Sherritt Reports Financial Results for Q3 2019
Sherritt International Corporation 1
For immediate release
Sherritt Reports Financial Results for Q3 2019
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES
Toronto – October 30, 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 nine-month periods ended September 30, 2019. All amounts are in Canadian currency unless otherwise noted.
CEO COMMENTARY
“Strengthening nickel and cobalt prices in Q3 provided a welcomed counterbalance to the impact of increased U.S. sanctions
against Cuba, and contributed to a number of positive developments in the quarter,” said David Pathe, President and CEO of
Sherritt International. “In particular, another strong operational quarter at the Moa Joint Venture helped support the receipt of
$11.6 million in dividend distributions and our continued efforts to preserve liquidity in the quarter delivered a 6% year to date
decline in administrative expenses from 2018 and the securing of temporary relief from the minimum cash balance covenant
from our credit facility syndicate.”
SUMMARY OF KEY Q3 DEVELOPMENTS
Sherritt’s share of finished nickel and cobalt production at the Moa Venture (Moa JV) in Q3 2019 were 4,139 tonnes
and 436 tonnes.
Excluding $77.3 million of cash and cash equivalents held by Energas, Sherritt ended Q3 2019 with cash and cash
equivalents of $92.0 million. Sherritt’s consolidated cash position of $169.3 million at the end of Q3 was down from
$176.8 million at the end of Q2 2019. The change in Sherritt’s liquidity was due to a combination of factors, including
interest paid on outstanding debentures and the lower receipt of Cuban energy payments.
Excluding the impact of stock-based compensation and depreciation, administrative expenses declined by 6% to $28.6
million on a year-to-date basis from $30.3 million for the nine-month period of 2018.
Received $11.6 million in dividend distributions from the Moa JV, indicative of strengthening nickel and cobalt prices in
the quarter.
Terms of Sherritt’s syndicated revolving-term credit facility were amended to lower the minimum cash balance
requirement to $60 million, less undrawn credit, through the end of 2019. The minimum cash balance requirement will
increase to $70 million, less undrawn credit, on December 31, 2019 and remain in effect to the credit facility’s maturity
on April 30, 2020.
Received US$18.8 million in Cuban energy payments during the quarter, including US$9.8 million received in
accordance with the overdue receivable agreement ratified in June and US$7.5 million accepted in Cuba to support
local Cuban costs relating to Sherritt’s Oil and Gas operations.
Q3 2019 Adjusted EBITDA(1) was $21.1 million, the highest quarterly total since Q3 2018 when $37.7 million was
generated. The year-over-year decline was driven by the 61% decrease in realized cobalt prices.
Consistent with its strategy to focus oil and gas operations in Cuba, Sherritt sold its working interest in a natural gas
field in Pakistan.
DEVELOPMENTS SUBSEQUENT TO THE QUARTER END
Drilling on Block 10 resumed on October 19 following the import of drilling mud tanks due to the lack of availability in
Cuba. Sherritt anticipates drilling to a total depth of approximately 5,700 meters. The well will then be completed and
tested. As of October 29, drilling to a depth of 5,525 meters had been completed.
(1) For additional information see the Non-GAAP measures section of this press release.
