Sherritt Ends 2021 With Strong Production Results and a Favourable
Sherritt International Corporation 1
For immediate release
Sherritt Ends 2021 With Strong Production Results and a Favourable
Outlook for Nickel and Cobalt Markets
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
Toronto – February 9, 2022 – 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 and year ended December 31, 2021. All amounts are in Canadian currency unless otherwise noted.
“Our fourth quarter results capped a year of transition for Sherritt as we pivot towards growth and expansion,” said Leon Binedell,
President and CEO of Sherritt International Corporation. “Against a backdrop of a global pandemic, continued sanctions against
Cuba, and rising input costs, our strong performance in the fourth quarter enabled u s to meet our 2021 targets for pro duction
and unit costs at each of our business units . Just as significantly, we also embarked on a multi -pronged strategy focused on
generating incremental cash flow and transformative growth at a low capital intensity.”
Mr. Binedell added, “Underpinning the progress we made in 2021 were improved nickel and cobalt market fundamentals being
driven by the rapid adoption of electric vehicles. With market conditions expected to be bullish in the near term, Sherritt provides
favourable exposure to rising nickel prices as one of the few pure play companies. And as we commercialize projects developed
by Sherritt Technologies, increase our combined nickel and cobalt production capacity by up to 20%, and extend the mine life
of Moa beyond 2040, we expect to significantly grow shareholder value over the coming years.”
SELECTED Q4 2021 DEVELOPMENTS
Sherritt’s share of finished nickel and cobalt production at the Moa Joint Venture (Moa JV) were 4,266 tonnes and 476
tonnes, respectively. The totals, which are consistent with historical performance and reflective of efforts to mitigate
the impacts of COVID-19 and the 13-day full-facility shutdown experienced in Q3 2021, enabled Sherritt to meets its
production guidance at the Moa JV for FY2021(1).
Net Direct Cash Cost (NDCC) (2) at the Moa JV was US$3.60/lb, the lowest total since Q4 2018. NDCC in Q4 2021
benefitted from improved cobalt an d fertilizer by-product credits offset by significantly higher input costs, incl uding a
146% increase in sulphur prices, 76% increase in natural gas prices and 72% increase in fuel oil prices.
Sherritt recognized net earnings from continuing operations of $14.4 million, or $0.04 per share, for Q4 2021 compared
to a net loss of $ 49.3 million, or a loss of $0.12 per share, in Q4 2020. Adjusted EBITDA(2) was $46.4 million, the
highest total since Q4 2017 and indicative of improved nickel and cobalt market fundamentals and Sherritt’s continued
efforts to reduce costs.
In support of the gr owth strategy announced on November 3, 2021 aimed at growing finished nickel and cobalt
production by 15 to 20% of combined totals achieved in FY2021 and extending the life of mine at Moa beyond 2040,
the Moa JV completed a feasibility study for a new slur ry preparation plant (SPP) and received approval for planned
expenditures from its Board of Directors. The SPP, which is estimated to cost US$27 million and be completed in early
2024 will deliver a number of benefits, including reduced ore haulage, lower carbon intensity from mining, and increased
annual production of mixed sulphides by approximately 1,700 tonnes commencing in mid-2024.
Sherritt outlined its strategic priorities for 2022, which are focused on establishing the Corporatio n as a leading green
metals producer, leveraging its Technologies group for transformational growth, achieving balance sheet strength,
being recognized as a sustainable organization, and maximizing the value of its Cuban energy businesses.
Dr. Peter Hanco ck, a mining industry executive with more than 30 years of experience overseeing nickel mining
operations, developing and commercializing process technologies, and ramping up nickel projects, was appointed to
Sherritt’s Board of Directors.
Announced the planned retirement of Chief Operating Officer, Steve Wood, effective April 30, 2022.
Sherritt made a number of promotions to its senior leadership to accelerate its multi -pronged growth strategy naming
Dan Rusnell Senior Vice President of Metals, Elvin Sar uk Head of Growth Projects in addition to his accountabilities
for Oil & Gas and Power, and Greg Honig Head of Marketing and the Technologies Group in addition to his
accountabilities as Chief Commercial Officer.
