Sherritt Outlines Moa JV Expansion Strategy and Reports Q3 Results
Sherritt International Corporation 1
For immediate release
Sherritt Outlines Moa JV Expansion Strategy and Reports Q3 Results
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
Toronto – November 3, 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 nine months ended September 30, 2021, and announced it is embarking on an expansion strategy with
its Cuban partners to capitalize on the growing demand for high purity nickel and cobalt being driven by the accelerated adoption
of electric vehicles. The stra tegy, which will build on the 26-year successful track record of the Moa Joi nt Venture, centres on
growing finished nickel and cobalt production by 15 to 20% per year from the 34,876 tonnes produced in 2020 and exte nding
the life of mine at Moa beyond 2040 through the conversion of mineral resources into reserves using an economic cut-off grade.
“Backed by a strengthened balance sheet and a favourable outlook for nickel and cobalt, we are moving forward with a multi -
pronged strategy focused on generating incremental cash flow and transformative growth,” said Leon Binedell, President and
CEO of Sherritt International Corporation. “In addition to commercializing projects developed by Sherritt Technologies, our
growth will centre on brownfield opportunities, where working in close collaboration with our Cuban partners, we plan to increase
finished nickel and cobalt production and extend Moa’s mine life. Preliminary economics of the brownfield projects identified are
quite encouraging and suggest a high rate of return on investment and low capital intensity.
“By taking advantage of embedded growth opportunities, Sherritt will be better positioned to capitalize on the expected stron g
demand for green metals in the coming years and significantly grow shareholder value.”
Expansion plans for the Moa JV consist of a multi-phased approach, and includes completion of the new slurry preparation plant
and other expansion circuits at Moa, installation of new equipment and upgrading existing equipment at the refi nery in Fort
Saskatchewan, Alberta, updating the 43 -101 Technical Report published in June 2019 that reported more than 158 million
tonnes of measured and indicated resources at 1% nickel and 0.13% cobalt at Moa to reflect production based on economic
rather than a fixed, cut -off grade , and leveraging the expertise of Sherritt Technologies to optimize mine planning and
performance.
Sherritt and its Cuban partn ers are currently finalizing timelines, capital estimates, and economics of the various projects,
including identifying financing alternatives. Sherritt expects to provide an update on the rollout of the Moa JV expansion strategy
by the end of the first quarter of 2022.
SELECTED Q3 2021 DEVELOPMENTS
Received US$10 million in distributions from the Moa JV representing Sherritt’s 50% share of distributions declared by
the Moa JV. Through September 30, Sherritt has received a total of US$43 million in direct and re-directed distributions
from the Moa JV and its partner.
Adjusted EBITDA(1) was $17.6 million, up 14% from last year. The higher total was indicative of improved nickel and
cobalt prices, but offset by increased input costs, $3.1 million in other contractual benefits expenses and $0.5 million
of accelerated share-based compensation expenses, both of which relate to the departure of senior executives.
Sherritt’s share of finished nickel production at the Moa JV was 2,908 tonnes, down 22% from last year while Sherritt’s
share of finished cobalt production was 334 tonnes, down 18%. Finished nickel and cobalt production were negatively
impacted by a combination of factors, includ ing the spread of COVID -19, timing of the full-facility shutdown at the
refinery in Fort Saskatchewan, Alberta, and unplanned maintenance activities that temporarily d isrupted production
activities. All production has since resumed to normal , and Sherritt has adjusted its production guidance for 2021 to
reflect Q3 developments and anticipated production for the balance of the year.
Net Direct Cash Cost (NDCC)(1) at the Moa JV was US$4.53/lb, up 12% from last year. Despite a 52% improvement in
cobalt by-product credits, unit costs per pound of finished nickel sold were impacted by the 126% increase in sulphur
prices, 69% increase in fuel oil prices, and 59% increase in natural gas prices as well as by lower sales volumes. NDCC
guidance for 2021 remains unchanged at US$4.25 to $4.75 per pound of nickel sold as the recent rise in cobalt prices
partially offsets the rise in input costs.