2019 Third Quarter Report
Press Release
2 Sherritt International Corporation
Q3 2019 FINANCIAL HIGHLIGHTS(1)
For the three months ended For the nine months ended
2019 2018 2019 2018
$ millions, except per share amount September 30 September 30 Change September 30 September 30 Change
Revenue 27.8 29.9 (7%) $ 106.2 $ 115.8 (8%)
Combined revenue(2) 133.9 159.2 (16%) 402.8 458.1 (12%)
Net earnings (loss) for the period (30.0) (13.3) (126%) (182.2) (11.1) nm(3)
Adjusted EBITDA(2) 21.1 37.7 (44%) 29.4 113.8 (74%)
Cash provided (used) by continuing operations 1.5 14.1 (89%) (18.2) (5.2) (250%)
Combined adjusted operating cash flow(2) 15.4 15.7 (2%) (2.7) 39.7 (107%)
Combined free cash flow(2) (12.3) (2.5) (392%) (52.3) (5.8) (802%)
Average exchange rate (CAD/US$) 1.320 1.307 - 1.329 1.288 -
Net earnings (loss) from continuing operations per share (0.08) (0.03) (167%) (0.46) (0.03) 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 September 30 December 31 Change
Cash, cash equivalents and short term investments $ 169.3 $ 207.0 (18%)
Loans and borrowings 709.6 705.7 1%
Cash, cash equivalents and short-term investments at September 30, 2019 were $169.3 million, down from $176.8 million at
June 30, 2019. The decline was due to a number of factors, including $7.6 million in interest payments on outstanding
debentures, $5.7 million in cash capital expenditures primarily related to drilling on Block 10, and a negative change in working
capital. The decline was partly offset, however, by the receipt of $11.6 million in dividend distributions from the Moa JV and
Cuban energy receipts totaling US$18.8 million.
Cuban energy payments relate to US$9.8 million received in accordance with the Energas overdue receivable agreement
announced in June 2019, US$7.5 million accepted in Cuba to support local Cuban costs relating to Sherritt’s Oil and Gas
operations and US$1.5 million received from CUPET for Oil and Gas receivables. Amounts received from CUPET in Q3 were
lower than Q2 2019 due to advance payments received in the second quarter. No regular liquidity payments outside of the
overdue receivable agreement were received by Sherritt during Q3 2019. Total overdue scheduled receivables at September
30, 2019 were US$154.8 million, down from US$157.2 million at June 30, 2019.
The receipt of energy payments and the collection against overdue receivables were negatively affected in Q3 by increasing U.S.
sanctions against Cuba that reduced its access to foreign currency and economic stability. These sanctions included limits placed
on U.S. travel to Cuba, a ban on U.S. cruise ships entering Cuba, bans on specific types of banking transactions, and limits on
the sending of family remittances from the U.S. to Cuba to US$1,000 per quarter. Energy payments received in Q3 2019 were
consistent with the terms of the overdue receivables agreement that Sherritt ratified with its Cuban partners in June 2019 for the
repayment of US$150.0 million owed to Sherritt. Under the terms of the Agreement, Sherritt is to receive payments averaging
US$2.5 million per month effective May 2019. The monthly payments are 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. In Q3 2019, Sherritt received US$9.8 million in overdue payments
under the agreement (this amount is included in the total payments from Energas already cited). No Energas receivable payments
were received in Canada outside of the overdue receivable agreement. As at September 30, 2019, $77.3 million of Sherritt’s cash
and cash equivalents was held by Energas in Cuba, up from $75.7 million at the end of Q2 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.
Sherritt International Corporation 3
Adjusted net earnings (loss)(1)
2019 2018
For the three months ended September 30 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations (30.0) (0.08) (13.3) (0.03)
Adjusting items:
Unrealized foreign exchange (gain) loss (7.7) (0.02) 6.1 0.02
Revaluation of expected credit losses under IFRS 9 2.4 0.01 - -
Other 3.3 0.01 (3.0) (0.02)
Adjusted net loss from continuing operations (32.0) (0.08) (10.2) (0.03)
2019 2018
For the nine months ended September 30 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations (182.2) (0.46) (11.1) (0.03)
Adjusting items:
Unrealized foreign exchange (gain) loss 6.1 0.03 (12.6) (0.03)
Revaluation of expected credit losses under IFRS 9 57.0 0.14 - -
Other (9.1) (0.03) (10.0) (0.03)
Adjusted net loss from continuing operations (128.2) (0.32) (33.7) (0.09)
(1) For additional information see the Non-GAAP measures section.
Net loss from continuing operations for Q3 2019 was $30.0 million, or $0.08 per share, compared to a net loss of $13.3 million,
or $0.03 per share, for the same period last year.