2021 Fourth Quarter Report
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2 Sherritt International Corporation
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 amended 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
favourable outlook in light of improved nickel and cobalt markets.
Received US$6.5 million in Cuban energy payments. Sherritt anticipates continued variability in the timing of collections
into 2022, and is working with its Cuban partners to ensure timely receipts.
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. Unli ke the $47 million letter of
credit issued previously to support the ERO and secured by Sherritt’s credit facility, the new guarantee has no impact
on the Corporation’s available liquidity.
(1) Sherritt adjusted its nickel production guidance for 2021 on November 3, 2021 as a result of disruptions caused in the third quarter by the spread of COVID-19,
extension of the full-facility shutdown at the refinery in Fort Saskatchewan, Alberta, and unplanned maintenance activities .
(2) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
SUMMARY OF KEY 2021 DEVELOPMENTS
Sherritt ended 2021 with cash and cash equivalents of $145.6 million ($78.9 million held by Energas in Cuba), down
from $167.4 million at the end of last year ($75 million held by Energas in Cuba). The lower cash position and amount
held in Canada were driven by lower energy payments from Cuban partners on account of their reduced access to
foreign currency and by the deferral of distributions expected from the Moa JV in the fourth quarter as it assessed the
impact of delays in product deliveries on account of flooding in B.C. and congestion at the Vancouver Port in November.
In January 2022, Sherritt received $8.1 million as its share of Moa JV distributions.
Sherritt’s share of production, unit costs, and spending on capital for each of its business units in 2021 were in line with
guidance for the year, indicative of ongoing commitments to operational excellence and efforts to m itigate the spread
of COVID -19 through additional health and safety measures designed to protect employees, suppliers, and other
stakeholders at its operations in Canada and Cuba.
Sherritt announced it is embarking on an expansion strategy with its Cuban p artners to capitalize on the growing
demand for high purity nickel and cobalt being driven by the accelerated adoption of electric vehicles which builds on
the 26-year successful track record of the Moa Joint Venture and centres on growing annual finished nickel and cobalt
production by 15 to 20% from the 34,710 tonnes produced in 2021 and extending the life of mine at Moa beyond 2040
through the conversion of mineral resources into reserves using an economic cut-off grade.
Sherritt improved its net earning s from continuing operations by $72.3 million in FY2021 as a result of strengthened
nickel, cobalt, and fertilizer prices and efforts to reduce operating and corporate costs. Adjusted EBITDA was $112.2
million, up 188% from last year.
Implemented a 10% workforce reduction at Sherritt’s Corporate office in Toronto that will result in a savings of employee
costs of approximately $1.3 million annually.
Sherritt released its 2020 Sustainability Report that featured a number of upgraded environmental, social, a nd
governance (ESG) targets, including achieving net zero greenhouse emissions by 2050, obtaining 15% of overall
energy from renewable sources by 2030, reducing nitrogen oxide emission intensity by 10% by 2024, and increasing
the number of women in the workforce to 36% by 2030.
Named Leon Binedell as President and CEO, 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 underscore 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 looking to improve their environmental performance and increase economic value.
Sherritt International Corporation 3
DEVELOPMENTS SUBSEQUENT TO THE YEAR END
Sherritt received $8.1 million of its share of Moa JV distributions on January 19, 2022. Given prevailing nickel and
cobalt prices, planned spending on capital at the Moa JV, and expected liquidity requirements Sherritt anticipates an
additional distribution in Q1 2022. Sherritt also expects distributions for FY2022 to be greater than the $35.9 million
(excluding re-directions from its Cuban partner, General Nickel Company S.A.) received in FY2021.
