Sherritt International Corporation · TSX:S
Sherritt International — Q3 2019 Earnings Presentation
29 slides from Sherritt International's earnings presentation, Oct 31, 2019
Slide 1: Q3 Earnings Call
Q3 Earnings Call October 31, 2019 1
Slide 2: Forward-looking statements
Forward-looking statements This presentation contains certain forward-looking statements. Forward-looking statements can generally be identified by the use of statements that include such words as “believe”, “expect”, “anticipate”, “intend”, “plan”, “forecast”, “likely”, “may”, “will”, “could”, “sho
Slide 3: Participants
Participants David Pathe President & CEO Steve Wood Executive Vice President & COO Andrew Snowden Senior Vice President & CFO 3
Slide 4: Highlights for Q3
Highlights for Q3 1 Solid finished nickel and cobalt production totals at Moa JV $11.6M in Moa JV distributions driven by solid production and 2 higher commodity prices 3 Efforts to preserve cash led to lower G&A costs and covenant relief 4 Liquidity impacted by interest payments and timing of energ
Slide 5: Q3 marked by rising commodity prices and tightening U.S. sanctions
Q3 marked by rising commodity prices and tightening U.S. sanctions 5
Slide 6: Recent nickel and cobalt prices
Recent nickel and cobalt prices Q3 2019 Q4 2019 50% US$8.45/lb 40% Indonesia bans ore export Nickel +32% 30% Cobalt (FM) +31% 20% US$16.12/lb 10% Mutanda news 0% (10%) (20%) Volatility driven by geopolitical and market developments 6
Slide 7: Nickel inventory continues to decline
Nickel inventory continues to decline 190,000 170,000 150,000 130,000 49% Tonnes 110,000 90,000 Decline in inventory 70,000 since Sept 30 50,000 Jul-19 Oct-19 Jun-19 Aug-19 Sep-19 LME SHFE Decline attributed to stockpiling in advance of Indonesian ore export ban Source: LME, SHFE 7
Slide 8: U.S. sanctions against Cuba
U.S. sanctions against Cuba Recent sanctions 1. Limits on U.S. travel to Cuba 2. Ban on U.S. cruise ships entering Cuba 3. Limits on family remittances to $1,000/Q No impact on 4. Bans on certain banking transactions Moa JV 5. Limit of U.S. content on certain supplies distributions in FY2019 Havana
Slide 9: Review of operations
Review of operations 9
Slide 10: Moa JV highlights
Moa JV highlights Q3 Production(1) (tonnes) YTD Production(1) (tonnes) Finished Nickel Finished Cobalt Finished Nickel Finished Cobalt 12,505 4,457 4,139 465 436 11,060 1,277 1,189 Q3 2018 Q3 2019 Q3 2018 Q3 2019 YTD 2018 YTD 2019 YTD 2018 YTD 2019 • Q3 2019 impacted by unplanned maintenance • YTD p
Slide 11: Moa JV highlights
Moa JV highlights Q3 Mixed sulphides production(1) (tonnes) NDCC (US$/lb) 4,861 $4.37 4,165 $2.16 Q3 2018 Q3 2019 Q3 2018 Q3 2019 • Decline impacted by requirements to preserve fuel • Q3 2019 NDCC impacted by 61% reduction in • Fuel supply has returned to normal in Q4 2019 realized cobalt prices yea
Slide 12: Oil and Gas highlights
Oil and Gas highlights Oil Production (Cuba GWI, bopd)(1) Unit operating costs (Cuba GWI, $/bbl(2)) 4,668 $21.40 4,060 $18.84 Q3 2018 Q3 2019 Q3 2018 Q3 2019 • Production decrease due to natural reservoir declines • Cost increase due to lower production volumes • Costs also negatively impacted by a
Slide 13: Power highlights
Power highlights Electricity production (33⅓% GWh(1)) Unit operating costs ($/MWh(2)) 197 $24.60 191 $14.42 Q3 2018 Q3 2019 Q3 2018 Q3 2019 • Higher production is due to deferred timing of • Unit costs lower due to decision to defer maintenance activities and unexpected availability of maintenance p
Slide 14: Financial highlights
Financial highlights 14
Slide 15: Cash waterfall from Q2 2019 to Q3 2019
Cash waterfall from Q2 2019 to Q3 2019 Moa distributions offset impact of interest payments and capital spend 1. For additional information see Non-GAAP measures section 15
