Sherritt Reports Higher Nickel and Cobalt Production at Moa JV in Q2 2019
Sherritt International Corporation 1
For immediate release
Sherritt Reports Higher Nickel and Cobalt Production at Moa JV in
Q2 2019
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES
Toronto – July 31, 2019 – Sherritt International Corporation (“Sherritt”, the “Corporation”, the “Company”) (TSX: S), a world
leader in the mining and hydrometallurgical refining of nickel and cobalt from lateritic ores, today reported its financial results for
the three and six months ended June 30, 2019. All amounts are in Canadian currency unless otherwise noted.
CEO COMMENTARY
“Against a backdrop of volatile commodity prices and unfavorable geopolitical developments, we continued our focus in the
second quarter on preserving our liquidity and managing costs,” said David Pathe, President and CEO of Sherritt International.
“During Q2, we worked closely with our Cuban partners to ensure sufficient collections to enable us to meet our Canadian cash
requirements for the quarter despite increasing U.S. sanctions against Cuba. To that end, we received ratification of an overdue
receivables agreement by our Cuban partners and an advance payment on Cuban oil receipts.”
Mr. Pathe added, “With commodity prices expected to be volatile in the near term, despite strong underlying market
fundamentals, and with the impact of increasing U.S. sanctions against Cuba continuing to adversely affect the country, we
remain steadfast in our resolve to continue to work with our Cuban partners and to preserve our liquidity, including taking steps
to reduce capital spending and limit administrative expenses in the second half of the year as we continue to benefit from
operational excellence initiatives that are driving improved production at the Moa Joint Venture.”
SUMMARY OF KEY Q2 DEVELOPMENTS
Sherritt’s Cuban partners ratified an overdue receivables agreement for the repayment of US$150 million from Energas
S.A., and made US$5.4 million in payments under the plan through June 30, 2019.
Received $13.5 million in dividend distributions from the Moa Venture (“Moa JV”) and US$32.1 million in Cuban energy
payments, a total that included early payments on amounts scheduled to be paid to Sherritt in Q3 2019.
Sherritt ended Q2 2019 with cash, cash equivalents and short-term investments of $176.8 million, down slightly from
$177.3 million at the end of Q1 2019. The decrease was due to the timing of capital expenditures and interest paid on
outstanding debentures, partly offset by positive changes to working capital due to the receipt of Cuban energy
payments and Moa JV distributions. Sherritt’s liquidity position at the end of Q2 2019 included $75.7 million of cash
and cash equivalents held by Energas in Cuba.
Filed a National Instrument 43-101 technical report on SEDAR that confirmed the Moa JV’s current Mineral Reserves
and outlined increased Mineral Resources with the potential to extend Moa’s mine life.
Sherritt’s share of finished nickel production at the Moa JV in Q2 2019 was 3,969 tonnes, up 6% from last year, while
finished cobalt was 415 tonnes, up 7% compared to Q2 2018.
Q2 2019 Adjusted EBITDA(1) was $9.5 million, down from $40.6 million in Q2 2018. The decrease was largely driven
by the 12% and 64% year-over-year declines in realized nickel and cobalt prices, respectively.
Implemented a number of austerity measures, including the elimination of discretionary expenditures, the deferral of
non-critical projects and limiting the number of new hires, aimed at preserving liquidity.
Sir Richard Lapthorne, CBE, was named Chairman of Sherritt’s Board of Directors following the Company’s 2019
Annual Meeting of shareholders.
DEVELOPMENTS SUBSEQUENT TO THE QUARTER END
Reduced planned capital spend at the Moa JV to US$30 million from US$40 million in support of austerity measures
designed to preserve liquidity.
Following completion of approximately 5,300 meters of drilling on Block 10 through July 31, Sherritt anticipates drilling
to a total depth of approximately 5,700 meters at which point the well will be completed and tested.
