Sherritt International Corporation · TSX:S
Sherritt International — Q1 2018 Earnings Presentation
25 slides from Sherritt International's earnings presentation, Apr 25, 2018
Slide 1: Sherritt Q1 Earnings Call
SHERRITT THE NAME IN NICKEL Q1 Earnings Call April 25, 2018 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: Q1 2018 highlights
Q1 2018 highlights 1 Stronger balance sheet – more cash; lower debt 2 Received US$40.7 million in Cuban energy payments 3 Moa’s NDCC in lowest cost quartile for the 4th consecutive quarter 4 Highest nickel reference price in three years 4
Slide 5: Market environment
Market environment 5
Slide 6: Favorable nickel and cobalt price trends
Favorable nickel and cobalt price trends Nickel vs. 90-Day Moving Average (DMA) Cobalt vs. 90-Day Moving Average (DMA) $7.00 $45 Avg. reference price Avg. reference price $6.50 Q1 2018: US$6.03 $40 Q1 2018: US$39.01 $6.00 $35 $5.50 $30 $5.00 $25 $4.50 $4.00 $20 $3.50 $15 $3.00 $10 4/2/2017 1/2/2017
Slide 7: Not all nickel is the same
Not all nickel is the same Differences in nickel supply and uses 3.5 >70% 3.0 Stainless steel Low purity 2.5 2.0 Class II – Mt Nickel Pig Iron & 1.5 Ferro-nickel Stainless steel with Of all nickel supply is high purity nickel unsuitable for EV High purity 1.0 Non-stainless exc. Class I – 0.5 Cathode
Slide 8: Sherritt is a low cost nickel producer
Sherritt is a low cost nickel producer 2018 Nickel industry NDCC 10 Q1 2018 avg. reference price US$6.03/lb Ambatovy = US$5.34 C1 Cash Costs (US$/lb) (Q1 2018) 5 Moa = US$2.06 (Q1 2018) 0 25th percentile 50th percentile (5) US$2.06 US$4.19 0 1,000 2,000 3,000 4,000 Mlbs Moa’s NDCC in lowest cost qua
Slide 9: Operations
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Slide 10: Metals highlights - Moa JV
Metals highlights - Moa JV Production(1) (tonnes) NDCC (US$/lb) Nickel Cobalt $3.25 3,840 436 2,854 336 $2.06 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 • Reduced availability of mixed sulphides negatively • Lower unit costs driven by US$4.27 cobalt by- impacted production in Q1 2018 due to: pr
Slide 11: Metals highlights - Ambatovy JV
Metals highlights - Ambatovy JV Production(1) (tonnes) NDCC (US$/lb) Nickel Cobalt $5.34 1,145 97 $3.93 668 49 Q1 2017 Q1 2018 Q1 2017 Q1 2018 Q1 2017 Q1 2018 • Q1 2018 production was impacted by Cyclone Ava • Higher unit production costs impacted by and the limited availability sulphuric acid reduc
Slide 12: Oil and Gas highlights
Oil and Gas highlights Oil Production (total NWI, boepd) Unit operating costs (Cuba GWI, $/bbl) 8,889 $20.83 3,916 $8.66 Q1 2017 Q1 2018 Q1 2017 Q1 2018 • Q1 2018 production decrease due to • Increase in unit production costs due to lower expiration of Varadero West PSC in Nov. production volume 201
Slide 13: Power highlights
Power highlights Electricity production (331/3%, GWh) Unit operating costs ($/MWh) 217 $17.22 202 $15.95 Q1 2017 Q1 2018 Q1 2017 Q1 2018 • Production was lower due to reduced natural • Unit costs increased due to lower volume gas supply 13
Slide 14: Financial highlights
Financial highlights 14
Slide 15: Consolidated cash from Dec. 31, 2017 to March 31, 2018
Consolidated cash from Dec. 31, 2017 to March 31, 2018 $ millions 132.3 237.3 33.1 (110.3) 203.0 (9.4) (4.1) 16.0 (1.3) (11.0) (11.0) Dec. 31, 2017 Adj. Interest paid Receipt of WC change Unit offering Repurchase Unit and Capex Other March 31, continuing on debentures advances of debentures debentur
Slide 16: Strengthened balance sheet
Strengthened balance sheet Balance sheet initiatives 2021 2023 2025 achieved 2014 - 2018 - Sold non-core coal assets for $946M and repaid $425M in debentures - Q2 2014 - $170M(1) in 8% - $206M in 7.5% - $223M in 7.875% - Repurchased $30M of debentures at a debentures due Q4 debentures due Q3 debentu
Slide 17: Debt reduction in perspective
Debt reduction in perspective Net debt ($M)(1) Net debt / LTM EBITDA 48.4x 1,938 653 507 4.4x 3.4x 12/31/2016 12/31/2017 3/31/2018 12/31/2016 12/31/2017 3/31/2018 Net debt has decreased significantly since 2016 year end (1) Net debt is defined as debt due within one year plus the face value of long-
Slide 18: Status of scheduled Cuban energy receivables
Status of scheduled Cuban energy receivables Q1 progress US$M Q4 overdue Expected/due Received Q1 overdue Oil & Gas receivables $41.4 $21.5 ($27.4) $35.5 Power receivables $91.2 $13.3 ($13.3) $91.2 Total Cuban energy $132.6 $34.8 ($40.7) $126.7 receivables • Overdue receivables have always fluctuate
Slide 19: Updates to 2018 forecasts
Updates to 2018 forecasts(1) Production NDCC (US$/lb) Moa Oil&Gas - Total NWI (boepd) $2.75 2,450 $2.00 2,000 -27% - Due to increase - Due to higher in cost recovery cobalt prices Old New Old New Ambatovy - Cobalt (tonnes)(2) Ambatovy 4,050 $3.25 3,650 $2.75 - Due to lower -15% - Driven by higher fo
Slide 20: Impact of IFRS 9 and IFRS 15
Impact of IFRS 9 and IFRS 15 • New accounting standards effective January 1, 2018 • IFRS 9 Financial instruments – changes to measurement of various items on Sherritt’s balance sheet, limited impact to income statement. • IFRS 15 Revenue – no significant impact • Detailed disclosure of changes are i
Slide 21: Recent developments and outlook
Recent developments and outlook 21
Slide 22: Oil and Gas - developments
Oil and Gas - developments Puerto Escondido/Yumuri Oil fields • Three-year extension of Production Havana Sharing Contract to 2021 Moa Nickel Update on Block 10 • Finalized evaluation of available and proven technology to complete drilling • Preliminary results expected in Q3 • US$13 million in spen
Slide 23: New available technology
New available technology 1 Using the existing wellbore Drill and set expandable liner at least 100 meters 2 below the loss circulation zone Another liner would be set if an unexpected loss 3 circulation zone is encountered Set the last liner as part of the completion of the well in 4 the Lower Veloz
Slide 24: Discussion
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Slide 25: Sherritt International Corporation
Sherritt International Corporation 181 Bay Street, 26th Floor, Brookfield Place Toronto, Ontario, Canada M4T 2Y7 Investor Relations Joe Racanelli Telephone: 416.935.2457 Toll-Free: 1.800.704.6698 Email: investor@sherritt.com Website: www.sherritt.com 25
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