Sherritt narrows headline loss as cost savings, higher metal prices boost bottom line

VANCOUVER (miningweekly.com) – Canadian diversified miner Sherritt International has narrowed its headline loss for the 12 months ended December 31, as lower costs and higher commodity prices boosted the bottom line.

The Toronto-based miner, which produces nickel, cobalt and oil in Cuba, and nickel and cobalt at the Ambatovy mine, in Madagascar, reported an adjusted net loss of C$317.1-million, or C$1.07 a share outstanding, compared with an adjusted net loss of C$427.9-million, or C$1.46 a share outstanding, for 2016.

Net earnings for the period, including a C$629-million gain related to the Ambatovy Joint Venture (JV) restructuring, were C$293.8-million, or C$0.99 a share outstanding, up from a net loss of C$378.9-million, or C$1.29 a share outstanding, in 2016.

Revenue for the period fell 22% to C$54.8-million.

In the fourth quarter, Sherritt and its partners successfully completed the restructuring of the Ambatovy JV, with Sherritt retaining a 12% ownership interest in Ambatovy and continuing as operator.

As a result of the restructuring, Sherritt eliminated C$1.4-billion in debt from its balance sheet, while it also benefitted from the lowest direct cash cost at the Moa JV since the third quarter of 2004 of C$1.80/lb of finished nickel sold. The decline was mainly the result of higher cobalt prices and the C$0.50/lb cost savings achieved with the commissioning of the third acid plant at Moa in the fourth quarter of 2016.

"Sherritt ended 2017 with a significantly strengthened balance sheet and a much improved outlook as a result of a number of key developments over the past year. We have sustained this momentum since the start of 2018 with our first equity financing in more than a decade, and are currently conducting a modified Dutch auction tender process to reduce our debt even further.

"With the strong outlook for Class 1 nickel and cobalt, given electric vehicle market trends, and the maturities on our outstanding debentures not due until the fourth quarter of 2021, we are particularly encouraged by our prospects in 2018 and beyond," president and CEO David Pathe stated.

Sherritt's share of finished nickel out at the Moa JV was 4 134 t – up 9% from the comparable period a year earlier, and its share of finished cobalt was 465 t, up 22% from the fourth quarter of 2016. Production increased on a year-on-year basis despite heavy rains having lowered mixed sulphide production in November and December 2017, the company said.

Total attributable nickel output fell 19% year-on-year to 8 893 t, with cobalt output falling 10% to 786 t. Sherritt also benefitted from higher metals prices, which saw nickel climb 7% year-on-year to $5.25/lb, and that of cobalt skyrocketing 134% in the past 12 months to $31.60/lb.

Since the start of the year, Sherritt has closed a unit offering financing transaction that generated gross proceeds of C$132-million. Net proceeds will be used to reduce Sherritt's outstanding indebtedness, for general corporate purposes and to fund future growth initiatives.

Further, Sherritt has launched a modified Dutch auction tender offer to repurchase up to C$75-million of outstanding unsecured debentures. The tender offering is expected to close on Friday.

The company's TSX-listed equity rallied more than 7% on Tuesday, to an intraday high of C$1.10 apiece.