Consistent with its strategy to focus Oil and Gas operations in Cuba, Sherritt sold its working interest in a natural gas
field in Pakistan.
(1) For additional information see the Non-GAAP measures section of this press release.
2019 Second Quarter Report
Press Release
2 Sherritt International Corporation
Q2 2019 FINANCIAL HIGHLIGHTS(1)
For the three months ended For the six months ended
2019 2018 2019 2018
$ millions, except per share amount June 30 June 30 Change June 30 June 30 Change
Revenue 46.5 46.5 - $ 78.4 $ 85.9 (9%)
Combined revenue(2) 144.3 169.8 (15%) 268.9 298.9 (10%)
Net earnings (loss) for the period (90.4) 2.8 nm(3) (152.2) 2.2 nm
Adjusted EBITDA(2) 9.5 40.6 (77%) 8.3 76.1 (89%)
Cash provided (used) by continuing operations 14.9 (30.4) 149% (19.7) (19.3) (2%)
Combined adjusted operating cash flow(2) (8.2) 17.3 (147%) (18.1) 24.0 (175%)
Combined free cash flow(2) 4.0 (18.3) 122% (40.0) (3.3) nm
Average exchange rate (CAD/US$) 1.338 1.291 - 1.334 1.278 -
Net earnings (loss) from continuing operations per share (0.23) 0.01 nm (0.38) 0.01 nm
(1) The financial results for the Ambatovy JV are only discussed as part of share of earnings in associate based on financial statement amounts. Prior period non-GAAP
measures have been revised to exclude the Ambatovy JV performance.
(2) For additional information see the Non-GAAP measures section.
(3) Not meaningful (nm).
2019 2018
$ millions, as at June 30 December 31 Change
Cash, cash equivalents and short term investments $ 176.8 $ 207.0 (15%)
Loans and borrowings 705.9 705.7 -
Cash, cash equivalents and short-term investments at June 30, 2019 were $176.8 million, down from $177.3 million at March
31, 2019. The decline was due to a number of factors, including $15.8 million in interest payments on outstanding debentures
and $11.9 million in capital expenditures primarily related to drilling on Block 10. The cash balance decline was partly offset,
however, by the receipt of $13.5 million in dividend distributions from the Moa JV and positive changes to working capital totaling
$19.1 million largely driven by receipts on overdue receivables. In Q2 2019, US$32.1 million of Cuban energy payments were
received, comprising US$11.9 million in total payments from Energas and US$20.2 million of Oil and Gas receivables. Oil and
Gas receipts in Q2 2019 included early payments on amounts that CUPET was scheduled to pay Sherritt in Q3 2019. As such,
overdue Oil and Gas receivables are expected to increase through September 30, 2019. At June 30, 2019, total overdue energy
receivables were US$157.2 million, down from US$171.6 million at March 31, 2019.
During Q2 2019, Sherritt’s Cuban partners ratified an overdue receivables agreement (the “Agreement”) for repayment of
US$150.0 million owed to Sherritt from Energas. Under the terms of the Agreement, Sherritt will receive payments averaging
US$2.5 million per month effective May 2019. The monthly payments will be made by way of a currency exchange involving the
Moa JV and Energas with foreign currency that would be used by the Moa JV to pay for specified costs in Cuba instead being
provided to Sherritt in exchange for local currency held by Energas. Since the ratification of the Agreement on June 13, 2019,
Sherritt has received US$5.4 million in overdue payments through June 30, 2019 (this amount is included in the total payments
from Energas already cited). As at June 30, 2019, $75.7 million of Sherritt’s cash and cash equivalents was held by Energas in
Cuba, up from $73.4 million at the end of Q1 2019.
The Agreement recognizes and acknowledges 100% of the amounts owed to Sherritt. In addition, the Agreement provides that
Sherritt will receive 100% of available distributions from the Moa JV once each partner has received a minimum amount of
distributions. The minimum dividend threshold for 2019 is US$68 million (100% basis). The minimum dividend threshold for
2020 is currently under discussion and is expected to be finalized in Q4 2019.
