Sherritt International Corporation · TSX:S
Sherritt International — Q4 2017 Earnings Presentation
26 slides from Sherritt International's earnings presentation, Feb 12, 2018
Slide 1: Q4 Earnings Call
SHERRITT THE NAME IN NICKEL Q4 Earnings Call February 12, 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: Q4 2017 highlights
Q4 2017 highlights 1 Restructuring at Ambatovy JV eliminated $1.4B of debt 2 NDCC at Moa was lowest since Q3 2004 3 Received $19.9M in cash flow from Moa JV 4 Higher commodity prices and favorable market outlook Sherritt is now ideally positioned to benefit from the nickel price recovery 4
Slide 5: Market environment
Market environment 5
Slide 6: Nickel and cobalt price trends
Nickel and cobalt price trends Nickel vs. 90-Day Moving Average (DMA) Cobalt vs. 90-Day Moving Average (DMA) $7.00 $40 Avg. reference prices Avg. reference prices 2017: US$4.72 2017: US$26.53 $6.50 Q4 2017: US$5.25 $35 Q4 2017: US$31.60 $6.00 $30 $5.50 $5.00 $25 $4.50 $20 $4.00 $15 $3.50 $3.00 $10 5
Slide 7: Auto industry is undergoing dramatic changes
Auto industry is undergoing dramatic changes* 2019 2020 2022 2025 - China begins EV - 100% of Jaguar Land - Ford will launch an all- - Norway’s ban of ICE production quotas at Rover’s fleet will be electric SUV + 24 vehicles take effect 10% of all vehicles electric hybrid and 16 full EVs - 30% of Au
Slide 8: EV batteries will increasingly rely on nickel
EV batteries will increasingly rely on nickel Kg Content for 50k Wh NMC Battery Changes driven by: Nickel 24.1 - Cobalt supply constraints 32.4 34.4 - Commodity pricing Manganese 24.1 environment 10.8 - Surging end-product Cobalt 24.1 4.3 demand 10.8 4.3 NMC 1:1:1 NMC 6:2:2 NMC 8:1:1 Today 2025 Nick
Slide 9: Sherritt is a low cost nickel producer
Sherritt is a low cost nickel producer 2017 Nickel industry NDCC 10 C1 Cash Costs (US$/lb) 2017 avg. reference 5 price US$4.72/lb Ambatovy = US$3.83 (2017) Moa = US$2.35 (2017) 0 25th percentile 50th percentile US$2.08 US$3.75 (5) 0 1,000 2,000 3,000 4,000 Mlbs NDCC at Moa and Ambatovy declined sign
Slide 10: Operations
Operations 10
Slide 11: Metals highlights - Moa JV
Metals highlights - Moa JV Production(1) (tonnes) NDCC (US$/lb) Nickel Cobalt 4,134 465 3,782 $3.80 382 $1.80 Q4 2016 Q4 2017 Q4 2016 Q4 2017 Q4 2016 Q4 2017 • Q4 2017 production impacted by • US$1.80/lb lowest since Q3 2004 abnormally heavy rainfalls • Driven by high cobalt credit and US$0.50/lb •
Slide 12: Metals highlights - Ambatovy JV
Metals highlights - Ambatovy JV Production(1) (tonnes) NDCC (US$/lb) Nickel Cobalt 404 5,111 $3.27 $3.10 3,111 245 Q4 2016 Q4 2017 Q4 2016 Q4 2017 Q4 2016 Q4 2017 • Production decline driven by poor asset • High cobalt by-product credit offset higher reliability and plant shutdowns operating and mai
Slide 13: Oil and Gas highlights
Oil and Gas highlights Oil Production (total NWI, boepd) Unit operating costs (Cuba GWI, $/bbl) 8,163 $12.24 $10.95 6,101 Q4 2016 Q4 2017 Q4 2016 Q4 2017 • Decrease due to natural reservoir decline • Increase in unit production costs due to and expiration of Varadero West PSC in lower production cos
Slide 14: Power highlights