Slide 16: Status of scheduled Cuban energy receivables
Status of scheduled Cuban energy receivables Received on US$M Q2 2019 Receivables Q3 2019 overdue Expected/due Received Agreement overdue Oil & Gas - Trade receivables $ 22.7 $ 2.1 $ (1.5) -- $ 23.3 Power Trade receivables/other $ 13.0 $ 3.6 $ (5.5)(1) $ (8.5) $ 2.6 Energas CSA $121.5 $10.7 $ (2.0)(
Slide 17: Liquidity position
Liquidity position $207M $207M $177M $177M $169M Cash position impacted by: $61M $68M - Timing of Cuban energy $73M $76M $77 collections - $7.6M of interest $146M $139M $104M $101M payments on debentures $92 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 Canada and other Energas Liquidity preser
Slide 18: Covenant relief achieved in Q3
Covenant relief achieved in Q3 Existing credit facility To Dec 30 To April 30 $70M $19M - $60M cash in Canada less undrawn - $70M cash in Canada less undrawn credit facility credit facility Available - EBITDA not less than $60M - EBITDA not less than $100M - EBITDA/interest expense not less - EBITDA
Slide 19: Focus on reducing administrative expenses
Focus on reducing administrative expenses (1) $30.3M 6% $28.6M Decrease in administrative expenses YTD 2018 YTD 2019 Reducing administrative expenses is consistent with austerity measures (1) Excluding Stock-based compensation and depreciation 19
Slide 20: Adjusted EBITDA waterfall from Q2 2019 to Q3 2019
(1) Adjusted EBITDA waterfall from Q2 2019 to Q3 2019 Nickel price improvements driving EBITDA change 1. For additional information see Non-GAAP measures section 20
Slide 21: Recent developments and outlook
Recent developments and outlook 21
Slide 22: Update on Block 10
Update on Block 10 • 5,525 meters drilled through October 29 • Drilling has traversed zones where previous technical challenges were encountered • Drilling resumed following delivery of rental equipment unavailable in Cuba • Target drilling depth is 5,700 metres • Completion is expected in coming we
Slide 23: Guidance status
Guidance status Moa JV Oil and Gas Power On track to produce to 31,000 - On track to produce to 3,800 – On track to produce to 650 – 33,000 tonnes of finished nickel 4,100 BOPD – Cuba 700 GWh of electricty On track to produce 3,300 – On track for $23.00 - $24.50 On track for $20.00 - $23
Slide 24: Summary
Summary 1 Operational excellence initiatives continue to deliver benefits 2 Near-term volatility is expected until market conditions stabilize 3 Preserving liquidity and managing costs remain priorities 4 Long-term outlook for nickel market is favorable 24
Slide 25: Q&A Discussion
Q&A Discussion 25
Slide 26: Sherritt International Corporation contact details
Sherritt International Corporation 22 Adelaide West, 42nd Floor Toronto, Ontario, Canada M5H 4E3 Joe Racanelli Telephone: (416) 935-2457 Toll-Free: 1 (800) 704-6698 Email: investor@sherritt.com Website: www.sherritt.com 26
Slide 27: Appendix
Appendix 27
Slide 28: Important definitions (Non-GAAP measures)
Important definitions (Non-GAAP measures) All non-GAAP measures are reconciled to the most directly comparable IFRS measure in the MD&A. Adjusted EBITDA • The Corporation defines Adjusted EBITDA as earnings (loss) from operations, joint venture and associate as reported in the financial statements f
Slide 29: Important definitions
Important definitions Reference Prices: • Market price upon which price of the Sherritt’s products’ sales prices are derived: • Nickel – LME nickel; • Cobalt – Average low-grade cobalt published price per Fastmarkets MB; • Cuban Oil - U.S. Gulf Coast High Sulphur Fuel Oil. Mining, Processing and Ref
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