Sherritt International Corporation · TSX:S
Sherritt International — Q4 2018 Earnings Presentation
27 slides from Sherritt International's earnings presentation, Feb 14, 2019
Slide 1: Q4 Earnings Call
Q4 Earnings Call February 14, 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 Q4 and 2018
Highlights for Q4 and 2018 1 Stronger balance sheet - Ended 2018 with $207M, up from $203M - Eliminated $130M of debt - Moa JV provided $47.7M in total contributions - Reduced G&A expenses by $6.1M Improved operational performance 2 - Q4 nickel production at Moa JV was up 4% - NDCC at Moa for FY2018
Slide 5: Market environment
Market environment 5
Slide 6: A tale of two commodity prices – YTD
A tale of two commodity prices – YTD 25.00% 20.00% Nickel +19% 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% -20.00% Cobalt -18% Jan-02-2019 Jan-07-2019 Jan-12-2019 Jan-17-2019 Jan-22-2019 Jan-27-2019 Feb-01-2019 Price movement is being driven by short-term and long-term trends Source: LME 6
Slide 7: Trends impacting cobalt prices
Trends impacting cobalt prices 1. De-stocking of inventory by consumers 2. Increased supply of intermediate product from the DRC 3. Seasonal slowness due to Chinese New Year Downward cobalt price movement is expected to be temporary 7
Slide 8: Nickel prices are catching up to market fundamentals
Nickel prices are catching up to market fundamentals Tonnes 450,000 400,000 350,000 48% 300,000 250,000 200,000 Decline in inventory 150,000 since Jan 1 2018 100,000 Feb-18 1-Jan-18 Mar-18 May-18 Jul-18 Apr-18 Oct-18 Nov-18 Dec-18 Jan-18 Jun-18 Aug-18 Sep-18 Jan-19 LME Inventories SHFE Supply defici
Slide 9: Demand for nickel is growing
Demand for nickel is growing* Stainless steel +4% growth per year Special alloys +2% growth per year EV batteries +33% growth per year Nickel consumption to grow to 2.4MT in 2019 and 2.5MT in 2020 Source: Wood Mackenzie 9
Slide 10: Operations
Operations 10
Slide 11: Safety Update
Safety Update 0.60 Three Year Safety Performance Lost time and recordable injuries 0.50 per hours worked 0.40 0.30 0.23 44% improvement 0.20 0.10 0.08 43% improvement 0.00 Q1'15 Q2'15 Q3'15 Q4'15 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18 Lost Time Incident Frequency Rate Tota
Slide 12: Metals highlights - Moa JV
Metals highlights - Moa JV Production(1) (tonnes) NDCC (US$/lb) Nickel Cobalt $2.94 4,294 4,134 465 428 $1.80 Q4 2017 Q4 2018 Q4 2017 Q4 2018 Q4 2017 Q4 2018 • Production impacted by disruption of H2S supply • Increase driven by higher sulphur and energy • Nickel production growth driven by new mini
Slide 13: Moa JV is low cost nickel producer
Moa JV is low cost nickel producer $US/lb 2018 nickel industry NDCC $8.00 $7.00 $6.00 Nickel price $5.00 $4.00 50th percentile of cost curve $3.00 25th percentile of cost curve $2.00 Moa NDCC $1.00 $0.00 Moa JV is the lowest cost HPAL operation in the world Source: Wood Mackenzie, Q4 2018 dataset 13
Slide 14: Oil and Gas highlights
Oil and Gas highlights Oil Production (total NWI, boepd)1 Unit operating costs (Cuba GWI, $/bbl)2 $25.16 6,101 $12.24 1,597 Q4 2017 Q4 2018 Q4 2017 Q4 2018 • Production decrease due to expiration of Varadero • Cost increase due to lower production volume West PSC and natural reservoir decline • Cost
Slide 15: Power highlights
Power highlights Electricity production (331/3%, GWh1) Unit operating costs ($/MWh2) $23.43 201 $21.09 184 Q4 2017 Q4 2018 Q4 2017 Q4 2018 • Production declined due to reduced natural gas • Costs declined due to timing of maintenance supply activities • Decline offset by a stronger $U.S 1. GWh = Gig
Slide 16: Financial highlights
Financial highlights 16
Slide 17: Change in consolidated cash in Q4
Change in consolidated cash in Q4 $6.1M reduction in G&A expenses paved the way for higher cash position 17
Slide 18: Adjusted EBITDA to cash from operations - Q4 2018
Adjusted EBITDA(1) to cash from operations - Q4 2018 Cash from operations driven by distributions from the Moa JV and fertilizer sales (1) For additional information see Non-GAAP measures section 18
Slide 19: 2019 guidance summary
2019 guidance summary* Production Unit Costs Capital Spend Moa JV • 31,000– 33,000 Ni • US$3.40 - US$3.90/lb • US$40M • 3,300– 3,600 Co Ambatovy JV • 40,000– 45,000 Ni • US$3.80 - US$4.30/lb • US$10M • 3,500– 4,000 Co Oil & Gas • 3,800– 4,100 • C$25.00 - $26.50/bbl • US$21M Electricity • 650 - 700 •
Slide 20: 2019 capital spend considerations
2019 capital spend considerations Capital spend(1) Purpose Moa JV • $40M • New mining equipment • Infrastructure Ambatovy JV • $10M • Acid plant reliability • Process improvements Oil & Gas • $21M • Block 10 ($5.8M) • PE/Yumuri ($7.3M) • Equipment certification ($3.7M) • Internal costs and other ($3
Slide 21: 2019 unit cost considerations – Moa JV
2019 unit cost considerations – Moa JV Total cost per pound of nickel (US$/lb) $5.17 0.08 0.83 0.07 Sensitivity 0.29 $0.25 Income taxes paid - A US$5 increase in cobalt reference price Capital cost, net of results in a US$0.50 decrease in NDCC financing Net financing cost/Other - A US$20 decrease in
Slide 22: Recent developments and outlook
Recent developments and outlook 22
Slide 23: Status of scheduled Cuban energy receivables
Status of scheduled Cuban energy receivables Q4 progress US$M Q3 overdue Expected/due Received Q4 overdue Oil & Gas receivables $44.4 $6.1 ($12.8) $37.7 Power receivables $103.4 $16.0 ($4.6) $114.8 Total Cuban energy $147.8 $22.1 ($17.4) $152.5 receivables • Plan to address overdue receivables prese
Slide 24: Update on Block 10
Update on Block 10 • Drilling is currently suspended • Wellbore instability encountered between the upper and lower target reservoir • 3rd party experts are assisting with data analysis and development of new drilling parameters • Drilling to resume in March pending business case confirmation • Dril
Slide 25: Fort Saskatchewan refinery to reach 3B pounds of nickel production milestone
Fort Saskatchewan refinery to reach 3B pounds of nickel production milestone in February 25
Slide 26: Q&A Discussion
Q&A Discussion 26
Slide 27: Sherritt International Corporation
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 27
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