The Q3 2019 net loss includes a $2.4 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 Q3 2019, the change in expected equity conversions resulted in an increase in the ECL allowance. In
Q2 2019, Sherritt recognized a $53.6 million increase in the ECL allowance.
Adjusted net loss from continuing operations was $32.0 million, or $0.08 per share, for the three months ended September 30,
2019 compared to an adjusted net loss from continuing operations of $10.2 million, or $0.03 per share, for Q3 2018. Significant
adjustments to earnings or losses in each of the reporting periods include unrealized foreign exchange gains and, for 2019,
adjustments for the ECL allowance discussed above.
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4 Sherritt International Corporation
METALS MARKET
Nickel
Nickel prices on the London Metals Exchange (LME) strengthened dramatically in Q3 2019, closing up 42% to US$7.97/lb on
September 30 from US$5.60/lb at the start of the quarter. Higher prices were initially driven by speculation that Indonesia would
implement a nickel ore export ban on January 1, 2020, two years in advance of when the ban was slated to take effect. Higher
prices were also triggered by continued strong demand from China’s stainless steel sector as well as by concerns of a possible
shutdown of Ramu, one of the world’s largest nickel mines located in Papua New Guinea, following a slurry seepage.
Nickel prices reached a high of US$8.45/lb on September 2, immediately following confirmation by Indonesian officials that the
ore export ban will indeed take effect at the start of the new year. Since the start of Q4, nickel prices have declined, mirroring
the softness in demand in the physical market and speculation about what is driving changes to inventory levels. Combined,
these developments suggest increased nickel price volatility in the short term.
Combined nickel inventories on the London Metals Exchange (LME) and the Shanghai Futures Exchange (SHFE) at the end
of Q3 2019 totaled 179,487 tonnes, down 1% from the combined total of 181,063 tonnes at the end of Q2 2019.
Total inventory levels have decreased significantly since the start of the Q4 2019, declining by approximately 49%. Although
the decrease is being attributed to inventory stockpiling by stainless steel producers in advance of the Indonesian ore export
ban taking effect. There is growing speculation that the recent de-stocking has been overdone and may be reversed in the
near term As of October 30, combined nickel inventories on the LME and SHFE were approximately 92,000 tonnes, the lowest
level since 2012.
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 1 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
Cobalt prices increased by more than 30% in Q3, ending a year-long downward trend. Standard grade cobalt prices closed at
US$17.85/lb, up from $13.50/lb at the start of the quarter according to data collected by Fastmarkets MB. Higher prices in Q3
were driven by news that Mutanda, one of the largest cobalt mines in the Democratic Republic of Congo, will be placed on
care and maintenance effective with start of the new year.
While cobalt prices in Q3 2019 showed signs of improvement, they were considerably off of highs reached in 2018. The average
reference price for standard grade cobalt in Q3 2019 was US$15.20/lb, down 57% from US$35.21/lb in Q3 2018 according to
data collected by Fastmarkets MB. The year-over-year decline was driven by a combination of factors that has resulted in
increased available supply and decreased demand. These factors have included 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.
The rise of cobalt prices experienced in Q3 2019 has been sustained into Q4, suggesting that factors that previously put
downward price pressure may be abating. Given growing demand from the electric vehicle battery market, the near-term
outlook for cobalt prices remains stable.