Q4 2021 FINANCIAL HIGHLIGHTS
For the three months ended For the year ended
2021 2020 2021 2020
$ millions, except per share amount December 31 December 31 Change December 31 December 31 Change
Revenue $ 36.6 $ 28.2 30% $ 110.2 $ 119.8 (8%)
Combined revenue(1) 198.6 135.9 46% 612.8 497.0 23%
Earnings (loss) from operations and joint venture 20.5 (33.9) 160% 8.5 (197.1) 104%
Net earnings (loss) from continuing operations 14.4 (49.3) 129% (13.4) (85.7) 84%
Net earnings (loss) for the period 14.1 (49.6) 128% (18.4) 22.2 (183%)
Adjusted EBITDA(1) 46.4 10.7 334% 112.2 38.9 188%
Net earnings (loss) from continuing operations ($ per share) 0.04 (0.12) 133% (0.03) (0.22) 86%
Cash (used) provided by continuing operations for operating
activities (13.4) 12.7 (206%) 1.3 48.0 (97%)
Combined free cash flow(1) (26.4) (11.6) (128%) 14.5 17.9 (19%)
Average exchange rate (CAD/US$) 1.260 1.303 (3%) 1.254 1.341 (7%)
(1) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
$ millions, as at December 31 2021 2020 Change
Cash and cash equivalents $ 145.6 $ 167.4 (13%)
Loans and borrowings 444.5 441.4 1%
Cash and cash equivalents at December 31, 2021 were $145.6 million, down from $163.4 million at September 30, 2021. During
the quarter, the Moa JV deferred distributions to its partners as it assessed the impact of delays in customer deliveries caused
by flooding in B.C. and congestion at the Vancouver port on its expected cash needs . Subsequent to the year end, Sherritt
received $8.1 million as its share of Moa JV distributions.
During the quarter, th e C orporation received US$6.5 mil lion in Cuban energy payments, which were offset by the interest
payment of $14.8 million on the second lien notes and sustaining capital expenditures of $2.9 million.
During 2021, Sherritt received a total of $52.8 million in direct and re -directed distributions from the Moa JV and its partner,
General Nickel Company S.A. (GNC).
Total overdue scheduled receivables at December 31, 2021 were US$156 million, up from US$152.5 million at September 30,
2021. Subsequent to year end, Sherritt received US$2.2 million in Cuban energy payments. Collections on overdue amounts
from Sherritt’s Cuban energy partners continue to be adversely impacted by Cuba’s access to foreign currency as a result of
ongoing U.S. sanctions and the global pandemic. While Sherritt anticipates improved economic conditions in Cuba in 2022, it
continues to anticipate 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.
Of the $145.6 million of cash and cash equivalents, $64.2 million was held in Canada, down from $82.1 million at September
30, 2021 and $78.9 million was held at Energas, up from $76.7 million at September 30, 2021. The remaining amounts were
held in Cuba and other countries.
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4 Sherritt International Corporation
Adjusted net earnings (loss) from continuing operations(1)
2021 2020
For the three months ended December 31 $ millions $/share $ millions $/share
Net earnings (loss) from continuing operations 14.4 0.04 (49.3) (0.12)
Adjusting items:
Unrealized foreign exchange (gain) loss - continuing operations (1.4) - 4.3 0.01
Other contractual benefits expense 0.6 - - -
Realized and unrealized losses on commodity put options, net 0.1 - 3.4 0.01
Impairment of Power assets - - 9.4 0.02
Other(2) 1.3 - 2.3 0.01
Total adjustments, before tax 0.6 - 19.4 0.05
Tax adjustments (0.2) - (1.8) (0.01)
Adjusted net earnings (loss) from continuing operations 14.8 0.04 (31.7) (0.08)
2021 2020
For the year ended December 31 $ millions $/share $ millions $/share
Net loss from continuing operations (13.4) (0.03) (85.7) (0.22)
Adjusting items:
Unrealized foreign exchange gain - continuing operations (4.7) (0.01) (4.4) (0.01)
Severance and other contractual benefits expense 6.1 0.02 - -
Realized and unrealized losses on commodity put options, net 5.6 0.02 3.4 0.01
Gain on repurchase of notes (2.1) (0.01) - -
Gain on debenture exchange - - (142.3) (0.36)
Impairment of Oil assets - - 115.6 0.30
Realized foreign exchange gain due to Cuban currency unification (10.0) (0.03) - -
Impairment of Power assets - - 9.4 0.03
Other(2) 5.0 0.01 1.7 -
Total adjustments, before tax (0.1) - (16.6) (0.03)
Tax adjustments (0.4) - (2.4) (0.01)
Adjusted net loss from continuing operations (13.9) (0.03) (104.7) (0.26)
(1) A non-GAAP financial measure. The tables above summarize some of the key components of Adjusted net earnings (loss) from continuing operations and
associated per share amount. For a full reconciliation to net earnings (loss) from continuing operations and additional information see the Non-GAAP and other
financial measures section of this press release.