Received US$6.4 million in Cuban energy payments. 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.
2021 Third Quarter Report
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2 Sherritt International Corporation
Sherritt released its 2020 Sustainability Report that featured a num ber of upgraded environmental, social, and
governance (ESG) targets, including achieving net zero g reenhouse emissions by 2050, obtaining 15% of overall
energy from renewable sources by 2030, reducing nitrogen oxide emission intensity by 10% by 2024, and i ncreasing
the number of women in the workforce to 36% by 2030.
Named Yasmin Gabriel as Chief Financial Officer, Greg Honig as Chief Commercial Officer, and Chad Ross as Chief
Human Resources Officer as part of senior leadership changes. The appointments un derscore Sherritt’s two-pronged
growth strategy focused on capitalizing on the accelerating demand for high -purity nickel and cobalt from the electric
vehicle industry and commercializing innovative process technology solutions for resources companies look ing to
improve their environmental performance and increase economic value.
DEVELOPMENTS SUBSEQUENT TO THE QUARTER END
Sherritt amended its syndicated revolving-term credit facility with its lenders, increasing the maximum amount of credit
available to $100 million from $70 million and extending the maturity to April 2024. Under the new terms, borrowings
on the credit facility are available to fund capital as well as for working capital purposes. Spending on capital
expenditures cannot exceed $75 million in a fiscal year. Capital expenditure restrictions do not apply to planned
spending of Moa Nickel S.A. The increase in credit facility is indicative of Sherritt’s strengthened financial position and
favorable outlook in light of improved nickel market fundamentals.
Environmental rehabilitation obligations (ERO) held by Sherritt’s Spanish Oil and Gas operations were secured by a
parent company guarantee of €31.5 million ($46.7 million) until December 31, 2023. Unlike the $47 million letter of
credit issued previously to support the ERO and backed by Sherritt’s credit facility, the new guarantee has no impact
on the Corporation’s available liquidity.
Planned capital spending at the Moa JV for 2021 has been reduced to US$35 million from US$44 million (Moa JV 50%
basis Fort Site 100% basis). The reduction in planned capital spending reflects operational challenges experienced
through September 30, including freight and order delays caused by COVID-19.
(1) For additional information see the Non-GAAP and other financial measures section of this press release.
Q3 2021 FINANCIAL HIGHLIGHTS
For the three months ended For the nine months ended
2021 2020 2021 2020
$ millions, except per share amount September 30 September 30 Change September 30 September 30 Change
Revenue 20.7 24.9 (17%) $ 73.6 $ 91.6 (20%)
Combined revenue(1) 120.2 115.3 4% 414.2 361.1 15%
Loss from operations and joint venture (10.8) (124.7) 91% (12.0) (163.2) 93%
Net (loss) earnings from continuing operations (15.5) 11.4 (236%) (27.8) (36.4) 24%
Net (loss) earnings for the period (16.2) 228.5 (107%) (32.5) 71.8 (145%)
Adjusted EBITDA(1) 17.6 15.5 14% 65.8 28.2 133%
Cash provided by continuing operations for operating
activities 16.2 25.3 (36%) 14.7 35.3 (58%)
Combined free cash flow(1) 19.3 27.1 (29%) 40.9 29.5 39%
Average exchange rate (CAD/US$) 1.260 1.332 (5%) 1.251 1.354 (8%)
Net (loss) earnings from continuing operations ($ per share) (0.04) 0.03 (233%) (0.07) (0.09) 22%
(1) For additional information see the Non-GAAP and other financial measures section.
2021 2020
$ millions, as at September 30 December 31 Change
Cash, cash equivalents and short term investments $ 163.4 $ 167.4 (2%)
Loans and borrowings 444.7 441.4 1%
Cash, cash equivalents, and short-term investments at September 30, 2021 were $163.4 million, up from $153.8 million at June
30, 2021. The increase was due to a number of developments in the quarter, including the receipt of US$6.4 million in Cuban
energy payments, strong fertilizer presales of $13.9 million, and the receipt of US$10 million in distributions from the Moa JV.
