Sherritt International Corporation · TSX:S
Sherritt International — Q3 2018 Earnings Presentation
27 slides from Sherritt International's earnings presentation, Nov 1, 2018
Slide 1: Q3 Earnings Call
Q3 Earnings Call November 1, 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: Q3 2018 highlights
Q3 2018 highlights 1 Nickel production at Moa JV was up 10% from last year 2 Moa’s NDCC in lowest quartile for 6th consecutive quarter 3 Completed several initiatives to improve production reliability 4 Cash position grew by ~$10M to $207.1M 4
Slide 5: Market environment
Market environment 5
Slide 6: Macro-economic headwinds impacting commodity prices
Macro-economic headwinds impacting commodity prices 130 Start of trade war rhetoric US announces 25% tariffs on 120 $50B of Chinese goods 110 China growth Base 100 rate @ 6% Increased cobalt 100 sulphate supply from DRC Nickel price 90 80 Cobalt price 70 US 10% tariffs on $200B Chinese 10% on $60B 6
Slide 7: Class 1 nickel supply deficit is accelerating
Class 1 nickel supply deficit is accelerating 600,000 500,000 400,000 Tonnes 300,000 200,000 100,000 41% inventory decline YTD 0 LME Inventories SHFE No new nickel mines currently in development Source: LME, SHFE 7
Slide 8: Nickel demand will accelerate with EV revolution
Nickel demand will accelerate with EV revolution Global EV sales actuals(1) EV production forecasts(1) ’000s 16 0 50 100 150 200 250 300 350 400 14 Million vehicles produced/Yr +105% China 12 10 Europe +42% 8 US +37% 6 4 Japan -7%% 2 +86% ROW 0 China Europe USA RoW H1 2018 H1 2017 2016 2020 2025 203
Slide 9: Operations
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Slide 10: Metals highlights - Moa JV
Metals highlights - Moa JV Production(1) (tonnes) NDCC (US$/lb) Nickel Cobalt 464 465 $2.16 4,457 $1.94 4,049 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 • Nickel production was up 10%, largely because of • NDCC in the lowest cost quartile for 6th new mining equipment consecutive quarter • Cobal
Slide 11: Sherritt is a low cost nickel producer
Sherritt is a low cost nickel producer 2018 nickel industry NDCC (YTD data) 9.0 8.0 7.0 6.0 Nickel price 5.0 US$/lb 4.0 50th percentile of cost curve 3.0 2.0 25th percentile of cost curve Moa NDCC 1.0 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2014 2014 2014 2015 2015 2015 201
Slide 12: Initiatives to optimize production at Moa JV
Initiatives to optimize production at Moa JV • Improve mining fleet availability • Total of 29 new trucks, 3 excavators, 2 loaders deployed through end of Q3 • Improved fleet maintenance • Improved costs and production • Slurry preparation plant “dump pocket” • Commissioning expected in Q4 • Shorter
Slide 13: Oil and Gas highlights
Oil and Gas highlights Oil Production (total NWI*, boepd) Unit operating costs (Cuba GWI**, $/bbl) $18.84 7,658 $8.98 1,536 Q3 2017 Q3 2018 Q3 2017 Q3 2018 • Production decrease due to expiration of Varadero • Increase largely due to lower production volume West PSC and natural reservoir decline • C
Slide 14: Power highlights
Power highlights Electricity production (331/3%, GWh) Unit operating costs ($/MWh) 210 $24.60 191 $16.59 Q3 2017 Q3 2018 Q3 2017 Q3 2018 • Production declined due to reduced natural gas • Unit operating costs decline due to lower volume supply • Costs were negatively impacted by stronger $U.S and ti
Slide 15: Ambatovy update
Ambatovy update • Ongoing efforts to improve reliability • Replacement of two economizers • Replacement of equipment damaged by Cyclone Ava • Anti corrosion program • Impacts to Q3 production results • Oxidizing ore and PAL bottleneck issues • Planned plant shutdown • Outlook • Strong start to Q4 pr
Slide 16: Financial highlights
Financial highlights 16
Slide 17: How consolidated cash position grew in Q3 2018
How consolidated cash position grew in Q3 2018 Cash position at year-end will depend on progress against overdue receivables 17
Slide 18: How cash is generated
How cash is generated Fort Site Moa JV Oil & Gas Power Ambatovy 100% 50% interest 100% interest 33.3% interest 12% Finished products sold by ICCI to Fertilizer products sold in Cost-recovery oil and profit oil sold Finished products sold through international customers, no Electricity sold locally w
Slide 19: Adjusted EBITDA to cash provided by continuing operations
Adjusted EBITDA to cash provided by continuing operations Interest expenses and Fort Site contributions will vary each quarter 19
Slide 20: 2018 guidance updates - Moa
2018 guidance updates - Moa Production (tonnes) NDCC (US$/lb)(1) Old New Old New Nickel 31,500 – 32,500 30,500 – 31,000 $1.75 - $2.25 $1.90 - $2.40 Cobalt 3,500 – 3,800 3,250 – 3,400 • Production at Moa JV lowered due to impact of H2S • Update reflects higher input costs and lower cobalt supply inte
Slide 21: 2018 guidance update - CAPEX
2018 guidance update - CAPEX(1) Moa and Fort Site (US$M)(1) Oil & Gas (US$M)(1) $41 $29 $25 $31 Old New Old New • Decline due to change in scope and deferral of • Increase due to extended Block 10 drilling offset by capital projects deferral of other capital spending projects to 2019 (1) Sherritt’s
Slide 22: Recent developments and outlook
Recent developments and outlook 22
Slide 23: Disruption of hydrogen sulphide supply
Disruption of hydrogen sulphide supply • Alberta regulator stopped supplier from delivering H2S due to non-compliance issues • H2S is an important reagent used to eliminate contaminants in nickel and cobalt production • Supply disruptions reduced finished production at Fort Site refinery in October
Slide 24: Update on Block 10
Update on Block 10 • Drilling resumed early July • Drilling advanced to 5,000 meters of planned 5,900 meters • Wellbore instability was encountered between the upper and lower reservoirs • Portion of wellbore is now being re-drilled • Results expected within 90 days • Capital spending at Oil and Gas
Slide 25: Considerations for longer-term growth strategy
Considerations for longer-term growth strategy Continue to strengthen balance sheet 1 - Debt reduction remains a priority 2 Any future growth initiative be rooted in disciplined capital allocation 3 Any future growth to build on Sherritt’s unique capabilities Evaluate growth opportunities against gu
Slide 26: Q&A Discussion
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Slide 27: 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 27
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