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
2019 2018 2019 2018
$ millions, except as otherwise noted September 30 September 30 Change September 30 September 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 112.2 $ 136.3 (18%) $ 337.6 $ 378.1 (11%)
Earnings from operations 12.2 25.1 (51%) 2.3 73.5 (97%)
Adjusted EBITDA(1) 25.5 39.5 (35%) 43.9 111.0 (60%)
CASH FLOW
Cash provided by operations $ 4.4 $ 12.3 (64%) $ 8.0 $ 40.5 (80%)
Adjusted operating cash flow(1) 24.7 29.2 (15%) 42.3 92.9 (54%)
Free cash flow(1) (0.5) 3.8 (113%) (11.0) 18.5 (159%)
Distributions and repayments to Sherritt from the Moa JV 11.6 16.0 (28%) 28.4 41.0 (31%)
PRODUCTION VOLUMES (tonnes)
Mixed Sulphides 4,165 4,861 (14%) 12,807 12,969 (1%)
Finished Nickel 4,139 4,457 (7%) 12,505 11,060 13%
Finished Cobalt 436 465 (6%) 1,277 1,189 7%
Fertilizer 66,296 57,235 16% 192,923 162,416 19%
NICKEL RECOVERY (%) 85% 89% (4%) 85% 83% 2%
SALES VOLUMES (tonnes)
Finished Nickel 4,145 4,404 (6%) 12,609 10,982 15%
Finished Cobalt 440 467 (6%) 1,329 1,180 13%
Fertilizer 25,186 27,567 (9%) 118,695 116,774 2%
AVERAGE-REFERENCE PRICES (US$ per pound)
Nickel $ 7.08 $ 6.01 18% $ 6.09 $ 6.20 (2%)
Cobalt(2) 15.20 35.21 (57%) 16.46 39.05 (58%)
AVERAGE REALIZED PRICE(1)
Nickel ($ per pound) $ 9.11 $ 7.96 14% $ 8.04 $ 8.10 (1%)
Cobalt ($ per pound) 17.54 44.75 (61%) 17.18 48.82 (65%)
Fertilizer ($ per tonne) 345 333 4% 444 390 14%
UNIT OPERATING COSTS(1) (US$ per pound)
Nickel - net direct cash cost $ 4.37 $ 2.16 102% $ 4.25 $ 1.96 117%
SPENDING ON CAPITAL(3)
Sustaining $ 4.9 $ 8.9 (45%) $ 26.7 $ 26.5 1%
$ 4.9 $ 8.9 (45%) $ 26.7 $ 26.5 1%
(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 nine months ended September 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 4,139 tonnes of finished nickel in Q3 2019, down 7% from 4,457 tonnes produced in Q3 2018. The Moa
JV produced above normal production totals in Q3 2018 due to the increased availability of mixed sulphides at the refinery in Fort
Saskatchewan, Alberta. Earlier in 2018, mixed sulphides supply had been negatively impacted by the disruption of rail
transportation services in Canada, and considerable efforts were made to process the subsequent backlog of refinery feed in Q3
2018. On a year-to-date basis, the Moa JV has produced 12,505 tonnes of finished nickel and 1,277 tonnes of finished cobalt, up
13% and 7%, respectively, from the same nine-month period of 2018. Higher production for 2019 is due to the benefits of a
number of operational excellence initiatives aimed at improving mining equipment reliability and ore access.
Production in Q3 2019 was affected by an unscheduled maintenance shutdown at the refinery that resulted in approximately 320
tonnes of lost finished nickel production. Efforts are underway to recover the production shortfall, and the Moa JV expects to
achieve its production guidance for 2019. Finished cobalt production for Q3 2019 was 436 tonnes, down 6% from Q3 2018. The
nickel to cobalt ratio in mixed sulphides produced at Moa in Q3 2019 is consistent with historical norms.
2019 Third Quarter Report
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6 Sherritt International Corporation
Mixed sulphide production at Moa in Q3 2019 was negatively impacted by reduced diesel fuel supply availability caused by
economic and trade sanctions imposed on Venezuela, Cuba’s largest oil supplier. In response to reduced fuel availability in
Cuba, the Moa JV implemented diesel conservation measures at its Moa operations in August and September. While finished
nickel and cobalt production at the Moa JV’s refinery in Fort Saskatchewan in the third quarter were not impacted, diesel
conservation efforts limited the use of mining equipment, resulting in a higher draw down of lower grade ore stockpiles and
reduced mixed sulphides production at Moa. Ongoing diesel requirements were secured by quarter-end and mixed sulphides
production has returned to normal levels. Moa remains on track to achieve its full-year mixed sulphides production target due to
higher rates achieved in the first half of the year as a result of previous initiatives aimed at improving operational excellence, ore
access and mining equipment availability.