The increase was partly offset by sustaining capital expenditures of $3.6 million.
Sherritt International Corporation 3
Since the start of 2021, Sherritt has received a total of US$43 million in direct and re-directed distributions from the Moa JV and
its partner. 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.
As a result of the restructuring of its balance sheet in August 2020 that eliminated $30 million in cash interest payments annually,
Sherritt did not have any cash interest payments in Q3 2021.
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 agains t Cuba and Cuba’s reduced access to foreign
currency on account of the global pandemic which has eliminated almost all tourism revenue over the past 18 months . Cuba
has announced plans to fully open its borders to international travelers on November 15, 2021 in advance of the winter travel
season. As at October 31, 88 % of Cuba’s population had received at least one vaccine dose and 64 % have been fully
vaccinated(1).
Total overdue scheduled receivables at September 30, 2021 were US$152.5 million, down from US$154.7 million at June 30,
2021. Subsequent to quarter end, Sherritt received US$2.5 million in Cuban energy payments. Sherritt anticipates variability in
the timing and the amount of energy payments in the near term, and continues to work with its Cuban partners to ensure timely
receipt of energy payments. With the opening up of Cuba’s borders, the resumption of international tourism and the influx of
foreign currency, Sherritt anticipates economic conditions in Cuba to improve in 2022.
As at September 30, 2021, Sherritt held cash, cash equivalents and short-term investment in Canada totaling $82.1 million, up
from $77.4 million at June 30, 2021.
(1) Source: Our World in Data.
Adjusted net loss(1)
2021 2020
For the three months ended September 30 $ millions $/share $ millions $/share
Net (loss) earnings from continuing operations (15.5) (0.04) 11.4 0.03
Adjusting items:
Unrealized foreign exchange loss (gain) - continuing operations 7.9 0.02 (3.6) (0.01)
Other contractual benefits expense 3.1 0.01 - -
Losses on commodity put options 0.4 - - -
Gain on debenture exchange - - (143.4) (0.36)
Impairment loss of Oil assets - - 115.6 0.29
Realized foreign exchange gain due to Cuban currency unification (10.0) (0.03) - -
Other 0.7 0.01 3.9 0.01
Adjusted net loss from continuing operations (13.4) (0.03) (16.1) (0.04)
2021 2020
For the nine months ended September 30 $ millions $/share $ millions $/share
Net loss from continuing operations (27.8) (0.07) (36.4) (0.09)
Adjusting items:
Unrealized foreign exchange gain - continuing operations (3.3) (0.01) (8.7) (0.02)
Severance and other contractual benefits expense 5.5 0.02 - -
Losses on commodity put options 5.5 0.02 - -
Gain on repurchase of notes (2.1) (0.01) - -
Gain on debenture exchange - - (143.4) (0.36)
Impairment loss of Oil assets - - 115.6 0.29
Realized foreign exchange gain due to Cuban currency unification (10.0) (0.03) - -
Moa JV expansion loans receivable ACL revaluation - - (6.4) (0.02)
Other 3.5 0.01 6.3 0.02
Adjusted net loss from continuing operations (28.7) (0.07) (73.0) (0.18)
(1) For additional information see the Non-GAAP and other financial measures section.
Adjusted net loss from continuing operations was $13.4 million, or $0.03 per share, for the quarter ended September 30, 2021.
In the same period last year adjusted net loss was $16.1 million or $0.04 per share. Sherritt’s adjusted net loss for Q3 2021
excluded an unrealized foreign exchange loss of $7.9 million, the realized g ain on Cuban currency unification , and other
contractual benefits expense of $3.1 million. In Q3 2020, the primary adjustments, in addition to an unrealized foreign exchange
gain of $3.6 million, included the gain on debenture exchange offset by the impairment of oil assets related to Block 10.
