Strong Operational Performance Drives Sherritt’s Q1 2020 Results
Sherritt International Corporation 1
For immediate release
Strong Operational Performance Drives Sherritt’s Q1 2020 Results
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED
STATES
Toronto – April 30, 2020 – 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 months ended March 31, 2020. All amounts are in Canadian currency unless otherwise noted.
CEO COMMENTARY
“In response to the health risks and market uncertainty introduced by COVID-19, we took decisive action in Q1 to protect our
employees and maintain production through new health and safety practices and work processes,” said David Pathe, President
and CEO of Sherritt International. “As a result of these efforts, Sherritt experienced no COVID-19 impacts to production in Q1.”
Mr. Pathe added, “Our liquidity was enhanced in Q1 through a number of measures, including collections on Cuban receivables
under the agreement we announced in Q1, a nickel sale prepayment of $16 million, other temporary working capital initiatives,
and further austerity measures introduced in response to COVID-19. Given that economic uncertainty is expected to persist in
the near term, that we experienced a significant decline in Cuban collections in April, and that some of the actions taken in Q1
were one-time measures, we anticipate that our current liquidity position will decline through the end of 2020.
“Q1 was also marked by the launch of a balance sheet initiative aimed at strengthening our capital structure. Discussions with
key stakeholders continue and we will provide further updates on our efforts to address our pending debt maturities and provide
a resolution to our Ambatovy debt legacy in the coming weeks.”
Mr. Pathe concluded, “Despite the disruption in delivery of mixed sulphides to our refinery in Fort Saskatchewan and the
softening of nickel prices, Sherritt’s performance in Q1 was marked by solid nickel and cobalt production totals and lower unit
costs. These positive results are indicative of the benefits that operational excellence initiatives implemented over the past two
years continue to deliver.”
SUMMARY OF KEY Q1 DEVELOPMENTS
In response to health risks associated with the spread of COVID-19, Sherritt implemented a number of additional health
and safety measures designed to protect employees at its operations around the world. Alt hough the pandemic has
had limited impact on nickel, cobalt, power and oil production to date, and while production activities continue, Sherritt
has withdrawn its guidance for 2020 due to a number of market and economic uncertainties caused by COVID -19. As
a result of this uncertainty and lack of near-term visibility, Sherritt has also implemented a number of austerity measures,
identifying opportunities to reduce or defer budgeted expenditures for the Moa Joint Venture (100% basis), Sherritt’s
Oil and Gas and Power operations, and Corporate Office for 2020 by approximately $90 million.
Launched a balance sheet initiative aimed at improving the Corporation’s liquidity, reducing debt levels and building
balance sheet strength. Sherritt is currently in discussions with key stakeholders in respect of the initiative, and believes
that it is appropriate and in the best interests of the Corporation to continue to work towards a consensual transaction
for the benefit of all stakeholders.
Sherritt’s share of fini shed nickel and cobalt production at the Moa Joint Venture (Moa JV) in Q1 2020 were 3,836
tonnes and 400 tonnes, respectively. Finished production totals were impacted by the reduced availability of mixed
sulphides as a result of heavy rains at Moa in Jan uary, and by the disruption of deliveries to the refinery in Fort
Saskatchewan caused by rail blockades in Canada and by extended transit times for shipping vessels from Cuba.
Secured a $16 million prepayment against future nickel deliveries in 2020 as part of efforts to enhance the Corporation’s
liquidity.
Excluding $86.2 million of cash and cash equivalents held by Energas, Sherritt ended Q1 2020 with cash and cash
equivalents of $107.2 million. Sherritt’s consolidated cash position of $193.4 million at t he end of Q1 was up from
$166.1 million at the end of Q4 2019. The change in Sherritt’s liquidity was due to the timing of a number of factors
including the receipt of distributions from the Moa JV, a positive change in working capital primarily as a result of higher
Cuban energy payments, a $16 million prepayment against future nickel deliveries in 2020, seasonal fertilizer
collections, and the deferral of $7.4 million in interest payments as a result of the launch of the balance sheet initiative.
Received $13.3 million in distributions from the Moa JV despite softening nickel prices in the quarter. The distributions
were primarily due to the Moa JV ending 2019 with a higher than required cash balance.
