Sherritt Reports Strong Nickel and Cobalt Production in Q2 and Upgrades ESG Targets
Sherritt International Corporation 1
For immediate release
Sherritt Reports Strong Nickel and Cobalt Production in Q2 and
Upgrades ESG Targets
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
Toronto – July 29, 2021 – 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, 2021. All amounts are in Canadian currency unless otherwise noted.
CEO COMMENTARY
“Our performance in Q2 was marked by strong nickel and cobalt production, receipt of US$28 million in distributions from the
Moa Joint Venture, and measures taken to reduce corporate costs by approximately $1.3 million annually,” said Leon Binedell,
President and CEO of Sherritt International. “Just as significant, we accelerated efforts to transition our Technologies Group
from being a cost centre to becoming an incubator of industry solutions that can be commercialized externally or applied internally
to improve operational performance, reduce carbon emissions, and support growth initiatives, such as efforts to de -bottleneck
production, evaluate brownfield expansion opportunities, and increase mineral reserves.”
Mr. Binedell added, “Although our ability to collect overdue receivables may be subject to near-term volatility due to the continued
impact of U.S. sanctions and Cuba’s reduced access to foreign currency on account of the global pandemic, we remain bullish
on our prospects given the favourable outlook for nickel and cobalt with the mass adoption of electric vehicles anticipated in the
coming years.”
SELECTED Q2 2021 HIGHLIGHTS
Leon Binedell, a 25-year mining industry veteran with a history of building shareholder value, was appointed President
and CEO of Sherritt International effective June 1, 2021.
Adjusted EBITDA(1) was $18 million, up 114% from last year. The higher total was indicative of strong production totals
at the Moa Joint Venture (Moa JV) and improved nickel and cobalt prices, but offset by increased input costs and $1.8
million of expenses relating to a 10% workforce reduction in Sherritt’s Corporate office, which will result in a reduction
of corporate costs by approximately $1.3 million annually, and $5.5 million in other contract benefits expenses relating
to the planned departure of senior executives.
Sherritt’s share of finished nickel production at the Moa JV was 4,230 tonnes, up 2% from last year while Sherritt’s
share of finished cobalt production was 476 tonnes, up 12%. The growth was largely attributable to higher inventories
of mixed sulphides available at the refinery in Fort Saskatchewan, Alberta and improved refinery reliability.
Net Direct Cash Cost (NDCC)(1) at the Moa JV was US$4.58/lb, up 17% from last year. Despite a 73% improvement in
cobalt by-product credits, unit costs per pound of finished nickel sold were impacted by the 65% increase in sulphur
prices, 16 0% increase in fuel oil prices , 4 6% increase in natural gas prices , and added costs stemming from the
purchase of sulphuric acid necessary because of the acid plant shutdown at Moa due to scheduled maintenance
repairs.
Upgraded a number of environmental, social, and governance (ESG) targets, including a target of achieving net zero
greenhouse emissions by 2050 and obtaining 15% of overall energy from renewable sources by 2030. Sherritt’s list of
long-term and interim ESG targets will be published in its upcoming Sustainability Report.
Received US$28 million in distributions from the Moa JV. The total consisted of She rritt’s 50% share of distributions
declared by the Moa JV, or US$14 million, and US$14 million re -directed by General Nickel Company S.A. (GNC),
Sherritt’s joint venture partner, from its 50% share to be used to fund Energas operations.
Received US$24.5 million in Cuban energy payments, including the US$14 million noted above redirected to Sherritt
by its Moa JV partner . Sherritt anticipates continued variability in the timing of collections through the remainder of
2021, and is working with its Cuban partners to ensure timely receipts.
Generated $1.5 million of cash from continuing operations for operating activities, r epresenting a turnaround of $14.1
million from Q2 2020.
2021 Second Quarter Report
Press Release
2 Sherritt International Corporation
Purchased a total of $2 million principal amount of 8.5% second lien notes at an aggregate cost of $1.3 million. The $2
million debt reduction will also result in cash interest savings of $0.9 million through to the maturity in November 2026.