2021 Third Quarter Report
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4 Sherritt International Corporation
METALS MARKET
Nickel
Nickel prices hit a seven-year high in Q3, climbing to US$9.24/lb on September 10. The price increase was driven by improving
market fundamentals, including strong demand from across multiple industries, reduced inventory levels, and supply disruptions
caused in part by COVID-19. By the end of the quarter, nickel pric es retreated closing at US$8.25/lb on September 30 on
concerns of a potential debt crisis in China as well as by speculation that stainless steel production would be impacted by China’s
efforts to ration power supply. Since the start of Q4, nickel prices have recovered, reaching a high of US$9.31/lb on October
21. It is anticipated that nickel prices will be sustained at current levels through end of year.
Strong nickel demand in Q3 was reflected by the continued decrease in inventory levels since the sta rt of 2021. In Q3, nickel
inventory levels on the London Metals Exchange (LME) fell by 32% from 232,476 tonnes at the start of the period to 157,062
tonnes on September 30. Similarly, inventory levels on the Shanghai Futures Exchange fell to 3,728 tonnes , down 25% from
4,982 tonnes at the start of the quarter.
Continued strong demand and market tightness led a number of industry analysts, including Wood Mackenzie and S&P Global,
to forecast a nickel supply deficit in 2021 in contrast to forecasts of a nic kel surplus at the start of the year. As at October 15,
nickel inventories on the LME declined further to 146,022 tonnes.
Although market conditions are currently favorable for nickel producers, nickel inventory level uncertainty is anticipated in 2022
and 2023 with some industry analysts forecasting an inventory surplus in the coming years. Visibility of market conditions in the
medium term is limited and no new sources of supply are anticipated.
The long-term outlook for nickel remains bullish on account of the strong demand expected from the electric vehicle battery
market. Some market observers, such as Wood Mackenzie, have forecast a prolonged nickel supply deficit beginning in 2025
due to recent developments in the electric vehicle market and no new nickel production coming on stream in the near term.
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 remain 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
Cobalt prices in Q3 2021 were marked by a steady rise, closing on September 30 at US$25.88/lb, up 13% from US$22.90/lb at
the start of the quarter according to data collected by Fastmarkets MB.
Higher cobalt prices in Q3 2021 were largely driven by increased buying from electric vehicle battery manufacturers. Cobalt is
a key component of rechargeable batteries providing energy stability. Higher cobalt prices in Q3 2021 were also driven by
increased stockpiling from consumers and by supply logistics disrupti ons in South Africa, where cobalt produced in the
Democratic Republic of Congo, the source of almost two-thirds of the world’s supply, is sent before being shipped internationally.
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.
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 nine months ended
2021 2020 2021 2020
$ millions (Sherritt's share), except as otherwise noted September 30 September 30 Change September 30 September 30 Change
FINANCIAL HIGHLIGHTS
Revenue(1) $ 108.9 $ 97.7 11% $ 377.4 $ 306.7 23%
Earnings (loss) from operations 14.6 3.0 387% 62.1 (0.5) nm(2)
Adjusted EBITDA(3) 27.1 17.4 56% 102.9 43.9 134%
CASH FLOW
Cash provided by operations $ 36.5 $ 23.1 58% $ 81.6 $ 40.3 102%
Free cash flow(3) 23.2 16.3 42% 55.9 20.4 174%
Dividend distributions from the Moa Joint Venture(4) 12.7 - - 35.9 13.3 170%