During the second quarter, the U.S. administration increased its sanctions against Cuba and its trading partners. These sanctions
continue to adversely affect Cuba’s economy and its ability to conduct international trade, including the sourcing of key supplies.
Sherritt International Corporation 3
Adjusted net earnings (loss)(1)
2019 2018
For the three months ended June 30 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations (90.4) (0.23) 2.8 0.01
Adjusting items:
Unrealized foreign exchange (gain) loss 8.0 0.02 (11.0) (0.03)
Revaluation of expected credit losses under IFRS 9 53.6 0.13 1.1 -
Other (12.5) (0.02) (0.6) -
Adjusted net loss from continuing operations (41.3) (0.10) (7.7) (0.02)
2018 2017
For the six months ended June 30 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations (152.2) (0.38) 2.2 0.01
Adjusting items:
Unrealized foreign exchange (gain) loss 13.8 0.04 (18.7) (0.05)
Revaluation of expected credit losses under IFRS 9 54.6 0.14 2.1 0.01
Other (12.4) (0.04) (6.8) (0.03)
Adjusted net loss from continuing operations (96.2) (0.24) (21.2) (0.06)
(1) For additional information see the Non-GAAP measures section.
Net loss from continuing operations for Q2 2019 was $90.4 million, or $0.23 per share, compared to earnings of $2.8 million, or
$0.01 per share, for the same period last year.
The Q2 2019 net loss includes a $53.6 million non-cash loss on revaluation of the estimated credit loss (“ECL”) allowance under
IFRS 9 recognized on Sherritt’s receivable from the Ambatovy JV. Sherritt reviews and updates its assumptions related to the
timing and amount of expected receipts and conversions of the receivables to equity each quarter. Based on a review of
Ambatovy operations in Q2 2019, the change in expected equity conversions resulted in an increase in the ECL allowance.
Adjusted net loss from continuing operations was $41.3 million, or $0.10 per share, for the three months ended June 30, 2019
compared to an adjusted net loss from continuing operations of $7.7 million, or $0.02 per share, for Q2 2018. Significant
adjustments to earnings or losses in each of the reporting periods include unrealized foreign exchange gains and losses. In Q2
2019 the loss was adjusted for the ECL discussed above.
2019 Second Quarter Report
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4 Sherritt International Corporation
METAL MARKETS
Nickel
Nickel experienced considerable price swings during Q2 2019, closing at US$5.74/lb on June 28, down 4% from the quarter’s
start. Despite strong supply and demand fundamentals, the price volatility was driven by the uncertainty of a U.S./China trade
deal being reached, the strength of the U.S. currency and concerns of a slowdown in China’s economy. Subsequent to the
start of Q3, nickel prices have experienced a modest recovery, reaching a 12-month high price of US$6.66/lb on July 18.
Combined nickel inventories on the London Metals Exchange (LME) and the Shanghai Futures Exchange at the end of Q2
2019 totaled 181,063 tonnes, down 13% from the combined total of 191,292 tonnes at the end of Q1 2019. In the 18 months
ended June 30, 2019, combined Class 1 nickel inventories have declined by approximately 55%, although inventory levels in
June 2019 were up modestly. Total inventory levels have decreased since the start of Q3 2019. As demand continues to
exceed available supply, the nickel market is anticipated to be in a structural deficit in the coming years, particularly with the
expected ban of nickel exports from Indonesia slated to take effect in 2022.
Despite the decline in available inventories, the average reference price for nickel in Q2 2019 was down 15% from last year,
declining from US$6.56/lb to US$5.56/lb. The year-over-year decline is largely attributable to the concerns that a protracted
trade war between the U.S. and China will negatively impact the world’s economy.