Excluding the non-cash impacts of share-based compensation and depreciation, administrative expenses declined by
$2.7 million from Q2 2020.
DEVELOPMENTS SUBSEQUENT TO THE QUARTER END
Sherritt donated $250,000 to UNICEF to support immunization efforts and improve the capacity of approximately 90
vaccination centres throughout Cuba, including the municipality of Moa in Holguin. The donation, which will benefit
almost 3 million people, including approximately 350,000 children, will help curb the spread of COVID -19 and support
future vaccination needs.
(1) For additional information see the Non-GAAP measures section of this press release.
Q2 2021 FINANCIAL HIGHLIGHTS
For the three months ended For the six months ended
2021 2020 2021 2020
$ millions, except per share amount June 30 June 30 Change June 30 June 30 Change
Revenue 31.0 40.4 (23%) $ 52.9 $ 66.7 (21%)
Combined revenue(1) 152.3 133.5 14% 294.0 245.8 20%
Loss from operations and joint venture (7.3) (19.7) 63% (1.2) (38.5) 97%
Net loss from continuing operations (10.4) (13.3) 22% (12.3) (47.8) 74%
Net loss for the period (10.7) (114.5) 91% (16.3) (156.7) 90%
Adjusted EBITDA(1) 18.0 8.4 114% 48.2 12.7 280%
Cash provided (used) by continuing operations for operating
activities 1.5 (12.6) 112% (1.5) 10.0 (115%)
Combined free cash flow(1) 2.6 (0.6) nm(2) 21.6 2.4 nm(2)
Average exchange rate (CAD/US$) 1.228 1.385 (11%) 1.247 1.365 (9%)
Net loss from continuing operations ($ per share) (0.03) (0.03) - (0.03) (0.12) 75%
(1) For additional information see the Non-GAAP measures section.
(2) Not meaningful (nm)
2021 2020
$ millions, as at June 30 December 31 Change
Cash, cash equivalents and short term investments $ 153.8 $ 167.4 (8%)
Loans and borrowings 439.6 441.4 -
Cash, cash equivalents, and short-term investments at June 30, 2021 were $153.8 million, down from $158.3 million at March
31, 2021. The decrease was due to a number of factors , including use of $1.3 million towards the repurchase of 8.5% second
lien notes with a principal value of $2 million, payment of $15 million in interest on 8.5% second lien notes and $2.9 million in
capital expenditures. The decrea se was partially offset by the receipt of US$14 million in distributions from the Moa JV
representing Sherritt’s 50% share and the receipt of US$24.5 million in Cuban energy payments, which included US$14 million
re-directed by GNC, Sherritt’s joint venture partner, from its 50% share of distributions.
The US$28 million of distributions paid by the Moa JV in Q2 2021 was indicative of improved nickel and cobalt average-realized
prices and strong production results . In Q2 2020 , the Moa JV did not declare any distributions . Sherritt anticipates receipt of
additional distributions from the Moa JV through to the end of 2021 based on prevailing nickel and cobalt prices, planned capital
spend, and liquidity requirements for the Moa JV.
Collections against overdue amounts owed to Sherritt by its Cuban energy partners continue to be adversely impacted by a
combination of factors, including the ongoing effects of U.S. sanctions against Cuba, Cuba’s reduced access to foreign currency
on account of the global pandemic, and the country’s launch of a currency unification process. Sherritt received US$24.5 million
of Cuban energy payments, which included US$14 million of redirections from GNC, in Q2 2021.
Total overdue scheduled receivab les at June 30, 2021 were US$154.7 million, largely unchanged from US$154.2 million at
March 31, 2021. Subsequent to quarter end, Sherritt received US$1.6 million in Cuban energy payments. Sherritt anticipates
variability in the timing and the amount of energy payment s, and continues to work with its Cuban partners to ensure timely
receipt of energy payments.