PRODUCTION VOLUMES (tonnes)
Mixed Sulphides 4,666 4,671 - 12,617 13,008 (3%)
Finished Nickel 2,908 3,750 (22%) 11,326 11,733 (3%)
Finished Cobalt 334 409 (18%) 1,287 1,234 4%
Fertilizer 46,730 53,743 (13%) 180,038 179,609 -
NICKEL RECOVERY (%) 87% 90% (3%) 85% 86% (1%)
SALES VOLUMES (tonnes)
Finished Nickel 2,989 3,568 (16%) 11,434 11,510 (1%)
Finished Cobalt 372 501 (26%) 1,301 1,235 5%
Fertilizer 25,201 36,169 (30%) 117,034 139,380 (16%)
AVERAGE-REFERENCE PRICE (US$ per pound)
Nickel $ 8.67 $ 6.45 34% $ 8.18 $ 5.93 38%
Cobalt(5) 24.55 14.87 65% 22.46 15.52 45%
AVERAGE-REALIZED PRICE(3)
Nickel ($ per pound) $ 10.76 $ 8.36 29% $ 9.99 $ 7.80 28%
Cobalt ($ per pound) 27.03 16.71 62% 23.69 17.95 32%
Fertilizer ($ per tonne) 433 289 50% 392 359 9%
UNIT OPERATING COST(3) (US$ per pound)
Nickel - net direct cash cost $ 4.53 $ 4.04 12% $ 4.30 $ 4.09 5%
SPENDING ON CAPITAL
Sustaining $ 13.2 $ 6.8 94% $ 25.6 $ 22.9 12%
$ 13.2 $ 6.8 94% $ 25.6 $ 22.9 12%
(1) Revenue of Moa Joint Venture and Fort Site is composed of revenue recognized by the Moa Joint Venture at Sherritt’s 50% share, which is equity-accounted and
included in share of earnings (loss) of Moa Joint Venture, net of tax, and revenue recognized by Fort Site, which is included in consolidated revenue. For additional
information, see the Non-GAAP and other financial measures section in the MD&A.
(2) Not meaningful (nm).
(3) For additional information see the Non-GAAP and other financial measures section.
(4) Excludes redirections of dividends from Sherritt’s joint venture partner.
(5) Average standard grade cobalt published price per Fastmarkets MB.
Despite additional measures taken to protect employees, suppliers and various stakeholders at operations at Moa and at the
refinery in Fort Saskatchewan since the start of the pandemic in March 2020, the significant rise in the number of cases as a result
of the spread of the Delta variant of COVID-19 negatively impacted mining operations and transportation activities in Q3 2021.
Most notably at Moa, the considerable increase in the number of COVID-19 cases in the Holguin province of Cuba adversely
affected mining activities and delayed shipment of mixed sulphides. While these developments had minimal impact on mixed
sulphides production in the quarter, measures to recover ore stockpiling inventory, including the use of contract mining services,
have been implemented in advance of the traditional rainy season at Moa. Mixed sulphides production at the Moa JV in Q3 2021
was 4,666 tonnes, essentially unchanged from the 4,671 tonnes produced in Q3 2020.
At the refinery in Fort Saskatchewan, the rise in number of COVID-19 cases in Alberta coupled with reduced contractor availability
resulted in the rescheduling and extension of the full-facility shutdown by two additional days than originally anticipated. This
year’s shutdown lasted 13 days compared to the typical five-day annual shutdowns, and included all of the refinery and utility
plants. Full-facility shutdowns occur once every six years.
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6 Sherritt International Corporation
Refinery operations were also disrupted by unplanned maintenance activities due to equipment and service failures in advance
of the full-facility shutdown. Subsequent to the shutdown, repairs to the cobalt reduction autoclave nozzle were required, resulting
in a temporary reduction in plant capacity.
As a result of the cumulative impact of these developments, finished nickel production in Q3 2021 totaled 2,908 tonnes, down
22% from the 3,750 tonnes produced in Q3 2020 while finished cobalt production for Q3 2021 was 334 tonnes, down 18% from
the 409 tonnes produced in Q3 2020.