Q3 2019 revenue of $112.2 million was down 18% when compared to last year due to a number of factors, including a 6%
decrease in nickel sales volume, and a decline in cobalt realized prices, though partially offset by the 14% increase in realized
nickel prices and a weaker Canadian dollar relative to the U.S. dollar.
Mining, processing and refining (MPR) costs for Q3 2019 were US$5.22/lb, down 1% from US$5.25/lb for Q3 2018. The decrease
was attributable to a combination of factors, including lower sulphur and energy prices, the impact of austerity measures, and the
benefits of operational excellence initiatives implemented previously that were aimed at lowering costs and improving efficiencies.
The decrease in MPR costs was partly offset by the impact of lower production on fixed costs.
NDCC in Q3 2019 was US$4.37/lb, up from US$2.16/lb for the same period last year. The increase was due to lower by-product
revenue stemming from the 61% decline in realized cobalt prices. The Moa JV remains on track to achieve its unit cost guidance
for 2019 based on performance year-to-date.
Sherritt received $11.6 million in dividend distributions from the Moa JV in Q3 2019 compared to $5.2 million in Q3 2018. On a
year-to-date basis, Sherritt has received $28.4 million (US$21.3 million) of dividend distributions from the Moa JV.
Sustaining capital spending in Q3 2019 was $4.9 million, down 45% from $8.9 million in Q3 2018 when Moa JV completed its
acquisition of a significant tranche of new mining equipment. The year-over-year decrease was due to austerity measures
implemented in Q2 2019 in response to expected commodity price volatility and unfavourable geopolitical developments over the
near term. The Moa JV is currently on track to meet its US$30 million of planned capital spend guidance.
Sherritt International Corporation 7
Oil and Gas
For the three months ended For the nine months ended
2019 2018 2019 2018
$ millions, except as otherwise noted September 30 September 30 Change September 30 September 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 6.9 $ 8.7 (21%) $ 23.4 $ 36.4 (36%)
Earnings (loss) from operations (6.5) (5.2) (25%) (17.6) (6.6) (167%)
Adjusted EBITDA(1) (3.8) (2.7) (41%) (9.2) 1.3 (808%)
CASH FLOW
Cash provided (used) by operations (9.2) 0.8 nm 4.3 18.6 (77%)
Adjusted operating cash flow(1) (4.8) (3.5) (37%) (11.6) (14.5) 20%
Free cash flow(1) (13.7) (7.3) (88%) (17.4) 0.6 nm
PRODUCTION AND SALES (bopd)
Gross working-interest (GWI) - Cuba 4,060 4,668 (13%) 4,306 4,973 (13%)
Total net working-interest (NWI) 1,199 1,536 (22%) 1,496 2,414 (38%)
AVERAGE REFERENCE PRICE (US$ per barrel)
West Texas Intermediate (WTI) $ 56.35 $ 69.56 (19%) $ 57.01 $ 66.90 (15%)
U.S. Gulf Coast High Sulphur Fuel Oil (USGC HSFO) 51.49 65.72 (22%) 57.90 61.16 (5%)
Brent 62.10 74.95 (17%) 64.84 72.18 (10%)
AVERAGE-REALIZED PRICE(1) (NWI)
Cuba ($ per barrel) $ 50.38 $ 63.55 (21%) $ 57.22 $ 55.25 4%
UNIT OPERATING COSTS(1) (GWI)
Cuba ($ per barrel) $ 21.40 $ 18.84 14% $ 20.83 $ 18.72 11%
SPENDING ON CAPITAL(2)
Development, facilities and other $ (0.2) $ 1.4 (114%) $ 0.8 $ 1.4 (43%)
Exploration 5.1 7.1 (28%) 21.1 16.6 27%
$ 4.9 $ 8.5 (42%) $ 21.9 $ 18.0 22%
(1) For additional information see the Non-GAAP measures section.