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2 Sherritt International Corporation
Sherritt received a commitment from its Cuban partners effective February 1, 2020 for an incremental US$5.0 million
per month payment to be used to fund Energas operations and reduce overdue amounts owed to Sherritt. The
increment will be added to US$2.5 million per month payment under the overdue receivables agreement first ratified in
June 2019. In Q1 2020, Sherritt received US$19.0 million in Cuban energy payments, including US$18.0 million related
to the overdue receivables agreement and US$1.0 million attributable to Sherritt’s Oil and Gas operations. Payments
in March were lower than expected as the spread of COVID-19 reduced Cuba’s access to foreign currency.
Excluding depreciation and share-based compensation, administrative expenses declined by an additional $600,000,
or 6%, from $9.3 million in Q1 2019.
Began preliminary testing on Block 10 following the completion of additional work on the well and recertification of
specific pieces of equipment. The onset of COVID -19 and travel restrictions imposed in Cuba have delayed test
samples from being analyzed in a lab setting. All Block 10 operations are currently suspended.
DEVELOPMENTS SUBSEQUENT TO THE QUARTER END
Sherritt agreed to an extension for the maturity of its $70 million credit facility from its senior lenders to August 31, 2020
to allow for completion of the balance sheet initiative launched in Q1. As part of the extension, the lenders agreed to
a reduction in the monthly minimum net available cash requirement to $65 million from $70 million starting April 30,
2020.
(1) For additional information see the Non-GAAP measures section of this press release.
Q1 2020 FINANCIAL HIGHLIGHTS(1)
$ millions, except as otherwise noted, for the three months ended March 31 2020 2019 Change
Revenue $ 26.7 $ 31.9 (16%)
Combined Revenue(2) 112.7 124.6 (10%)
Net loss for the period (42.2) (61.8) 32%
Adjusted EBITDA(2) 4.7 (1.2) 492%
Cash provided (used) by continuing operations 22.6 (34.6) 165%
Combined adjusted operating cash flow (2) 6.9 (9.9) 170%
Combined free cash flow(2) 3.0 (44.0) 107%
Average Exchange Rate (CAD/US$) 1.345 1.330 N/A
Net loss from continuing operations per share $ (0.11) $ (0.16) 31%
(1) The financial results for the Ambatovy JV are only discussed as part of Sherritt’s share of earnings in associate based on financial statement amounts. All non-GAAP
measures exclude the Ambatovy JV performance.
(2) For additional information see the Non-GAAP measures section.
2020 2019
$ millions, as at March 31 December 31 Change
Cash, cash equivalents and short term investments $ 193.4 $ 166.1 16%
Loans and borrowings 730.1 713.6 2%
Cash, cash equivalents and short-term investments at March 31, 2020 were $193.4 million, up from $166.1 million at December
31, 2019. The increase was due to a number of factors including, the receipt of $13.3 million in distributions from the Moa JV,
$8.9 million in positive working capital changes primarily related to Cuban energy receipts, a $16 million prepayment for nickel
sales against future deliveries in 2020, and the deferral of $7.4 million in interest payments as a result of the launch of the
balance sheet initiative on February 26. Sherritt anticipates that its current liquidity position will decline through the balance of
2020 given the volatility of commodity prices and the uncertainty of energy payment collections expected in the near term due
to the spread of COVID-19.
Cuban energy receipts consisted of US$18.0 million in payments made in accordance with the Energas overdue receivables
agreements and US$1.0 million in payments made by CUPET for Oil and Gas receivables.
In Q1 Sherritt received a commitment from its Cuban partners effective February 1, 2020 for an incremental US$5.0 million per
month payment related to an overdue receivables agreement ratified in June 2019. The incremental payment, which adds to the
US$2.5 million initially agreed to, will be used to fund Energas operations and reduce overdue amounts owed to Sherritt. In
March 2020, Sherritt received US$4.7 mil lion of the expected US$7.5 million payments largely as a result of the impact of
COVID-19 on Cuba’s economy and access to foreign currency. It is anticipated that the timing and amounts of Cuban energy
payments will fluctuate in the near term as Cuba’s economy and access to foreign currency recover from the impact of COVID-
19. Total overdue scheduled receivables at March 31, 2020 were US$154.0 million, down from US$158.4 million at December
31, 2019.