Finished nickel and cobalt production for the nine-month period of 2021 were 11,326 tonnes and 1,287 tonnes, respectively. The
totals compare to 11,733 tonnes and 1,234 tonnes for the same period of 2020. As a result of developments in Q3 and anticipated
performance through the balance of the year, Sherritt has adjusted its guidance for 2021 and now expects to produce 31,000 –
32,000 tonnes of nickel (100% basis). Guidance for cobalt production is unchanged at 3,300 – 3,600 tonnes (100% basis).
Sales volume for finished nickel and cobalt in Q3 2021 were down 16% and 26%, respectively, from last year. The year-over-year
decrease was due to lower production volumes and the impact of the full-facility shutdown.
Despite the decrease in sales volume total, Moa JV revenue in Q3 2021 increased by 11% to $108.9 million from $97.7 million
last year. The revenue increase was largely attributable to higher average-realized nickel, cobalt, and fertilizer prices. In Q3 2021,
average-realized nickel, cobalt, and fertilizer prices were up 29%, 62% and 50%, 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 Q3 2021 were US$6.43/lb, up 31% from last year. MPR
costs in Q3 2021 increased due to a combination of factors, including higher input costs and the impact of lower production
volumes on period costs. Input costs, in particular, were negatively impacted by the 126% increase in sulphur prices, 69% increase
in fuel oil prices, and 59% 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 Q3 2021 was US$4.53/lb, up 12% from last year. The increase was
primarily driven by higher MPR costs and higher third-party feed costs, but partially offset by the 52% improvement in cobalt by-
product credits due to higher average-realized prices and by higher fertilizer and other by-product credits. NDCC guidance for
2021 remains unchanged at US$4.25 - $4.75 per pound of nickel sold as the recent rise in cobalt prices partially offsets the rise
in input costs.
Sustaining capital spending in Q3 2021 was $13.2 million, up 94% from $6.8 million in Q3 2020 for the same period last year. The
year-over-year increase was due primarily to the timing of planned capital expenditures, including receipt of new mining equipment
at Moa. Sherritt’s share of planned spending at the Moa JV and Fort Site in 2021 has been reduced to US$35 million from US$44
million, and is primarily earmarked for the continued replacement of mine and plant equipment. The reduction in planned capital
spending reflects operating challenges, including freight and order delays caused by COVID-19.
In Q3 2021, the Moa JV advanced with its commitment to reduce carbon emissions through the use of renewable energy and
electric fleet equipment. As at September 30, 2021, the Moa JV received delivery of eight electric light vehicles with an additional
vehicle slated for delivery by end of year. Plans for the increased use of renewable energy and electric light vehicles beyond 2021
are being developed.
Sherritt International Corporation 7
Power
For the three months ended For the nine months ended
2021 2020 2021 2020
$ millions (33 ⅓% basis), except as otherwise noted September 30 September 30 Change September 30 September 30 Change
FINANCIAL HIGHLIGHTS
Revenue $ 7.3 $ 9.4 (22%) $ 20.2 $ 28.4 (29%)
(Loss) earnings from operations 0.2 1.6 (88%) (1.1) 4.5 (124%)
Adjusted EBITDA(1) 4.1 6.8 (40%) 10.6 20.3 (48%)
CASH FLOW
Cash provided by operations $ 3.0 $ 20.9 (86%) $ 17.3 $ 47.6 (64%)
Free cash flow(1) 3.0 20.2 (85%) 17.3 46.9 (63%)
PRODUCTION AND SALES
Electricity (GWh(2)) 110 152 (28%) 320 458 (30%)
AVERAGE-REALIZED PRICE(1)
Electricity ($/MWh(2)) $ 54.57 $ 57.55 (5%) $ 53.93 $ 57.67 (6%)
UNIT OPERATING COSTS(1)
Electricity ($/MWh) 23.14 14.63 58% 23.19 14.44 61%
NET CAPACITY FACTOR (%) 35 48 (27%) 34 48 (29%)
SPENDING ON CAPITAL
Sustaining $ - $ 0.8 (100%) $ - $ 0.8 (100%)
$ - $ 0.8 -100.0% $ - $ 0.8 -100.0%
(1) For additional information see the Non-GAAP and other financial measures section.
