Sherritt International Corporation · TSX:S
Sherritt International — Investor Presentation (June 2015)
32 slides from Sherritt International's investor presentation, June 2015
Slide 1: The Name in Nickel - Investor Presentation June 2015
THE NAME IN NICKEL Investor Presentation l June 2015 SHERRITT INTERNATIONAL CORPORATION 1
Slide 2: Cautionary Statement on Forward-Looking Information
Cautionary Statement on Forward-Looking Information This document 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”,
Slide 3: Our Operations
Our Operations SHERRITT INTERNATIONAL CORPORATION 3
Slide 4: Global Scope
Global Scope What we influence $17.4B Assets (2) What we (3) operate $2B Revenue (3) $373M Adj. EBITDA (1) Sherritt $5.6B Reported Assets (1) Assets of $5.6 billion as reported on the Balance Sheet of the Q1 Condensed Consolidated Financial Statements at March 31, 2015. (2) Total assets comprise the
Slide 5: A Major Shift by Contribution
A Major Shift by Contribution Historical Contribution: Medium Term Outlook Contribution: Adjusted EBITDA by Division (%)(1) Adjusted EBITDA (%)(1) 4% 5% 9% 30% 41% 61% 66% 65% 32% 24% 23% 15% 25% 2012 2013 2014 Metals Coal Oil & Gas Power Metals Oil & Gas Power (1) Excludes Corporate and Other SHERR
Slide 6: As Nickel Production Grows…
As Nickel Production Grows… Finished Nickel Production (tonnes) - Sherritt’s Attributable Share 19,800 14,821 10,059 2,278 17,132 16,771 16,455 16,750 2012 2013 2014 2015E(1) Moa Ambatovy 50% 40% (1) Mid-point of guidance SHERRITT INTERNATIONAL CORPORATION 6
Slide 7: … Cash Flow Estimates Increase
… Cash Flow Estimates Increase Analysts’ Mean Cash Flow Per Share Estimates 2015E-2016E $0.80 $0.34 $0.25 $0.19 (1) 2014 2014 Q12015/2015E Q1 2015 2015E 2016E 2016E Source: Factset Broker Estimates March 20, 2015 SHERRITT INTERNATIONAL CORPORATION 7 (1) Adjusted cash flow from operations for 2014
Slide 8: Metals
METALS Top ten global producer of nickel with two large scale nickel operations: The Moa JV is a lateritic nickel enterprise producing finished nickel and cobalt between Sherritt (50%) and GNC of Cuba (50%) with a capacity of 34,000 tonnes of finished nickel. The Ambatovy JV has a capacity to produc
Slide 9: The Start of a Long Mine Life at Ambatovy
The Start of a Long Mine Life at Ambatovy • Long-life nickel asset that is on the cusp of cash flow • World class accomplishment for Sherritt Illustrative Mining Life Cycle 10 Year Nickel Price Performance 30 Cash Flow 25 20 15 10 Exploration Construction Current Operations spot price & Drilling & R
Slide 10: Ambatovy JV Outperforms Expectations in Q1
Ambatovy JV Outperforms Expectations in Q1 • Finished nickel production increased 33% • Net direct cash costs decreased 16% • Operating cash flow increased to $13 million from a loss of $21 million in the previous year, adjusted EBITDA increased to $4.3 million from a loss of $4.4 million • Nickel r
Slide 11: Progress Toward Financial Completion
Progress Toward Financial Completion After IE sign off After IE sign off • Requirement for financial completion by September 30, 2015 After IE sign off • Ten certificates to be delivered Production Environmental Certificate Certificate • Upon achieving financial completion Pipeline Efficiency Capaci
Slide 12: Moa JV Highlights in Q1 2015
Moa JV Highlights in Q1 2015 • Capacity ~33,500 tpa finished nickel, 3,500 tpa finished cobalt • Finished nickel production in Q1 increased by 20% to 4,357 tonnes • Cash costs decreased to U.S.$4.36/lb • Cash flow from operations increased to $30 million • Adjusted EBITDA more than doubled to $18.3
Slide 13: Construction Underway at Moa Acid Plant
Construction Underway at Moa Acid Plant • Construction commenced in Q1 2015 • Sulphur and sulphuric acid represent 1/3 of our NDCC • Cost savings from eliminating the need to import sulphuric acid and from reduced fuel oil consumption for steam production SHERRITT INTERNATIONAL CORPORATION 13
Slide 14: Nickel Market Supply/Demand 2015E-2019E
Nickel Market Supply/Demand 2015E-2019E World Supply/Demand 2014-2019 • Prices remain under pressure 2,400 from softer demand; LME inventories continue to rise 2,300 2,200 • NPI supply challenges from China 2,100 starting to appear, and supply deficit expectations remain, but 2,000 timing is unpredi
Slide 15: Two Low Cash Cost Nickel Laterite HPAL Operations
Two Low Cash Cost Nickel Laterite HPAL Operations Wood Mackenzie Net Direct Cash Cost (C1) for Nickel Producers April 2015 12.00 10.00 8.00 6.00 50th percentile = US$5.51/lb 4.00 Ambatovy Moa US$5.74 US$4.36 (Q1 2015) (Q1 2015) 2.00 0.00 -2.00 -4.00 -6.00 -8.00 SHERRITT INTERNATIONAL CORPORATION 15
Slide 16: Oil & Gas
OIL & GAS Since 1992, Sherritt has produced over 200 million barrels heavy oil (gross working interest basis), and currently produces approximately 20,000 gross barrels per day. Weighted average unit operating costs per gross working-interest boe were $10.16 in Q1 2015 SHERRITT INVESTOR DAY l PAGE 1
Slide 17: Global Oil Prices Impacted Revenue in Q1