Sherritt International Corporation 3
As at March 31, 2020, $86.2 million of Sherritt’s cash and cash equivalents was held by Energas in Cuba, up from $79.8 million
at the end of Q4 2019.
Adjusted net loss(1)
2020 2019
For the three months ended March 31 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations (42.2) (0.11) (61.8) (0.16)
Adjusting items:
Unrealized foreign exchange (gain) loss (23.5) (0.06) 5.8 0.01
Other 18.0 0.05 1.1 0.01
Adjusted net loss from continuing operations (47.7) (0.12) (54.9) (0.14)
(1) For additional information see the Non-GAAP measures section.
Net loss from continuing operations for Q1 2020 was $42.2 million, or $0.11 per share, compared to a net loss of $61.8 millio n,
or $0.16 per share, for the same period last year.
Net loss for Q1 2020 includes non-cash adjustments of $17.2 million, related to the revaluation of allowances for expected credit
loss (“ACL”) on the Moa Joint Venture expansion loans under IFRS 9 and $23.5 million unrealized foreign exchange gains.
Sherritt’s share of losses from each of the Moa and Ambatovy joint ventures were both lower in Q1 2020 compared to Q1 2019.
Adjusted net loss from continuing operations, which adjusts for ACL’s and unrealized changes in foreign exchange, discussed
above, was $47.7 million, or $0.12 per share, for the three months ended March 31, 2020 compared to an adjusted net loss from
continuing operations of $54.9 million, or $0.14 per share, for Q1 2019.
METALS MARKET
Nickel
Nickel market conditions in the first quarter of 2020 were adversely impacted by the onset and spread of COVID-19. Triggered
initially by a slowdown of China’s economy and manufacturing activities, nickel prices and demand softened throughout the
quarter as uncertainty about the virus’ impact on the world’s economy and outlook grew. By the end of the period, nickel prices
had declined by 20% and nickel inventory grew by 37%.
Nickel prices on the London Metals Exchange (LME) started Q1 at US$6.38/lb and hit a peak of US$6.48/lb on January 16
before beginning a slow descent through end of March, ending the quarter at US$5.10/lb.
The price softness experienced in Q1 was matched by an increase in inventory levels on the London Metals Exchange (LME)
and the Shanghai Future Exchange (SHFE). Combined inventory levels at March 31 totaled approximately 257,000 tonnes,
up 37% from combined inventory totals of approximately 187,000 tonnes at the start of the year. The increase was largely
driven by reduced consumer purchasing in the wake of stainless steel manufacturing interruptions in China related to COVID-
19, extended Lunar New Year celebrations in January, and a slow recovery of production activities through March.
Since the start of Q2, nickel prices and combined inventories have stayed relatively flat. In the near term, it is anticipated that
nickel prices and inventory levels may be volatile given the economic uncertainty caused by the spread of COVID-19 and
related disruption of stainless steel production and mining operations around the world. In light of this uncertainty, a number
of industry experts and market watchers have withdrawn their forecasts for nickel demand. Previously, demand for nickel
through 2025 was expected to grow by approximately 3% per year to 2.8 million tonnes according to market research by Wood
Mackenzie.
Industry experts remain bullish on the longer term market outlook for nickel, however. Over the longer term, demand for nickel
is expected to accelerate with the increased adoption of electric vehicles since nickel – along with cobalt – is a key metal
needed to manufacture assorted energy storage batteries.
A shortage of 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 nickel supply is expected to come on stream in the near term.
Cobalt
In contrast to nickel, cobalt prices and demand remained relatively stable in Q1, in large part because electronics and battery
manufacturing activities in Japan and South Korea had not yet been significantly affected by the spread of COVID-19.
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4 Sherritt International Corporation
Cobalt prices, in fact, increased by 5% in Q1, reversing the downward trend experienced in Q4. Standard grade cobalt prices
on March 31 closed at US$16.28/lb, up from $15.53/lb at the start of the quarter according to data collected by Fastmarkets
MB. Cobalt prices since the start of Q2 have retreated modestly as consumer purchasing has softened.