Demand for nickel continues 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 2019, 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
Consistent with a trend that began in April 2018, cobalt prices continued to soften in Q2 2019. The average reference price for
standard grade cobalt in Q2 2019 was US$15.64/lb, down 64% from US$42.93/lb in Q2 2018 according to data collected by
Fastmarkets MB. The price decline is being driven by a combination of factors that is resulting in increased available supply
and decreased demand. These factors include increased supply of intermediate product from the Democratic Republic of
Congo, increased available supply of processed cobalt from China, continued de-stocking of inventory by Chinese consumers
and the deferral of purchases by consumers waiting for prices to reach floor levels.
Abundant available supply has recently resulted in cobalt producers selling product at significant discount to prevailing
reference prices. During the run-up in prices from late 2017 through 2018, cobalt producers often sold cobalt at a premium to
reference prices as consumers looked to lock in supply.
Since the start of Q3, the average standard grade cobalt price has declined by 9% to US$12.43 according to FastMarkets MB.
Given growing demand from the electric vehicle battery market, it is expected that the cobalt price is approaching a floor level
and will begin a rebound in the second half of the year.
Sherritt International Corporation 5
REVIEW OF OPERATIONS
Moa Joint Venture (50% interest) and Fort Site (100%)
For the three months ended For the six months ended
2019 2018 2019 2018
$ millions, except as otherwise noted June 30 June 30 Change June 30 June 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 123.1 $ 145.5 (15%) $ 225.4 $ 241.8 (7%)
(Loss) earnings from operations (0.4) 32.1 (101%) (9.9) 48.4 (120%)
Adjusted EBITDA(1) 14.2 44.4 (68%) 18.4 71.5 (74%)
CASH FLOW
Cash provided by operations $ 7.7 $ 10.1 (24%) $ 3.6 $ 28.2 (87%)
Adjusted operating cash flow(1) 14.8 36.9 (60%) 17.6 63.7 (72%)
Free cash flow(1) (0.1) 1.1 (109%) (10.5) 14.7 (171%)
Distributions and repayments to Sherritt from the Moa JV 13.5 9.0 50% 16.8 25.0 (33%)
PRODUCTION VOLUMES (tonnes)
Mixed Sulphides 4,306 4,226 2% 8,642 8,108 7%
Finished Nickel 3,969 3,749 6% 8,366 6,603 27%
Finished Cobalt 415 388 7% 841 724 16%
Fertilizer 59,665 52,741 13% 126,627 105,181 20%
NICKEL RECOVERY (%) 86% 80% 8% 85% 80% 6%
SALES VOLUMES (tonnes)
Finished Nickel 4,073 3,668 11% 8,464 6,578 29%
Finished Cobalt 429 388 11% 889 713 25%
Fertilizer 66,552 63,735 4% 93,509 89,207 5%
AVERAGE-REFERENCE PRICES (US$ per pound)
Nickel $ 5.56 $ 6.56 (15%) $ 5.59 $ 6.29 (11%)
Cobalt(2) 15.64 42.93 (64%) 17.09 40.97 (58%)
AVERAGE REALIZED PRICE(1)
Nickel ($ per pound) $ 7.52 $ 8.50 (12%) $ 7.51 $ 8.19 (8%)
Cobalt ($ per pound) 19.56 54.01 (64%) 17.00 51.49 (67%)
Fertilizer ($ per tonne) 491 427 15% 470 407 15%
UNIT OPERATING COSTS(1) (US$ per pound)
Nickel - net direct cash cost $ 3.83 $ 1.68 128% $ 4.19 $ 1.84 128%
SPENDING ON CAPITAL(3)
Sustaining $ 7.8 $ 13.1 (40%) $ 21.8 $ 17.6 24%
$ 7.8 $ 13.1 (40%) $ 21.8 $ 17.6 24%
(1) For additional information see the Non-GAAP measures section.
(2) Average standard grade cobalt published price per Fastmarkets MB.