Sherritt International Corporation 3
As at June 30, 2021, Sherritt held cash, cash equivalents and short -term investment in Canada totaling $77.4 million, up from
$75.6 million at March 31, 2021.
Adjusted net loss(1)
2021 2020
For the three months ended June 30 $ millions $/share $ millions $/share
Net loss from continuing operations (10.4) (0.03) (13.3) (0.03)
Adjusting items:
Unrealized foreign exchange (gain) loss - continuing operations (8.6) (0.02) 7.4 0.02
Severance and other contractual benefits expense 2.4 0.01 - -
Unrealized losses on commodity put options 3.7 0.01 - -
Moa JV expansion loans receivable ACL revaluation - - (23.6) (0.06)
Other (0.1) - 1.8 -
Adjusted net loss from continuing operations (13.0) (0.03) (27.7) (0.07)
2021 2020
For the six months ended June 30 $ millions $/share $ millions $/share
Net loss from continuing operations (12.3) (0.03) (47.8) (0.12)
Adjusting items:
Unrealized foreign exchange gain - continuing operations (11.2) (0.02) (5.1) (0.01)
Severance and other contractual benefits expense 2.4 0.01 - -
Unrealized losses on commodity put options 4.3 0.01 - -
Moa JV expansion loans receivable ACL revaluation - - (6.4) (0.02)
Gain on repurchase of notes (2.1) - - -
Other 3.6 (0.01) 3.2 0.01
Adjusted net loss from continuing operations (15.3) (0.04) (56.1) (0.14)
(1) For additional information see the Non-GAAP measures section.
Net loss from continuing operations for Q2 2021 was $10.4 million, or $0.03 per share, compared to a net loss of $13.3 million,
or $0.03 per share, for the same period last year. The improvement was driven largely by the strong contributions from the Moa
JV as a result of higher sales volumes and higher realized prices compared to the same period of last year.
Adjusted net loss from continuing operations was $13.0 million, or $0.03 per share, for the quarter ended June 30, 2021. In Q 2
2020, Sherritt incurred an adjusted net loss of $27.7 million or $0.07 per share. Sherritt’s adjusted net loss for Q2 2021 excluded
an unrealized foreign exchange gain of $8.6 million, severance and other contract benefits expense of $2.4 million, and
unrealized losses on commodity put options of $3.7 million.
METALS MARKET
Nickel
Following a price pullback triggered by Tsingshan’s announcement in early March that it plans to supply 100,000 tonnes of a
nickel intermediate product amenable for use in electric vehicle batteries starting in October 2021, nickel prices enjoyed a sharp
recovery in Q2, closing at US$8.37/lb on June 30, up 15% from the start of the quarter.
The price increase was driven by a number of market developments suggesting strong near -term demand for nickel and lower
available supply by year end.
Chief among the factors that contributed to rising nickel prices in Q2 was news from Indonesia that it plans to put restrictions on
the construction of new nickel pig iron and ferronickel smelters, effectively raising supply concerns, particularly about how
China’s growing demand for stainless steel production would be met. Supply concerns were also exacerbated by a labour strike
at a nickel operation in Ontario.
The impact of nickel supply disruptions and strong demand driven by global economic recovery since the start of the global
pandemic and growing electric vehicle sales was made evident by the 12% decrease in nickel inventory levels on the London
Metals Exchange (LME) to 232,476 tonnes by June 30. Similarly , inventory levels on the Shanghai Futures Exchange f ell to
4,982 tonnes, down from 8,972 tonnes at the start of the quarter.
Continued strong demand and market tightness led a number of industry analysts , including Wood Mackenzie, to forecast a
nickel supply deficit in 2021 in contrast to a forecast for nickel surpl us at the start of the year. As at July 29, nickel inventories
on the LME declined further to 215,412 tonnes.
2021 Second Quarter Report
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4 Sherritt International Corporation
Nickel inventory level uncertainty is, however, anticipated in 2022 and 2023, and some industry analysts have forecast an
inventory surplus in the near term.