The near-term outlook for cobalt remains uncertain, however, as the spread of COVID-19 has started to take a toll on consumer
purchasing and mining activities around the world.
REVIEW OF OPERATIONS
Moa Joint Venture (50% interest) and Fort Site (100%)
$ millions, except as otherwise noted, for the three months ended March 31 2020 2019 Change
FINANCIAL HIGHLIGHTS
Revenue $ 93.5 $ 102.3 (9%)
Loss from operations (4.7) (9.5) 51%
Adjusted EBITDA(1) 10.1 4.2 140%
CASH FLOW
Cash provided (used) by operations $ 4.5 $ (4.1) 210%
Adjusted operating cash flow(1) 7.2 2.8 157%
Free cash flow(1) (2.1) (10.4) 80%
PRODUCTION VOLUMES (tonnes)
Mixed Sulphides 4,014 4,336 (7%)
Finished Nickel 3,836 4,397 (13%)
Finished Cobalt 400 426 (6%)
Fertilizer 56,089 66,962 (16%)
NICKEL RECOVERY (%) 83% 84% (1%)
SALES VOLUMES (tonnes)
Finished Nickel 3,773 4,391 (14%)
Finished Cobalt 381 460 (17%)
Fertilizer 31,140 26,957 16%
AVERAGE-REFERENCE PRICES (US$ per pound)
Nickel $ 5.77 $ 5.62 3%
Cobalt(2) 16.77 18.53 (9%)
AVERAGE REALIZED PRICE
Nickel ($ per pound) 7.60 7.51 1%
Cobalt ($ per pound) 19.16 14.62 31%
Fertilizer ($ per tonne) 350 418 (16%)
UNIT OPERATING COSTS(1) (US$ per pound)
Nickel - net direct cash cost 4.33 4.53 (4%)
SPENDING ON CAPITAL(3)
Sustaining 6.6 14.0 (53%)
Expansion - - -
6.6 14.0 (53%)
(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 three months ended March 31, 2019 excludes right of use assets recognized on adoption of IFRS 16. Refer to note 4 of the audited
consolidated financial statements for the year ended December 31, 2019 for additional information.
Finished nickel production for Q1 2020 was 3,836 tonnes, down 13% from 4,397 tonnes produced in Q1 2019. Finished cobalt
production for Q1 2020 was 400 tonnes, down 6% from 426 tonnes produced in Q1 2019. Lower finished production in Q1 2020
was primarily due to reduced availability of mixed sulphides at the refinery in Fort Saskatchewan, driven by a number of factors
including heavy rains at Moa in January that adversely impacted mining operations and mixed sulphides production, and by
reduced deliveries to the refinery caused by transportation interruptions due to rail blockades in Canada in February and by
shipping vessel delays from Cuba.
Sherritt International Corporation 5
Mixed sulphides production at Moa in Q1 2020 was 4,014 tonnes down 7% from 4,336 tonnes produced in Q1 2019. The decline
was primarily due to heavy rains at Moa in January, which impacted mining operations. Unplanned maintenance activities at the
leach plant at Moa, which has since returned to production capacity, also impacted mixed sulphides production in Q1 2020.
Q1 2020 revenue of $93.5 million was down 9% when compared to $102.3 million for Q1 2019. The revenue decline was driven
by lower nickel and cobalt sales volumes in connection with reduced finished nickel and cobalt production. Higher cobalt
averaged-realized prices in Q1 2020 helped to offset reduced nickel sales volume. Although nickel and cobalt sales volume in
Q1 2020 were not impacted by the onset and spread of COVID-19, near-term sales volume through end of year may be affected
by the impact that the pandemic is having on the world’s economy and market outlook.
Mining, processing and refining (MPR) costs for Q1 2020 were US$5.34/lb, down 4% from US$5.59/lb for Q1 2019, largely as a
result of lower sulphur and fuel oil costs, partly offset by the impact of lower production volumes on fixed costs.
NDCC in Q1 2020 was US$4.33/lb, marking an improvement from US$4.53/lb for the same period last year. The improvement
was due to lower MPR costs and a higher cobalt credit from increased cobalt realized prices.