(3) Spending on capital for the six months ended June 30, 2019 excludes right of use assets recognized on adoption of IFRS 16. Refer to note 4 of the condensed
consolidated financial statements for the three months ended March 31, 2019 for additional information.
The Moa JV produced 3,969 tonnes of finished nickel in Q2 2019, up 6% from 3,749 tonnes produced in Q2 2018. Increased
production was driven by a number of operational excellence initiatives implemented over the past 18 months, including the
deployment of new mining equipment acquired throughout 2018 and Q1 2019 that resulted in improved ore access and reduced
equipment downtime compared to the same period of last year. Other operational excellence initiatives that contributed to higher
production included the commissioning of a new slurry preparation plant dump pocket in Q1 2019 at the Moa JV, which improved
ore screening and processing, and efforts to increase ore stockpiles to mitigate the impact of the rainy season.
Finished cobalt production for Q2 2019 was 415 tonnes, up 7% from Q2 2018. The nickel to cobalt ratio in mixed sulphides
produced at Moa in Q2 2019 is consistent with historical norms.
Second quarter production in the current and prior year periods was impacted by the annual maintenance shutdown of the refinery
in Fort Saskatchewan. The maintenance shutdown in Q2 2019 was completed on time and budget, and equipment inspection
resulted in no unplanned repairs or replacements.
2019 Second Quarter Report
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6 Sherritt International Corporation
Despite higher production, revenue for Q2 2019 was down 15% and totaled $123.1 million. The revenue decrease was due to the
12% and 64% decline in realized nickel and cobalt prices, respectively, from Q2 2018. A weaker Canadian dollar relative to the
U.S. dollar partly offset the impact of softer commodity prices.
Mining, processing and refining (MPR) costs for Q2 2019 were US$5.71/lb, up 2% from US$5.62/lb for Q2 2018 due to the impact
of higher energy costs, though partly offset by higher nickel sales volume.
NDCC in Q2 2019 was US$3.83/lb, up from US$1.68/lb for the same period last year. The increase was largely due to lower by-
product revenue stemming from the 64% decline in realized cobalt prices. Higher fertilizer prices and sales volumes as well as
lower third-party feed costs in Q2 2019 partly offset the impact of lower realized cobalt prices, however. NDCC in Q2 2019 was
US$0.70/lb lower than Q1 2019, reflecting the timing of spring season fertilizer shipments and that the impact of provisional pricing
adjustments experienced last quarter due to the rapid decline in cobalt pricing was not a significant factor in the current quarter.
Sherritt received $13.5 million in dividend distributions from the Moa JV in Q2 2019. In the comparable period of 2018, Sherritt
received $9.0 million as the final repayment on the Moa JV credit facility that was outstanding at the time.
Sustaining capital spending in Q2 2019 was $7.8 million, down from $13.1 million in Q2 2018 when Moa JV began acquiring new
mining equipment that has successfully improved equipment reliability, reduced maintenance costs and improved ore accessibility.
As a result of expected volatile commodity prices and unfavorable geo-political developments in the near term, the Moa JV has
implemented austerity measures for the balance of the year and will reduce capital spending from US$40 million to US$30 million.
Based on the Moa JV’s performance year-to-date, production targets for the year remain unchanged while NDCC guidance has
been updated to reflect the 53% year-to-date decline in cobalt prices has had on by-product credits. Sherritt now expects NDCC
at the Moa JV to be in the range of US$4.00 to US$4.50 per pound of nickel sold for 2019.