(2) Spending on capital for the nine months ended September 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 Q3 2019 was 4,060 barrels of oil per day (“bopd”), down 13% from 4,668 bopd
for Q3 2018. Lower production in 2019 was primarily due to natural reservoir declines and the absence of new development
drilling.
Revenue in Q3 2019 was $6.9 million, down 21% 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 weaker
Canadian dollar relative to the U.S. currency.
Unit operating costs in Cuba in Q3 2019 were $21.40 per barrel, up 14% from Q3 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 Q3 2019 was $4.9 million, down 42% from Q3 2018. Exploration capital spending in both the current and prior
year periods are primarily related to drilling on Block 10.
Subsequent to quarter end, drilling on Block 10 resumed on October 19 following the import of rented drilling mud tanks due to
the lack of availability in Cuba. Sherritt anticipates drilling to a total depth of approximately 5,700 meters. The well will then be
completed and tested. As of October 29, drilling to a depth of 5,525 meters had been completed.
The rental of new drilling equipment is not expected to increase planned capital spending previously disclosed for the Oil and Gas
business. Sherritt continues to explore partnerships for further investment in Block 10 following completion of the current well.
In Q3 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. While the sale reduced net working-interest, it did not have a significant impact on revenue or gross margin.
Based on year-to-date performance, the Oil and Gas business remains on track to achieve its 2019 guidance for production, unit
costs and planned capital spend.
2019 Third Quarter Report
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8 Sherritt International Corporation
Power
For the three months ended For the nine months ended
2019 2018 2019 2018
$ millions (33 ⅓% basis), except as otherwise noted September 30 September 30 Change September 30 September 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 12.1 $ 11.7 3% $ 33.9 $ 36.0 (6%)
Earnings (loss) from operations 1.8 (0.2) 1,000% 3.5 3.1 13%
Adjusted EBITDA(1) 8.6 6.1 41% 22.9 21.5 7%
CASH FLOW
Cash provided by operations 15.9 10.0 59% 31.1 29.3 6%
Adjusted operating cash flow(1) 11.2 5.7 96% 24.5 20.5 20%
Free cash flow(1) 15.7 9.8 60% 30.3 28.8 5%
PRODUCTION AND SALES
Electricity (GWh) 197 191 3% 550 597 (8%)
AVERAGE-REALIZED PRICE(1)
Electricity ($/MWh) $ 55.50 $ 54.57 2% $ 55.80 $ 53.99 3%
UNIT OPERATING COSTS(1) ($/MWh)
Base 13.84 17.38 (20%) 16.51 15.79 5%
Non-base(2) 0.58 7.22 (92%) 0.38 4.25 (91%)
14.42 24.60 (41%) 16.89 20.04 (16%)
NET CAPACITY FACTOR (%) 63 60 5% 58 62 (6%)
SPENDING ON CAPITAL(3)
Sustaining $ 0.2 $ 0.2 - $ 0.8 $ 0.5 60%
$ 0.2 $ 0.2 - $ 0.8 $ 0.5 60%
(1) For additional information see the Non-GAAP measures section.
(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 nine months ended September 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 Q3 2019 was 197 gigawatt hours (“GWh”) of electricity, up 3% from 191 GWh for the comparable period of
2018 primarily due to increased gas supply in the current quarter.
Average-realized prices in Q3 2019 were $55.50, up 2% from $54.57 last year. The increase was due to the depreciation of the
Canadian dollar relative the U.S. currency.
Revenue in Q3 2019 totaled $12.1 million, up 3% from $11.7 million for last year. The increase was due to higher power production
and realized prices.
Unit operating costs in Q3 2019 were $14.42, down 41% from $24.60 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 lower unit operating cost was also impacted by higher volume
partly offset by a weaker Canadian dollar in Q3 2019 as Power business costs are generally denominated in U.S. currency.
Total capital spending in Q3 2019 was negligible.
Based on performance through September 30, the Power business remains on track to achieve its 2019 guidance for production,
unit costs and planned capital spend.