Sustaining capital spending in Q1 2020 was $6.6 million, down 53% from $14.0 million in Q1 2019. The year-over-year decrease
is due to a number of factors, including the final delivery of new mining equipment in Q1 2019 and the implementation of austerity
measures in Q1 2020 in response to the economic uncertainty caused by the spread of COVID-19 around the world.
Sherritt received $13.3 million in distributions from the Moa JV in Q1 2020 compared to $3.3 million in Q1 2019. The growth is
reflective of improved commodity prices and the benefits that operational excellence initiatives have delivered to date and as a
result of the Moa JV ending 2019 with a higher than required cash balance.
Oil and Gas
$ millions, except as otherwise noted, for the three months ended March 31 2020 2019 Change
FINANCIAL HIGHLIGHTS
Revenue $ 7.1 $ 9.0 (21%)
Loss from operations (5.6) (5.7) 2%
Adjusted EBITDA(1) (3.6) (2.7) (33%)
CASH FLOW
Cash used by operations (7.4) (8.0) 8%
Adjusted operating cash flow(1) (3.6) (2.2) (64%)
Free cash flow(1) (9.1) (14.9) 39%
PRODUCTION AND SALES (boepd)
Gross working-interest (GWI) - Cuba 3,277 4,443 (26%)
Total net working-interest (NWI) 1,751 1,776 (1%)
AVERAGE-REFERENCE PRICE (US$ per barrel)
West Texas Intermediate (WTI) $ 45.44 $ 54.79 (17%)
U.S. Gulf Coast High Sulphur Fuel Oil (USGC HSFO) 37.22 61.04 (39%)
Brent 51.03 62.96 (19%)
AVERAGE-REALIZED PRICE(1) (NWI)
Cuba ($ per barrel) 35.26 $ 59.13 (40%)
UNIT OPERATING COSTS(1) (GWI)
Cuba ($ per barrel) 27.28 $ 21.19 29%
SPENDING ON CAPITAL(2)
Development, facilities and other $ 0.1 $ 1.5 (93%)
Exploration 1.6 4.2 (62%)
$ 1.7 $ 5.7 (70%)
(1) For additional information see the Non-GAAP measures section.
(2) Spending on capital for the three months ended March 31, 2019 excludes right of use assets recognized on adoption of IFRS 16. Refer to note 4 of the audited
consolidated financial statements for the year ended December 31, 2019 for additional information.
Gross working-interest oil production in Cuba in Q1 2020 was 3,277 barrels of oil per day (“bopd”), down 26% from 4,443 bopd
for Q1 2019. Lower production in the current year period was primarily due to natural reservoir declines and the absence of new
development drilling.
Total net working-interest oil production for Q1 2020 of 1,751 barrels was flat when compared to Q1 2019 totals.
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6 Sherritt International Corporation
Revenue in Q1 2020 was $7.1 million, down 21% when compared to Q1 2019 due to lower realized prices in Cuba, but partially
offset by a weaker Canadian dollar relative to the U.S. dollar.
While total operating costs were marginally lower for the three months ended March 31, 2020, unit operating costs in Cuba in
Q1 2020 were $27.28 per barrel, up 29% when compared to Q1 2019 as a result of lower production and the impact of a weaker
Canadian dollar relative to the U.S. dollar. Costs in Cuba are generally denominated in U.S. currency. Spending on equipment
has been deferred where possible until the test results of Block 10 can be finalized.
Capital spending in Q1 2020 of $1.7 million was 70% lower as drilling on Block 10 was completed in late 2019. Q1 2020 costs
include Block 10 completion and testing costs.
Sherritt began preliminary testing on Block 10 following the completion of additional work on the well and recertification of specific
pieces of equipment. The onset of the COVID-19 pandemic and travel restrictions imposed in Cuba have delayed test samples
from being analyzed in a lab setting. The Corporation will provide test results once lab access can be restored and samples
are analyzed. Block 10 operations are currently suspended.