The long-term outlook for nickel remains bullish due to the strong demand expected from the electric vehicle battery market.
Over the past year, in particular, multiple automakers and governments have announced plans for significant investments to
expand electric vehicle production capacity to meet growing demand as well as more aggressive timelines to phase out the sale
of internal combustion engines. In 2020, more than three million plug-in electric vehicles (PEV) were sold despite the global
pandemic. Industry observers estimate that the number of PEVs sold in 2021 will double to 6.1 million units. CRU has forecast
that electric vehicles sales will grow to 13.7 million units by 2025.
As a result of its unique properties, high -nickel cathode formulations rema in the dominant choice for long -range vehicles
manufactured by automakers with Class 1 nickel being an essential feedstock in the battery supply chain. Sherritt is particularly
well positioned given our Class 1 production capabilities and the fact that Cuba possesses the world’s fourth largest nickel
reserves.
Cobalt
While standard grade cobalt prices on June 30 closed at US$22.90/lb, essentially flat from the start of the second quarter
according to data collected by Fastmarkets MB, cobalt prices in Q2 were, in fact, marked by considerable volatility. Prices ranged
from a low of US$19.88/lb to a high of US$22.90/lb, a variance of more than 12%.
Prices in Q2 declined because of increased supply made available from the Democratic Republic of Congo. By quarter end,
prices recovered largely as a result of increased buying from electric vehicle battery manufacturers in Europe and increased
stockpiling from consumers. Cobalt is a key component of rechargeable batteries providing energy stability.
The recovery of cobalt prices by the end of Q2 2021 also reflected improved market conditions as demand grew from sectors
particularly impacted at the start of the pandemic, such as the aerospace sector and consumer electronics, which experienced
increased purchasing of home office equipment. In Q2 2020, when market conditions for cobalt were at their softest as a result
of the pandemic, the average reference price was US$15.19/lb. The higher average cobalt reference price of US$21.06/lb in Q2
2021 demonstrates the strengthening of the cobalt market over the past year.
Industry observers, such as CRU, expect cobalt prices to continue to rise in the near term with prices forecast to peak at US$31/lb
in 2024 as limited new sources of supply have been announced to fill expected demand over the next five years. Since the start
of Q3, cobalt prices have risen to US$24.85/lb largely because of supply logistics disruptions in South Africa.
The outlook for cobalt over the long term remains bullish as demand is expected to grow to 270,000 tonnes by 2025, representing
a compound annual growth rate of 13.5% according to CRU.
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
2021 2020 2021 2020
$ millions (Sherritt's share), except as otherwise noted June 30 June 30 Change June 30 June 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 142.2 $ 115.5 23% $ 268.5 $ 209.0 28%
Earnings (loss) from operations 19.7 1.2 nm(1) 47.5 (3.5) nm(1)
Adjusted EBITDA(2) 34.1 16.4 108% 75.8 26.5 186%
CASH FLOW
Cash provided by operations $ 21.6 $ 12.7 70% $ 45.1 $ 17.2 162%
Free cash flow(2) 13.8 6.2 123% 32.7 4.1 698%
Dividend distributions from the Moa Joint Venture(3) 16.9 - - 23.2 13.3 74%
PRODUCTION VOLUMES (tonnes)
Mixed Sulphides 4,020 4,323 (7%) 7,951 8,337 (5%)
Finished Nickel 4,230 4,147 2% 8,418 7,983 5%
Finished Cobalt 476 425 12% 953 825 16%
Fertilizer 69,516 69,777 - 133,308 125,866 6%
NICKEL RECOVERY (%) 85% 86% (1%) 84% 84% -
SALES VOLUMES (tonnes)
Finished Nickel 4,268 4,169 2% 8,445 7,942 6%
Finished Cobalt 452 353 28% 929 734 27%
Fertilizer 64,722 72,071 (10%) 91,833 103,211 (11%)
AVERAGE-REFERENCE PRICE (US$ per pound)
Nickel $ 7.87 $ 5.54 42% $ 7.92 $ 5.66 40%
Cobalt(4) 21.06 15.19 39% 21.38 15.89 35%
AVERAGE-REALIZED PRICE(2)
Nickel ($ per pound) $ 9.46 $ 7.51 26% $ 9.71 $ 7.55 29%
Cobalt ($ per pound) 22.82 18.39 24% 22.35 18.79 19%
Fertilizer ($ per tonne) 409 399 3% 381 384 (1%)
UNIT OPERATING COST(2) (US$ per pound)
Nickel - net direct cash cost $ 4.58 $ 3.92 17% $ 4.20 $ 4.10 2%
SPENDING ON CAPITAL
Sustaining $ 7.7 $ 9.5 (19%) $ 12.4 $ 16.1 (23%)
$ 7.7 $ 9.5 (19%) $ 12.4 $ 16.1 (23%)
(1) Not meaningful (nm)
(2) For additional information see the Non-GAAP measures section.
