership interest were recorded in Q4 2018 following a review of fixed
assets and a long-term ore stockpile re-valuation.
Capital spend at Ambatovy based on Sherritt’s ownership interest was $5.1 million in Q4 2018 and $15.3 million for FY2018.
Capital spend throughout the course of the year was earmarked towards initiatives aimed at improving production, increasing
asset plant reliability and replacing equipment damaged by Cyclone Ava.
Sherritt’s escrow account to cover funding requirements of the Ambatovy JV 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 funding based on Ambatovy’s current debt structure.
On February 13, 2019, Sherritt filed on SEDAR an updated National Instrument 43-101 compliant Technical Report on
Ambatovy. The new report includes mineral resource and reserve estimates that are based on an updated block model. The
new estimates, which have a lower tonnage and higher overall grade than estimates provided in the 2014 Ambatovy Technical
Report, largely offset each other. The economics of the updated Technical Report are based on a 10-year average weighted
price of US$6.82 per pound of nickel and US$25.50 per pound of cobalt. The economics of the 2014 Technical Report were
based on US$7.37 per pound for nickel and US$12.12 per pound for cobalt. The updated Technical Report is available via
www.sedar and referenced in Sherritt’s 2018 Annual Information Form.