Power
$ millions (33⅓% basis), except as otherwise noted, for the three months ended March 31 2020 2019 Change
FINANCIAL HIGHLIGHTS
Revenue $ 9.4 $ 10.7 (12%)
Earnings from operations 1.3 0.9 44%
Adjusted EBITDA(1) 6.5 7.2 (10%)
FINANCIAL HIGHLIGHTS
Cash provided by operations 18.4 3.6 411%
Adjusted operating cash flow(1) 13.2 6.3 110%
Free cash flow(1) 18.4 3.1 494%
PRODUCTION AND SALES
Electricity (GWh) 153 173 (12%)
AVERAGE-REALIZED PRICE(1)
Electricity ($/MWh) $ 56.97 $ 55.74 2%
UNIT OPERATING COSTS(1) ($/MWh)
Base 14.06 19.83 (29%)
Non-base(2) 0.51 0.45 13%
14.57 20.28 (28%)
NET CAPACITY FACTOR (%) 48 54 (11%)
SPENDING ON CAPITAL(3)
Sustaining $ - $ 0.5 (100%)
$ - $ 0.5 (100%)
(1) For additional information see the Non-GAAP measures section.
(2) Costs incurred at the Boca de Jaruco and P uerto Escondido facilities that otherwise would have been capitalized if these facilities were not accounted or as service
concession arrangements.
(3) Spending on capital f or the three months ended March 31, 2019 excludes right of use assets recognized on ado ption of IFRS 16. Refer to note 4 of the audited
consolidated financial statements for the year ended December 31, 2019 for additional information.
Power production in Q1 2020 was 153 gigawatt hours (“GWh”) of electricity, down 12% from 173 GWh for the comparable period
of 2019 as a result of a decline in gas supply.
Average-realized prices in Q1 2020 were $56.97, up 2% from $55.74 last year. The increase was due to the depreciation of the
Canadian dollar relative to the U.S. currency.
Revenue in Q1 2020 totaled $9.4 million, down 12% from $10.7 million for last year. The decrease was primarily due to lower
power production.
Unit operating costs in Q1 2020 were $14.57/MWh, down 28% from $20.28/MWh for last year. The decrease was due to the
timing of maintenance activities aimed at limiting operational spending and managing within Cuban energy receipts. Unit
operating costs for Q1 2020 were also impacted by a lower production and a change in Canadian dollar relative to the U.S. dollar
as Power operating costs are generally denominated in U.S. currency.
Sherritt International Corporation 7
2020 REVIEW OF STRATEGIC PRIORITIES
The table below lists Sherritt’s Strategic Priorities for 2020, and summarizes how the Corporation has performed against those priorities.
Strategic Priorities 2020 Actions Status
PRESERVE LIQUIDITY AND BUILD
BALANCE SHEET STRENGTH
Continue to emphasize de-leveraging of the
balance sheet within the context of a low
commodity price environment.
Sherritt launched a balance sheet initiative in Q1 2020 aimed
at strengthening the Corporation’s capital structure. Pending
approval from stakeholders, court approval and closing, the
transaction will result in the elimination of up to $424.5 million
in recourse debt and annual interest savings of up to $19
million. Discussions with key stakeholders are ongoing, and
the Corporation believes that working towards a consensual
transaction agreement is in the best interest of all
stakeholders. Ongoing austerity measures contributed to a 6%
reduction in administration expenses (excluding stock-based
compensation and depreciation) in Q1 2020 compared to the
same period last year. In response to the economic
uncertainty caused by the spread of COVID-19, Sherritt has
identified opportunities to save or defer approximately $90
million of capital spend, operating and administrative
expenses. These austerity measures will be applied against
2020 budgeted expenditures for Sherritt’s operations and
corporate office as well as the Moa JV (100% basis).
Optimize working capital and receivables
collection
In Q1 2020, Sherritt received a commitmen t from its Cuban
partners for incremental payments of US$5.0 million per
month effective February 1, 2020, which will be used to fund
Energas operations a nd apply to overdue amounts. This
increment is in additi on to the US$2.5 million per month
Sherritt is receiving under the overdue receivables agreement
ratified in June 2019. Sherritt received a total of US$19 million
Cuban energy payments in Q1 2020, including US$1.0 million
from Oil and Gas. As part of effor ts to enhance liquidity,
Sherritt secured a $16 million prepayment against future nickel
deliveries in 2020.