(2) Other items primarily relate to inventory obsolescence and (gains) losses in net finance (expense) income.
METALS MARKET
Nickel
Nickel prices hit a seven -year high in Q4 2021, climbing to US$9.59 /lb on November 24 . The price increase was driven by
improving market fundamentals, including strong demand from across multiple industries, consumer stockpiling, reduced
inventory levels, and ongoing supply disruptions caused by COVID-19. Rising nickel prices and favourable market conditions
were jolted by the rapid spread of the Omicron variant and concerns of its impact on the global economy in early December,
causing prices to soften slightly through to the end of the quarter. Nickel prices closed the year at US$9.49/lb, representing a
27% increase for 2021 relative to the closing price of 2020 of US$7.50/lb.
Since the start of 2022, nickel prices have sustained their recent momentum, reaching US$10.89/lb on January 21, the highest
price in more than 10 years . It is anticipated that nicke l prices will maintain their current robustness through th e end of 2022
based on forecasts provided by industry analysts.
Strong nickel demand in Q4 was reflected by the continued decrease in inventory levels since the sta rt of 2021. In Q4 , nickel
inventory levels on the London Metals Exchange (LME) fell by 35% from 157,062 tonnes at the start of the period to 101,886
tonnes on December 31 . Similarly, inventory levels on the Shangha i Futures Exchange fell 35% to 2,406 tonnes, down from
3,728 tonnes at the start of the quarter.
Sherritt International Corporation 5
Industry analysts, including Wood Mackenzie and S&P Global, have forecast continued strong demand and market tightness
through to the end of the 2022. LME nickel inventories continued to decline in 2022, falling below 100,000 tonnes on January
10, reaching 85,644 tonnes on February 9, the lowest level since November 2019.
Visibility of market fundamentals, including inventory levels, in the mid-term is limited given the economic uncertainty caused by
the pandemic and news from Indonesia suggesting that the country, one of the world’s largest suppliers of nickel, plans to curtail
exports in an effort to support a domestic refining and processing activities.
The long-term outlook for nickel remains bullish on account of the strong dem and expected from the stainless steel sector, the
largest market for nickel, and 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 th e electric vehicle market and
insufficient nickel production coming on stream in the near term.
Over the past year, 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 2021, more than 6.5 million plug-in electric vehicles were sold despite the global pandemic. Industry
observers estimate that the number of electric vehicles sold in 2022 will grow to 8.6 million units. CRU has forecast that electric
vehicles sales will grow to 17.4 million units by 2025.
As a result of its unique properties, high-nickel cathode formulations remain the dominant choice for long-range electric 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 rose steadily in Q4 2021, closing on December 31 at US$33.7 8/lb, up 30% from US$25.88/lb at the start of the
quarter according to data collected by Fastmarkets MB.
Higher cobalt prices in Q4 2021 were primarily driven by increased buying from electric vehicle battery manufacturers. Cobalt
is a key component of rechargeable batteries providing energy stability. Higher cobalt prices in Q4 2021 were also impacted by
increased st ockpiling by consumers and ongoing supply logistics disruptions 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 be robust in the near term 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 approximately 280,000 tonnes by
2025, representing a compound annual growth rate of 13.5% according to CRU.