Global Oil Prices Impacted Revenue in Q1 • Oil prices declined 50% year over year • First evidence of oil prices rebounding 120 100 80 60 40 20 0 Nov-14 Dec-14 May-14 Jul-14 Aug-14 Sep-14 Feb-15 May-15 Oct-14 Apr-14 Apr-15 Mar-14 Jun-14 Jan-15 Mar-15 WTI Fuel Oil No 6 SHERRITT INTERNATIONAL CORPORAT
Slide 18: Oil & Gas Operations in Q1
Oil & Gas Operations in Q1 • Adjusted EBITDA of $21.5 million down 64% • Cash provided by operations of $6.6 million down 59% • Gross production down 2%, primarily due to lower than expected production from two of the six wells drilled in the extension Production – Gross Working-Interest Unit Operat
Slide 19: Expansion Drilling in Two New Blocks
Expansion Drilling in Two New Blocks • Two new wells drilled in the quarter, with one producing and one being tested • Since start of drilling in the extension, six out of seven commitment wells completed SHERRITT INTERNATIONAL CORPORATION 19
Slide 20: Power
POWER A one-third interest in Energas, a Cuban joint venture operating facilities to process natural gas and generate electricity for sale and delivery to the Cuban grid SHERRITT INTERNATIONAL CORPORATION 20
Slide 21: Power Cash Flow Continues to Improve
Power Cash Flow Continues to Improve • Electricity generation increased 12% • Unit operating costs decreased 10% • Average realized price increased 14% • Cash flow from operations increased to $24 million • Boca de Jaruco plant is producing solid results Electricity Generation (GWh) Unit Operating C
Slide 22: The Political Landscape for Our Operations
The Political Landscape for Our Operations Cuba • Discussions continue regarding the re-establishment of diplomatic relations • Embargo/Helms-Burton legislation • Under new foreign investment law in Cuba: • Cuba tax rates have decreased, ~$17 million if tax changes were in place for all of 2014 Mada
Slide 23: Q1 2015 Financial Highlights
(1) Q1 2015 Financial Highlights STRENGTHENING OUR FINANC L POSITION Combined Adjusted Operating Earnings (Loss) from Cash Flow ($ millions) Continuing Operations/Share Adjusted EBITDA ($ millions) $56.1 $54.9 $34.7 $44.2 Q1 2014 Q1 2015 As reported Adjusted As reported Adjusted Q1 2014 Q1 2015 Q1 2
Slide 24: Maintaining Financial Strength
Maintaining Financial Strength Reduced leverage in 2014 As at March 31, 2015 ($ millions) Total Recourse Senior unsecured notes (2018, 2020, 2022) $732 $732 Ambatovy partner loans 121 121 Ambatovy additional partner loans 1,109 - DEBT REDUCED Other 8 8 Total debt 1,970 861 IN 2014 $790 Total debt to
Slide 25: Reducing Capital Spending
Reducing Capital Spending • At the current USD/ CAD exchange rate, originally forecasted expenditures are ~$250 million vs. $231 million at original exchange rates. • Capital guidance is now $210 million Division Original Guidance Current Guidance Change Feb 2015 Q1 2015 Oil & Gas $ 107 $ 96 $ (11)
Slide 26: Executing on Our 2015 Strategic Priorities
Executing on Our 2015 Strategic Priorities Focusing On Our Continuing To Extending The Life Building Balance Reducing Costs Core Nickel Ramp Up Of Our Cuban Sheet Strength Business Ambatovy Energy Business Sustaining Achieved a Securing two Maintaining a Optimizing production and production rate of
Slide 27: Investment Opportunity
Investment Opportunity Top 10 largest nickel producer in the world Rising production in base metals with forecasted nickel price increases Strong cash flow growth Catalysts - Increasing nickel production and rising nickel price SHERRITT INTERNATIONAL CORPORATION 27
Slide 28: Appendix
Appendix SHERRITT INTERNATIONAL CORPORATION 28
Slide 29: Ambatovy Distributable Cash Flow
Ambatovy Distributable Cash Flow Revenue Generated by Ambatovy (100%) subtract Payment of Operating Expenses (100%) subtract 1. Interest @ LIBOR + 255 bps (post financial Payment of Debt Service (2 parts) (100%) completion) 2. Principal repayments made semi-annually subtract (June, Dec) Funding of M
Slide 30: Combined Results
Combined Results • Combined Results are a non-GAAP measure that has been presented to report Sherritt's proportionate interest in all of its businesses including the Moa and Ambatovy Joint Ventures. Combined Results Per Financial Statements Combined revenue Revenue Combined cost of sales Adjustments
Slide 31: IFRS to Proportionate Ownership Reconciliation 2014 Results
IFRS to Proportionate Ownership Reconciliation 2014 Results Adjusted Results to IFRS 2014 Actual ($ millions) Adjusted IFRS adjustments IFRS Results(1) and other(2) Results Revenue Moa JV and Fort Site $ 457.4 $ (385.6) $ 71.8 Ambatovy JV 291.8 (291.8) - Other 64.6 (3.3) 61.3 Metals Subtotal 813.8 (
Slide 32: Sherritt International Corporation
Sherritt International Corporation 181 Bay Street, 26th Floor, Brookfield Place Toronto ON M5J 2T3 Investor Relations Sean McCaughan or Flora Wood Telephone: 416.935.2451/ 2457 Toll-Free: 1.800.704.6698 Email: investor@sherritt.com SHERRITT INTERNATIONAL CORPORATION 32 Website: www.sherritt.com
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