Operate the Metals business to maintain a
leadership position as a low-cost producer
of finished nickel and cobalt while
maximizing Free Cash Flow
The Moa JV and Fort Site generated $7.2 million of adjusted
operating cash flow in Q1 2020, up 157% from the same
period last year.
UPHOLD GLOBAL OPERATIONAL
LEADERSHIP IN FINISHED NICKEL
LATERITE PRODUCTION
Further reduce NDCC towards the goal of
being consistently in the lowest cost
quartile.
NDCC in Q1 2020 improved by 4% to US$4.33/lb from
US$4.53 last year, largely as a result of higher realized cobalt
prices and lower input costs.
Maximize production of finished nickel and
cobalt and improve predictability over 2019
results
Finished nickel production at the Moa JV in Q1 2020 was
7,672 tonnes (100% basis), while finished cobalt production
was 800 tonnes (100% basis) . Production was impacted by
the reduced availability of mixed sulphides at the refinery in
Fort Saskatchewan due to weather and transportation
challenges experienced in the quarter.
Achieve peer leading performance in
environmental, health, safety and
sustainability
In Q1 2020, Sherritt’s operations at Moa, Fort Site, Oil & Gas
and Power had two lost time incidents
In Q1 2020, Moa/Fort Site had a recordable injury frequency
rate of 0.27 and a lost time injury frequency rate of 0.12; the
Oil and Gas business had a recordable injury frequency rate
of 0.48 and a lost time injury rate o f 0.00; and the Power
business had recordable injury frequency and lost time injury
frequency rates of 0.00.
Overall Sherritt had a recordable injury frequency rate of 0.26
and a lost time injury frequency rate of 0.09. Sherritt remains
in the lowest quartile of its benchmark peer set of data.
OPTIMIZE OPPORTUNITIES IN
CUBAN ENERGY BUSINESS
Successfully execute Block 10 drilling
program
Sherritt completed approximately 5,700 meters to reach the
target drilling depth. Preli minary testing started in Q1 2 020
following the re-certification of specific pieces of equipment
and completion of additional wor k on the well. Testing has
been suspended due to restricti ons on travel caused by
COVID-19, which has prevented samples from being analyzed
in a lab environment.
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8 Sherritt International Corporation
OUTLOOK
2020 Production, unit operating costs and capital spending guidance
In response to health risks associated with the spread of COVID -19, Sherritt has implemented a number of health and safety
measures designed to protect employees at its oper ations around the world. Although nickel, cobalt, power and oil production
activities have experienced modest disruption to date, and while production activities continue, Sherritt has withdrawn its
guidance for 2020 due to a number of market and economic uncertainties caused by COVID-19.
Initial Year-to-date Updated
2020 guidance - actuals - 2020 guidance -
Production volumes, unit operating costs and spending on capital Total(1) Total Withdrawn
Production volumes
Moa Joint Venture (tonnes, 100% basis)
Nickel, finished 32,000 - 34,000 7,672
Cobalt, finished 3,300 - 3,600 800
Oil – Cuba (gross working-interest, bopd) 3,000 - 3,300 3,277
Oil and Gas – All operations (net working-interest, boepd) 1,900 - 2,100 1,751
Electricity (GWh, 33⅓% basis) 500 - 550 153
Unit operating costs
Moa Joint Venture - NDCC (US$ per pound) $4.00 - $4.50 $4.33
Oil and Gas - Cuba (unit operating costs, $ per barrel) $28.00 - $29.50 $27.28
Electricity (unit operating cost, $ per MWh) $28.00 - $29.50 $14.57
Spending on capital
Moa Joint Venture (50% basis), Fort Site (100% basis)(2) US$34 (CDN$45) US$5 (CDN$7)
Oil and Gas US$6 (CDN$8) US$1 (CDN$2)
Power (33⅓% basis) US$1 (CDN$1.3) US$0 (CDN$0)
Spending on capital (excluding Corporate) US$41 (CDN$54) US$6 (CDN$9)
(1) As originally announced January 22, 2020.
(2) Spending is 50% of US$ expenditures for the Moa JV and 100% expenditures for Fort Site fertilizer and utilities.