Oil and Gas
For the three months ended For the six months ended
2019 2018 2019 2018
$ millions, except as otherwise noted June 30 June 30 Change June 30 June 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 7.5 $ 9.6 (22%) $ 16.5 $ 27.7 (40%)
Earnings (loss) from operations (5.4) (3.1) (74%) (11.1) (1.4) (693%)
Adjusted EBITDA(1) (2.7) (0.6) (350%) (5.4) 4.0 (235%)
CASH FLOW
Cash provided by operations 21.5 10.5 105% 13.5 17.8 (24%)
Adjusted operating cash flow(1) (4.6) (3.3) (39%) (6.8) (11.0) 38%
Free cash flow(1) 11.2 3.7 203% (3.7) 7.9 (147%)
PRODUCTION AND SALES (bopd)
Gross working-interest (GWI) - Cuba 4,420 4,689 (6%) 4,432 5,128 (14%)
Total net working-interest (NWI) 1,523 1,821 (16%) 1,648 2,862 (42%)
AVERAGE REFERENCE PRICE (US$ per barrel)
West Texas Intermediate (WTI) $ 59.88 $ 68.14 (12%) $ 57.35 $ 65.56 (13%)
U.S. Gulf Coast High Sulphur Fuel Oil (USGC HSFO) 61.26 62.42 (2%) 61.15 58.86 4%
Brent 69.77 74.67 (7%) 66.28 70.78 (6%)
AVERAGE-REALIZED PRICE(1) (NWI)
Cuba ($ per barrel) $ 62.11 $ 59.97 4% $ 60.47 $ 53.44 13%
UNIT OPERATING COSTS(1) (GWI)
Cuba ($ per barrel) $ 19.93 $ 16.10 24% $ 20.56 $ 18.66 10%
SPENDING ON CAPITAL(2)
Development, facilities and other $ (0.5) $ 0.3 (267%) $ 1.0 $ - -
Exploration 11.8 6.9 71% 16.0 9.5 68%
$ 11.3 $ 7.2 57% $ 17.0 $ 9.5 79%
(1) For additional information see the Non-GAAP measures section.
(2) Spending on capital for the six months ended June 30, 2019 excludes right of use assets recognized on adoption of IFRS 16. Refer to note 4 of the condensed
consolidated financial statements for the three months ended March 31, 2019 for additional information.
Gross working-interest oil production in Cuba in Q2 2019 was 4,420 barrels of oil per day (“bopd”), down 6% from 4,689 bopd for
Q2 2018. Lower production in 2019 was primarily due to natural reservoir declines and the absence of new development drilling.
Sherritt International Corporation 7
Revenue in Q2 2019 was $7.5 million, down 22% when compared to last year. The decline in gross working-interest production
resulted in a corresponding decline in total net working-interest production. The decline was partially offset, however, by a higher
realized oil price which was positively impacted by a weaker Canadian dollar relative to the U.S. currency.
Unit operating costs in Cuba in Q2 2019 were $19.93 per barrel, up 24% from Q2 2018. The increase was driven largely by
reduced production. Costs were also negatively impacted by a stronger U.S. dollar relative to the Canadian currency as expenses
in Cuba are generally denominated in U.S. currency.
Capital spending in Q2 2019 was $11.3 million, up 57% from Q2 2018. Exploration capital spending in both the current and prior
year periods are primarily related to drilling on Block 10.
Drilling on Block 10 resumed on April 1, 2019 using updated drilling parameters developed with the assistance of third-party
experts and the results of detailed lab analysis of rock cuttings collected previously. Approximately 5,300 meters were drilled and
lined with casing through July 31, 2019. During Q2, Sherritt successfully traversed a number of zones where it previously
experienced technical challenges due to the complexity of the geological formation. Sherritt anticipates drilling to a total depth of
approximately 5,700 meters. The well will then be completed and tested.
The adoption of new drilling parameters implemented in Q2 2019 is not expected to increase 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 overdue receivables. Sherritt intends to explore partnerships for further
investment in Block 10 following completion of the current well. In Q2, Sherritt’s production sharing contract on Block 10 was
extended to 28 years from 25 years.
Subsequent to Q2 2019, Sherritt sold its working interest in a natural gas field in Pakistan for a price that did not differ materially
from the carrying amount of the assets sold. The sale was consistent with Sherritt’s strategy to focus its Oil and Gas business on
Cuban operations.