(3) Excludes redirections of dividends from Sherritt’s joint venture partner.
(4) Average standard grade cobalt published price per Fastmarkets MB.
Mixed sulphides production at the Moa JV in Q2 2021 was 4,020 tonnes, down 7% from 4,323 tonnes produced in Q2 2020. The
decline was primarily due to reduced availability of sulphur on account of shipment delays to Moa. Lower mixed sulphides
production was offset by the availability of high feed inventory levels at the refinery in Fort Saskatchewan, Alberta. Mixed sulphides
production levels returned to normal in the latter part of Q2 with completion of acid plant repairs and improved suphur availability
at Moa.
Finished nickel production in Q2 2021 totaled 4,230 tonnes, up 2% from the 4,147 tonnes produced in Q2 2020 while finished
cobalt production for Q2 2021 was 476 tonnes, up 12% from the 425 tonnes produced in Q2 2020. The growth was largely
attributable to the availability of higher inventory of mixed sulphides at the refinery and improved refinery reliability. Finished cobalt
production also improved because of a higher cobalt to nickel ratio in ore feed.
Consistent since the start of the global pandemic in February 2020, production of mixed sulphides and finished nickel and cobalt
were not affected by the spread of COVID-19 in Q2 2021 largely because of additional health and safety measures implemented
to protect employees, suppliers and various stakeholders at operations at Moa and at the refinery in Fort Saskatchewan. Safety
protocols to mitigate the impact of COVID-19, which are in accordance with or are more stringent than guidelines outlined by local
governments, will continue.
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6 Sherritt International Corporation
As disclosed previously, the annual maintenance shutdown of the refinery in Fort Saskatchewan was deferred from Q2 to Q3,
and finished nickel and cobalt production will be impacted accordingly. This year’s shutdown will be a full-facility shutdown,
including all of the refinery and utility plants, that occurs once every six years. Full-facility shutdowns have previously occurred
once every five years. The extended interval between full-facility shutdowns reflects ongoing commitments to asset management
and operational excellence measures implemented over the past several years. This year’s shutdown is expected to last
approximately 11 days compared to the typical five-day annual shutdowns. Sherritt’s guidance for 2021 production, unit cost and
capital spend at the Moa JV is based on this full-facility shutdown. Based on performance through June 30, guidance for 2021
remains in effect.
Sales volume for finished nickel and cobalt in Q2 2021 were up 2% and 28%, respectively, from last year. The year-over-year
increase was largely due to higher production and improved demand as a result of economic recovery since the onset of the
global pandemic, particularly in China, which is a significant consumer of nickel and cobalt.
Total Moa JV revenue in Q2 2021 was $142.2 million, up 23% from $115.5 million last year. The revenue increase was attributable
to a number of factors, including higher average-realized nickel and cobalt prices as well as higher nickel and cobalt sales volumes,
but partially offset by lower fertilizer sales volumes. In Q2 2021, average-realized nickel and cobalt prices were up 26% and 24%,
respectively, from last year. Average-realized prices are impacted by the timing of deliveries, settlement against contract terms,
and fluctuations in the value of the Canadian currency.