2021 Fourth Quarter Report
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6 Sherritt International Corporation
REVIEW OF OPERATIONS
Moa Joint Venture (50% interest) and Fort Site (100%)
For the three months ended For the year ended
2021 2020 2021 2020
$ millions (Sherritt's share), except as otherwise noted December 31 December 31 Change December 31 December 31 Change
FINANCIAL HIGHLIGHTS
Revenue(1) $ 183.2 $ 118.8 54% $ 560.6 $ 425.5 32%
Cost of Sales(1) 142.7 111.3 28% 451.4 411.7 10%
Earnings from operations 36.2 4.4 723% 98.3 3.9 nm(2)
Adjusted EBITDA(3) 49.4 24.8 99% 152.3 68.7 122%
CASH FLOW
Cash provided by continuing operations for operating activities $ 8.9 $ 13.4 (34%) $ 90.5 $ 53.7 69%
Free cash flow(3) 0.6 4.1 (85%) 56.5 24.5 131%
Dividend distributions from the Moa Joint Venture(4) - 26.3 (100%) 35.9 39.6 (9%)
PRODUCTION VOLUMES (tonnes)
Mixed Sulphides 3,881 4,421 (12%) 16,498 17,429 (5%)
Finished Nickel 4,266 4,020 6% 15,592 15,753 (1%)
Finished Cobalt 476 451 6% 1,763 1,685 5%
Fertilizer 65,021 56,277 16% 245,059 235,886 4%
NICKEL RECOVERY(5) (%) 90% 86% 4% 86% 86% -
SALES VOLUMES (tonnes)
Finished Nickel(6) 4,169 4,177 - 15,603 15,687 (1%)
Finished Cobalt 474 443 7% 1,775 1,678 6%
Fertilizer 51,748 48,542 7% 168,782 187,922 (10%)
AVERAGE-REFERENCE PRICE (USD)
Nickel (US$ per pound) $ 8.99 $ 7.23 24% $ 8.39 $ 6.25 34%
Cobalt (US$ per pound)(7) 29.89 15.73 90% 24.34 15.58 56%
AVERAGE-REALIZED PRICE (CAD)(3)
Nickel ($ per pound) $ 11.16 $ 9.13 22% $ 10.30 $ 8.16 26%
Cobalt ($ per pound) 31.88 17.55 82% 25.88 17.84 45%
Fertilizer ($ per tonne) 545.08 298.02 83% 438.75 343.45 28%
UNIT OPERATING COST(3) (US$ per pound)
Nickel - net direct cash cost $ 3.60 $ 4.47 (19%) $ 4.11 $ 4.20 (2%)
SPENDING ON CAPITAL(3)
Sustaining $ 12.1 $ 9.3 30% $ 37.7 $ 32.2 17%
$ 12.1 $ 9.3 30% $ 37.7 $ 32.2 17%
(1) Revenue and Cost of sales of Moa Joint Venture and Fort Site is composed of revenue/cost of sales, respectively, 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/cost of sales recognized by Fort Site,
which is included in consolidated revenue. For a breakdown of revenue between Moa Joint Venture and Fort Site see the Combined revenue section in the Non-
GAAP and other financial measures section of this press release.
(2) Not meaningful (nm).
(3) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
(4) Excludes redirections of dividends from Sherritt’s joint venture partner.
(5) The nickel recovery rate measures the amount of finished nickel that is produced compared to the original nickel content of the ore that was mined.
(6) For the three months and year ended December 31, 2021, excludes 600 tonnes (50% basis) of finished nickel purchased from and sold to a third party as it was not
internally produced.
(7) Average standard grade cobalt published price per Fastmarkets MB.
Sherritt International Corporation 7
Finished production at the Moa JV in the fourth quarter of 2021 resumed to levels consistent with historical performance following
the completion of a 13-day full-facility shutdown and unplanned maintenance activities at the refinery, and efforts to mitigate the
spread of COVID-19 in Fort Saskatchewan and in the Holguin province of Cuba through the successful rollout of vaccines and
additional health and safety measures to protect employees, suppliers and various stakeholders in the third quarter of 2021.
Improved results in Q4 relative to performance in Q3 2021 enabled the Moa JV to meet its targets for finished nickel and cobalt
production and achieve unit costs that were below target for the year.
Mixed sulphides production at the Moa JV in Q4 2021 was 3,881 tonnes, down 12% from the 4,421 tonnes produced in Q4 2020.
