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Sherritt International announces financial results for Q1

Mining News - Published on Tue, 30 Apr 2019

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Sherritt International Corporation, a world leader in the mining and hydrometallurgical refining of nickel and cobalt from lateritic ores, reported its financial results for the three months ended March 31, 2019. All amounts are in Canadian currency unless otherwise noted. Mr David Pathe, President and CEO of Sherritt International, said that initiatives launched in 2018 to improve operational effectiveness, increase mining equipment availability, and improve ore access paved the way for the Moa JV's highest ever Q1 nickel and cobalt production total. “Our record production results in Q1 2019 were negatively impacted, however, by the dramatic 70% decline in realized cobalt prices, contributing to considerably lower by-product revenue and higher NDCC than we have experienced in recent quarters. Our Q1 progress was also impeded by the disappointing collections on our Cuban overdue receivables. Since the start of Q2 2019, we have seen a number of positive developments, including the resumption of drilling on Block 10, the recovery of cobalt prices by more than 15%, and the continued draw down of Class 1 nickel inventories. Combined, these trends signal a more favorable outlook for our prospects for the balance of 2019 and beyond.

1. Sherritt's share of finished nickel production at the Moa Joint Venture in Q1 2019 was 4,397 tonnes, up 54% from last year, while finished cobalt was 426 tonnes, up 27%. The combined nickel and cobalt total for Q1 2019 marks the Moa JV's highest ever Q1 production results.

2. Q1 2019 Adjusted EBITDA(1) was negative USD 1.2 million, down from positive Adjusted EBITDA of USD 35.5 million in Q1 2018. The decrease was due to a number of factors, including a 70% YoY decline in realized cobalt prices and lower contributions from the Oil and Gas business as a result of decreased net working-interest production stemming from maturing oil fields and a lower profit share.

3. Net direct cash cost (NDCC)(1) at the Moa JV for Q1 2019 was USD 4.53 per pound of finished nickel sold, up from USD 2.06 per pound for Q1 2018. The increase reflects the negative impact that sharply declining cobalt prices had on by-product credits, including the settlement of approximately 200 tonnes of provisionally-priced cobalt sales (100% basis) from Q4 2018. The variance between Q1 2019 cobalt reference and realized prices that resulted from provisional pricing adjustments negatively impacted NDCC by approximately USD 0.40 per pound.

Sherritt ended Q1 2019 with cash, cash equivalents and short-term investments of USD 177.3 million, down from USD 207.0 million at the end of 2018. The decrease was due to the timing of capital expenditures, interest paid on outstanding debentures and changes to working capital, including lower than expected Cuban energy receipts.

Reached an agreement in principle, subject to final approvals, with its Cuban partners on a payment plan to reduce overdue energy receivables. Final approval of the agreement and payment schedule is expected shortly.

Consistent with its previously announced strategy to no longer fund the Ambatovy Joint Venture, Sherritt elected to not fund its share of a USD 45 million cash call and became a defaulting shareholder with reduced local influence and authority. As a result, the Ambatovy JV is no longer considered an operating segment, and its financial performance is not included in Sherritt's combined or adjusted financial results.

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Posted By : Rabi Wangkhem on Tue, 30 Apr 2019
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