Mining, processing and refining (MPR) costs per pound of nickel sold for Q2 2021 were US$5.86/lb, up 23% from last year. MPR
costs in Q2 2021 increased due to a combination of factors, including higher input costs, higher maintenance costs and added
costs stemming from the purchase of sulphuric acid necessary during the acid plant shutdown at Moa due to scheduled
maintenance repairs. Input costs, in particular, were negatively impacted by the 65% increase in sulphur prices, 160% increase
in fuel oil prices, and 46% increase in natural gas prices. Higher MPR costs were partially offset by the effect of Cuba’s unification
of its currencies in lowering labour and other service expenses.
Net direct cash cost (NDCC) per pound of nickel sold in Q2 2021 was US$4.58/lb, up 17% from last year. The increase was
primarily driven by MPR costs, but partially offset by the 73% improvement in cobalt by-product credits due to higher average-
realized prices, and by the higher cobalt to nickel production ratio. Lower fertilizer and other by-product credits were driven by
higher fertilizer and sulphuric-acid production costs due to higher sulphur and energy prices.
Sustaining capital spending in Q2 2021 was $7.7 million, down 19% from $9.5 million in Q2 2020 for the same period last year.
The year-over-year decrease was due primarily to the timing of planned capital expenditures. Sherritt’s share of planned spending
at the Moa JV and Fort Site in 2021 is unchanged at US$44 million, and primarily earmarked for the continued replacement of
mine and plant equipment.
Sherritt has begun preliminary discussions with its Moa JV partner on brownfield expansion opportunities, including the launch of
a slurry preparation plant initiative that would result in improved ore sorting and processing as well as reduced transportation
expenses.
Sherritt International Corporation 7
Power
For the three months ended For the six months ended
2021 2020 2021 2020
$ millions (33 ⅓% basis), except as otherwise noted June 30 June 30 Change June 30 June 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 7.0 $ 9.6 (27%) $ 12.9 $ 19.0 (32%)
(Loss) earnings from operations (0.2) 1.6 (113%) (1.3) 2.9 (145%)
Adjusted EBITDA(1) 3.7 7.0 (47%) 6.5 13.5 (52%)
CASH FLOW
Cash provided by operations $ 11.5 $ 8.3 39% $ 14.3 $ 26.7 (46%)
Free cash flow(1) 11.5 8.3 39% 14.3 26.7 (46%)
PRODUCTION AND SALES
Electricity (GWh(2)) 115 153 (25%) 210 306 (31%)
AVERAGE-REALIZED PRICE(1)
Electricity ($/MWh(2)) $ 52.60 $ 58.48 (10%) $ 53.60 $ 57.73 (7%)
UNIT OPERATING COSTS(1)
Electricity ($/MWh) 21.03 14.12 49% 23.23 14.34 62%
NET CAPACITY FACTOR (%) 37 49 (24%) 33 48 (31%)
SPENDING ON CAPITAL
Sustaining $ - $ - - $ - $ - -
$ - $ - - $ - $ - -
(1) For additional information see the Non-GAAP measures section.
(2) Gigawatt hours (GWh), Megawatt hours (MWh).
Power production in Q2 2021 was 115 gigawatt hours (GWh) of electricity, down 25% from 153 GWh produced in the comparable
period of 2020. The production decline was due to maintenance activities performed at Boca de Jaruco deferred from 2020
and delays in other maintenance activities on account of limited liquidity availability. As a result of the US$14 million of Moa JV
distributions re-directed by GNC to fund Energas operations and Cuban energy payments, Sherritt does not anticipate liquidity
constraints for the Power business through the end of 2021.
The average-realized price in Q2 2021 was $52.60/MWh was down 10% from Q2 2020. The decline was primarily due to the
strengthening of the Canadian currency relative to the U.S. dollar.