The decline was chiefly due to reduced availability of mining equipment on account of delays in the delivery of spare parts and
diesel fuel supply caused by disruptions to global logistics and supply chains.
Mixed sulphides production for FY2021 was 16,498 tonnes, down 5% from 17,429 tonnes produced in FY2020. In addition to
impacts on mixed sulphides production cited for Q4 2021, production in FY2021 was also negatively impacted by reduced
availability of sulphur due to shipment delays to Moa in Q2 and by unplanned maintenance at the existing slurry preparation plant
in Q4.
Sherritt’s share of finished nickel production in Q4 2021 totaled 4,266 tonnes, up 6% from the 4,020 tonnes produced in Q4 2020
while finished cobalt production for Q4 2021 was 476 tonnes, up 6% from the 451 tonnes produced in the same period last year.
Production in Q4 2021 benefitted from additional health and safety measures implemented to mitigate the spread of COVID-19.
Production in Q4 2020 was impacted by unplanned autoclave repairs at the refinery in Fort Saskatchewan.
Finished nickel production for FY2021 was 15,592 tonnes, largely flat from the 15,753 tonnes produced in FY2020. Despite
production challenges experienced in Q3 2021 relating to the spread of COVID-19, including the rescheduling and extension of
the full-facility shutdown at the refinery in Fort Saskatchewan, FY2021 nickel production totals were in line with guidance for the
year. Sherritt has forecast finished nickel production for FY2022 will be between 32,000 and 34,000 tonnes on a 100% basis, a
range consistent with the Moa JV’s performance over the past 10 years.
Finished cobalt production for FY2021 was 1,763 tonnes, up 6% from 1,685 tonnes produced in FY2020. Finished cobalt
production for FY2021, which met guidance for the year, grew largely because of higher cobalt to nickel ratios in mixed sulphides
feed throughout the year relative to FY2020. Sherritt has forecast finished cobalt production in FY2022 to be between 3,400 and
3,700 tonnes on a 100% basis, also consistent with the Moa JV’s performance over the past 10 years.
Revenue in Q4 2021 increased by 54% to $183.2 million from $118.8 million last year. The revenue increase was largely
attributable to higher average-realized nickel, cobalt, and fertilizer prices, which were up 22%, 82% and 83%, respectively, from
Q4 2020.
On a full-year basis, revenue in FY2021 increased by 32% to $560.6 million from $425.5 million last year. The revenue increase
was principally due to higher average-realized nickel, cobalt, and fertilizer prices, which were up 26%, 45% and 28%, respectively,
from FY2020. Average-realized prices are impacted by the timing of deliveries, timing of settlement against contract terms, and
fluctuations in the value of the Canadian currency.
Mining, processing and refining (MPR) costs per pound of nickel sold in Q4 2021 were up 20% from last year. Consistent since
the start of the pandemic, higher MPR costs in Q4 2021 were driven by the significant rise in input costs. Most notably, input
costs were marked by the 146% increase in sulphur prices, 72% increase in fuel oil prices, and 76% increase in natural gas prices
in Q4 2021 from the same period last year. Higher MPR costs were partially offset by the effect of Cuba’s unification of its
currencies in lowering labour and other service expenses as well as by ongoing efforts to reduce costs.
Net direct cash cost (NDCC) per pound of nickel sold decreased by 19% to US$3.60/lb in Q4 2021 from US$4.47/lb for last year.
The improvement was principally due to higher cobalt and fertilizer by-product credits generated by higher average-realized prices
which more than offset higher MPR costs. NDCC for Q4 2021, which was the lowest since the fourth quarter of 2018, enabled the
Moa JV to exceed its unit cost targets for FY2021. On a full-year basis, NDCC was US$4.11/lb in FY2021, down 2% from
US$4.20/lb for last year. NDCC for FY2022 is forecast at between US$4.00 and US$4.50 per pound of finished nickel sold.
Sustaining spending on capital in Q4 2021 was $12.1 million, up 12% from $9.3 million in Q4 2020 for the same period last year.