Power highlights Electricity production (331/3%, GWh) Unit operating costs ($/MWh) 224 201 $24.73 $23.43 Q4 2016 Q4 2017 Q4 2016 Q4 2017 • Production decline impacted by reduced • Cost improvement driven by the timing of gas availability and after-effects of maintenance activities Hurricane Irma 14
Slide 15: Financial highlights
Financial highlights 15
Slide 16: Balance sheet impact of Ambatovy JV restructuring
Balance sheet impact of Ambatovy JV restructuring $M Sept. 30, 2017 Dec. 31, 2017 ASSETS Cash, cash equivalents and short-term investments 290.3 203.0 Restricted cash 1.0 13.0 Other 388.6 364.3 Current Assets 679.9 580.3 Advances, loans receivable and other financial assets 1,422.1 713.0 Investment
Slide 17: Income statement impact of Ambatovy JV restructuring
Income statement impact of Ambatovy JV restructuring $M 2017 Q4 2017 FY Net earnings (loss) from continuing operations 552.9 308.9 Adjusting items: Gain on Ambatovy restructuring (629.0) (629.0) Unrealized foreign exchange loss 24.1 7.7 Other 1.8 (4.7) Total adjustments (603.1) (626.0) Adjusted net
Slide 18: Status of overdue receivables
Status of overdue receivables Q4 Progress US$M Q3 Overdue Expected/Due Received Q4 Overdue Oil & Gas receivables $28.5 $20.4 ($7.5) $41.4 Power receivables $72.0 $19.2 - $91.2 Total Cuban energy $100.5 $39.6 ($7.5) $132.6 Receivables • Overdue receivables have always fluctuated over the years • Timi
Slide 19: Consolidated cash from Dec. 31, 2016 to Dec. 31, 2017
Consolidated cash from Dec. 31, 2016 to Dec. 31, 2017 $ millions 51.3 31.7 308.6 (57.2) (35.0) (71.5) 5.7 203.0 (30.6) Dec. 31, 2016 Adj. continuing Interest paid on Receipt of Repayment of Ambatovy Capital Other Dec. 31, 2017 operating cash debentures advances borrowings restructuring expenditures
Slide 20: 2018 forecast highlights
2018 forecast highlights Production(1) Capex(1) Nickel (tonnes) 2018 Guidance US$ 16,000 Moa $41M Spending on Oil and Ambatovy $13M Gas will be tied to rate of collections of 4,980 Oil & Gas $39M overdue receivables Power $1M Moa Ambatovy NDCC (US$/lb)(2) Cobalt (tonnes) 1,780 $3.25 $2.75 486 Moa Am
Slide 21: Moa's NDCC – sensitivity analysis
Moa’s NDCC – sensitivity analysis Impact of a US$5/lb cobalt price increase and US$25/t sulphur price decrease 3.00 2.75 2.50 Key assumptions NDCC (US$/lb) (0.50) 2.00 (0.16) • Cobalt price: ~US$30/lb 1.50 • Sulphur: total cost: ~US$200/tonne (including freight and handling) 1.00 0.50 0.00 Midpoint
Slide 22: Recent developments and outlook
Recent developments and outlook 22
Slide 23: Oil and Gas - developments
Oil and Gas - developments Oil fields Havana Puerto Escondido/Yumuri • Three-year extension of Production Moa Sharing Contract to 2021 Nickel Update on Block 10 • Extended drilling timeline at 2nd well • Assessing options to reach target reservoir • Drilling results expected in Q3 • Target based on
Slide 24: Corporate developments
Corporate developments Unit offering Dutch auction tender offer • Generated $132M in gross • Offer to purchase up to $75 proceeds million of outstanding • 1st capital raise in 10 years debentures • Proceeds to reduce debt • Bidding ends Feb. 13 @ 5:00pm • Expanded shareholder base • Clearing price t
Slide 25: Q&A Discussion
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Slide 26: 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 26
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