Revenue in Q2 2021 totaled $7 million, down 27% from $9.6 million for the same quarter last year primarily due to lower power
production.
Unit operating costs in Q2 2021 were $21.03/MWh, up 49% from $14.12/MWh for last year. The year-over-year increase was
attributable to lower sales volume and higher operational spending on maintenance activities that were deferred from 2020. The
increase in unit operating costs in Q2 2021 was partially offset by the impact of a strengthening Canadian dollar as costs are
denominated in U.S. currency, and by the effect of Cuba’s unification of its currencies in lowering labour and third-party service
costs.
The Power business unit had negligible capital spend for the three-month period ended June 30, 2021.
Sherritt is currently in discussions with its Cuban partners to extend its power generation agreement with Energas, which is
currently slated to expire in March 2023.
2021 Second Quarter Report
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8 Sherritt International Corporation
Technologies
Sherritt’s Technologies business accelerated efforts to transition from a cost centre to an incubator of industry solutions that can
also be commercialized externally or applied internally to improve operational performance, reduce carbon emissions, and
support growth initiatives, such as efforts to de-bottleneck production, evaluate brownfield expansion opportunities and increase
mineral reserves.
The Technologies business also continued to make progress on the commercialization of its enhanced proprietary process to
fully upgrade heavy oil, refining residues and bitumen, which provides a number of environmental and business benefits, such
as eliminating the need for bitumen diluent, thereby increasing pipeline capacity, and increasing the economic value of the oil
transported to downstream markets, as well as reduced energy consumption due to the elimination of energy intensive unit
operations, which translates into a reduced carbon footprint for the process. This process has reached a Technology Readiness
Level of 5. As a result, Technologies will undergo piloting again with a new catalyst system that allows for full upgrading instead
of partial upgrading. Discussions are ongoing with external parties regarding the potential use of this process.
Technologies is also pursuing the commercialization of its proprietary process for the treatment of copper concentrates with
higher arsenic content. Arsenic is a poisonous element requiring significant mitigation and management costs rendering certain
copper projects uneconomical. With copper demand expected to grow significantly over the next decade, Technologies’
advanced hydrometallurgical process technology fulfills a pressing industry need, presenting a significant step change in the
stabilization of arsenic bearing solid waste, produces zero carbon emissions, extends the life of aging copper mines, reduces
treatment costs and capitalizes on existing infrastructure. This process has reached a Technology Readiness Level of 4 after
completing successful batch testing and completion of a pilot plant. Discussions with potentially interested parties to progress
the commercialization of this process have commenced.
OUTLOOK
2021 Production, unit operating costs and capital spending guidance
Sherritt’s targets for production, unit costs and capital spending in 2021 remain consistent with guidance announced on January
25, 2021 based on oper ational results achieved through June 30, prevailing commodity prices and input costs and planned
capital spend for the year.
Guidance Year-to-date Updated
for 2021 - actuals - 2021 guidance -
Production volumes, unit operating costs and spending on capital Total Total Total
Production volumes
Moa Joint Venture (tonnes, 100% basis)
Nickel, finished 32,000 - 34,000 16,836 No change
Cobalt, finished 3,300 - 3,600 1,906 No change
Electricity (GWh, 33⅓% basis) 450 - 500 210 No change
Unit operating costs
Moa Joint Venture - NDCC (US$ per pound) $4.25 - $4.75 $4.20 No change
Electricity (unit operating cost, $ per MWh) $30.50 - $32.00 $23.23 No change
Spending on capital
Moa Joint Venture (50% basis), Fort Site (100% basis)(1) US$44 (CDN$57) US$10 (CDN$12) No change
Power (33⅓% basis) US$1 (CDN$1.3) US$0 (CDN$0) No change
Spending on capital (excluding Corporate) US$45 (CDN$58) US$10 (CDN$12) No change
(1) Spending is 50% of US$ expenditures for the Moa JV and 100% expenditures for Fort Site fertilizer and utilities.