The year-over-year increase was due primarily to the timing of planned capital expenditures at the refinery in Fort Saskatchewan.
2021 Fourth Quarter Report
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8 Sherritt International Corporation
On a full-year basis, spending on capital in FY2021 was C$37.7 million, a total below planned spending for the year due to
operational challenges, including freight and order delivery delays caused by COVID-19. Sherritt’s share of spending on capital
at the Moa JV and at the Fort Site for FY2022 is forecast at C$75 million, and excludes estimates for the expansion strategy.
Spending on capital in 2022 is planned for the replacement of mine and plant equipment, fertilizer handling, tailings management,
and includes amounts deferred in 2021 due to the impacts of COVID-19 and disruptions to logistics, supplies and contractor
availability. Funding considerations for planned spending on capital in FY2022 include operating cash flows, the recently-amended
revolving term credit facility, and vendor financing.
In FY2021, the Moa JV advanced with its commitment to reduce carbon intensity through the use of renewable energy and electric
fleet equipment. As at December 31, 2021, the Moa JV received delivery of nine electric light vehicles. Plans for the increased
use of renewable energy and electric light vehicles in 2022 and over the longer term, are being developed.
With support from Sherritt Technologies, the Moa JV launched an expansion strategy aimed at growing nickel and cobalt
production by 15 to 20% from the combined 34,710 tonnes produced in FY2021 and extending the life of mine at Moa beyond
2040 through the conversion of mineral resources into reserves using an economic cut-off grade.
In Q4 2021, the Moa JV completed a feasibility study and identified cost estimates for completion of a slurry preparation plant
(SPP) at Moa. The SPP, which is estimated to cost US$27 million and be completed in early 2024, will deliver a number of
benefits, including reduced ore haulage, lower carbon intensity from mining, increased annual nickel and cobalt contained in mixed
sulphides production by approximately 1,700 tonnes commencing in mid-2024.
Sherritt and its Cuban partners are finalizing timelines, cost estimates and economics of other components of the growth strategy,
including identifying financing alternatives. Sherritt currently estimates the growth strategy will deliver incremental increases to
finished nickel and cobalt production by 15 to 20% from totals produced in FY2021 once all projects at Moa, including the SPP,
and the refinery in Fort Saskatchewan, are completed in 2024 at an anticipated cost of US$20,000 to US$25,000 per tonne of
new nickel capacity. Progress on the growth strategy, including milestone updates, will be disclosed regularly.
Power
For the three months ended For the year ended
2021 2020 2021 2020
$ millions (33 ⅓% basis), except as otherwise noted December 31 December 31 Change December 31 December 31 Change
FINANCIAL HIGHLIGHTS
Revenue $ 8.1 $ 8.8 (8%) $ 28.3 $ 37.2 (24%)
Cost of sales 7.0 8.9 (21%) 26.1 31.3 (17%)
Earnings (loss) from operations 0.5 (10.1) 105% (0.6) (5.6) 89%
Adjusted EBITDA(1) 4.5 4.4 2% 15.1 24.7 (39%)
CASH FLOW
Cash provided by continuing operations for operating activities $ 0.8 $ 30.2 (97%) $ 18.1 $ 77.8 (77%)
Free cash flow(1) 0.7 30.2 (98%) 18.0 77.1 (77%)
PRODUCTION AND SALES
Electricity (GWh(2)) 130 144 (10%) 450 602 (25%)
AVERAGE-REALIZED PRICE(1)
Electricity ($/MWh(2)) $ 54.33 $ 55.10 (1%) $ 54.05 $ 57.05 (5%)
UNIT OPERATING COSTS(1)
Electricity ($/MWh) 22.72 26.73 (15%) 23.06 17.38 33%
NET CAPACITY FACTOR (%) 40 45 (11%) 36 47 (23%)
SPENDING ON CAPITAL(1)
Sustaining $ 0.1 $ (0.1) 200% $ 0.1 $ 0.7 (86%)
$ 0.1 $ (0.1) 200.0% $ 0.1 $ 0.7 -86.0%
(1) Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
(2) Gigawatt hours (GWh), Megawatt hours (MWh).