As a result of the sale of its working interest in a gas field in Pakistan, Sherritt has reduced its net working-interest production
guidance for 2019 to 1,600 to 1,800 barrels of oil equivalent per day. Based on performance year to date, Sherritt expects to
realize its gross working interest production target in Cuba for 2019. Unit operating costs guidance for oil production in Cuba have
been lowered to a range of $23.00 to $24.50 per barrel, consistent with Sherritt’s austerity measures to preserve liquidity.
Power
For the three months ended For the six months ended
2019 2018 2019 2018
$ millions (33 ⅓% basis), except as otherwise noted June 30 June 30 Change June 30 June 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 11.1 $ 12.4 (10%) $ 21.8 $ 24.3 (10%)
Earnings from operations 0.8 1.5 (47%) 1.7 3.3 (48%)
Adjusted EBITDA(1) 7.1 7.6 (7%) 14.3 15.4 (7%)
CASH FLOW
Cash provided by operations 11.6 8.1 43% 15.2 19.3 (21%)
Adjusted operating cash flow(1) 7.0 7.3 (4%) 13.3 14.8 (10%)
Free cash flow(1) 11.5 7.9 46% 14.6 19.0 (23%)
PRODUCTION AND SALES
Electricity (GWh) 180 204 (12%) 353 406 (13%)
AVERAGE-REALIZED PRICE(1)
Electricity ($/MWh) $ 56.20 $ 54.18 4% $ 55.97 $ 53.71 4%
UNIT OPERATING COSTS(1) ($/MWh)
Base 16.24 15.63 4% 18.00 15.04 20%
Non-base(2) 0.11 2.94 (96%) 0.27 2.86 (91%)
16.35 18.57 (12%) 18.27 17.90 2%
NET CAPACITY FACTOR (%) 57 64 (11%) 56 63 (11%)
SPENDING ON CAPITAL(3)
Sustaining $ 0.1 $ 0.2 (50%) $ 0.6 $ 0.3 100%
$ 0.1 $ 0.2 (50%) $ 0.6 $ 0.3 100%
(1) For additional information see the Non-GAAP measures section.
2019 Second Quarter Report
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8 Sherritt International Corporation
(2) Costs incurred at the Boca de Jaruco and Puerto Escondido facilities that otherwise would have been capitalized if these facilities were not accounted or as service
concession arrangements.
(3) Spending on capital for the six months ended June 30, 2019 excludes right of use assets recognized on adoption of IFRS 16. Refer to note 4 of the condensed
consolidated financial statements for the three months ended March 31, 2019 for additional information.
Power production in Q2 2019 was 180 gigawatt hours (“GWh”) of electricity, down 12% from 204 GWh for the comparable period
of 2018. The decline was due to reduced natural gas supply that is used to generate electricity.
Average-realized prices in Q2 2019 were $56.20, up 4% from $54.18 from last year. The increase was due to the depreciation of
the Canadian dollar relative the U.S. currency.
Revenue in Q2 2019 totaled $11.1 million, down 10% from $12.4 million for last year. The decline was due to lower power
production, partially offset by higher realized prices.
Unit operating costs in Q2 2019 were $16.35, down 12% from $18.57 for last year. The decrease was primarily due to Sherritt’s
decision to limit operational spending to levels required to maintain certain plant operations as the Company continues to work
with its Cuban partners to collect on Cuban energy receivables. The impact of reduced spending more than offset the impact of
lower sales volume and a weaker Canadian dollar in Q2 2019 as Power business costs are generally denominated in U.S.
currency.
Total capital spending in Q2 2019 was negligible.
The Power business remains on track to achieve its production and capital spend targets for 2019 based on performance year to
date. Guidance for unit operating costs has been lowered to a range of $20.00 to $23.75 per MWh consistent with austerity
measures to preserve liquidity.