(2) Gigawatt hours (GWh), Megawatt hours (MWh).
Power production in Q3 2021 was 110 gigawatt hours (GWh) of electricity, down 28% from 152 GWh produced in the comparable
period of 2020. The production decline was due to maintenance activities deferred from 2020 on account of limited liquidity
availability and reduced availability of spare parts.
Revenue in Q3 2021 totaled $7.3 million, down 22% from $9.4 million for the same quarter last year. The revenue decline was
primarily due to lower power production.
The average-realized price in Q3 2021 was $54.57/MWh, down 5% from Q3 2020. The decrease was primarily due to the
strengthening of the Canadian currency relative to the U.S. dollar.
Unit operating costs in Q3 2021 were $23.14/MWh, up 58% from $14.63/MWh for last year. The year-over-year increase was
attributable to lower sales volume and higher operational spending on maintenance activities deferred from 2020. The increase
in unit operating costs in Q3 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 months ended September 30, 2021.
Sherritt continues to be in discussion with its Cuban partners to extend its power generation agreement with Energas, which is
currently slated to expire in March 2023.
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8 Sherritt International Corporation
Technologies
Sherritt Technologies continued its 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.
In Q3, the primary activities of Sherritt Technologies centred on supporting brownfield expansion opportunities at the Moa JV,
including preparations for final testing to support a change in mine planning to use an economic cut-off grade to potentially
upgrade resources into reserves and significantly expand the life of mine, and support Sherritt’s growth strategy.
Other activities included efforts to commercialize Sherritt’s most advanced, innovative technologies. In particular, Sherritt
Technologies continued to make progress on its enhanced proprietary process to fully upgrade heavy oil, refining residues and
bitumen. Sherritt’s process provides a number of environmental and business benefits, including eliminating the need for bitumen
diluent and thereby increasing pipeline capacity, 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 results in lower carbon
emissions. Discussions with external parties regarding the potential use of Sherritt’s process have identified multiple, distinct
scenarios for the application of this technology. External industry expertise has been engaged to assist in further developing
these specific opportunities. Piloting of the new catalyst system, which allows for full upgrading instead of partial upgrading, is
scheduled to occur during 2022, and will be designed to test the multiple product and processing scenarios.
Sherritt 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, Sherritt’s
advanced hydrometallurgical process technology fulfills a pressing industry need, presenting a significant step change in the
stabilization of arsenic bearing solid waste, produces net zero carbon emissions, extends the life of aging copper mines, reduces
treatment costs and capitalizes on existing infrastructure. Discussions have started with external parties on a variety of potential
commercialization routes on optimal sourcing options for laterite ore and copper concentrate. Different copper products can be
considered, depending on specific project drivers and circumstances.
OUTLOOK
2021 Production, unit operating costs and capital spending guidance
Based on operational results achieved through September 30, prevailing commodity prices, anticipated performance and
expected input cost and planned capital spend for the year, Sherritt updated its production and planned capital spend guidance
for 2021
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 22,652 31,000 - 32,000
Cobalt, finished 3,300 - 3,600 2,574 No change
Electricity (GWh, 33⅓% basis) 450 - 500 320 No change
Unit operating costs
Moa Joint Venture - NDCC (US$ per pound) $4.25 - $4.75 $4.30 No change
Electricity (unit operating cost, $ per MWh) $30.50 - $32.00 $23.19 No change
Spending on capital
Moa Joint Venture (50% basis), Fort Site (100% basis)(1) US$44 (CDN$57) US$21 (CDN$26) US$35 (CDN$44)
Power (33⅓% basis) US$1 (CDN$1.3) US$0 (CDN$0) No change
Spending on capital (excluding Corporate) US$45 (CDN$58) US$21 (CDN$26) US$36 (CDN$45)
(1) Spending is 50% of US$ expenditures for the Moa JV and 100% expenditures for Fort Site fertilizer and utilities.