Sherritt International Corporation · TSX:S
Sherritt International — Q1 2019 Earnings Presentation
27 slides from Sherritt International's earnings presentation, Apr 26, 2019
Slide 1: Q1 Earnings Call
Q1 Earnings Call April 26, 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 Q1
Highlights for Q1 1 Record first quarter nickel and cobalt production at Moa JV 2 3B tonne production milestone at Fort Saskatchewan refinery 3 Continued progress with operational excellence initiatives 4 Financial results impacted by 70% decline in realized cobalt prices Production improvements off
Slide 5: Market environment
Market environment 5
Slide 6: Q1 - A tale of two commodity prices
Q1 - A tale of two commodity prices 40% 30% 20% Nickel 10% +25% 0% (10%) (20%) (30%) Cobalt (40%) -28% 3-Mar 6-Mar 9-Mar 2-Jan 5-Jan 8-Jan 10-Feb 13-Feb 16-Feb 19-Feb 22-Feb 25-Feb 28-Feb 12-Mar 15-Mar 1-Feb 4-Feb 7-Feb 18-Mar 21-Mar 24-Mar 27-Mar 11-Jan 14-Jan 17-Jan 20-Jan 23-Jan 26-Jan 29-Jan Con
Slide 7: Trends that drove commodity prices in Q1
Trends that drove commodity prices in Q1 1. Easing of trade war concerns 2. Ongoing nickel inventory declines 3. De-stocking of cobalt inventory by consumers 4. Softened cobalt demand due to declining prices Nickel market trends have been consistent over past 12 months Source: Capital IQ 7
Slide 8: Nickel market fundamentals remain strong
Nickel market fundamentals remain strong 450,000 400,000 350,000 54% 300,000 Tonnes 250,000 200,000 Decline in inventory 150,000 since Jan 1 2018 100,000 1-Jan-18 May-18 Apr-18 Feb-18 Mar-18 Jul-18 Oct-18 Feb-19 Mar-19 Aug-18 Sep-18 Nov-18 Dec-18 Jan-18 Jun-18 Jan-19 LME Inventories SHFE Supply defi
Slide 9: Q2 marked by cobalt price recovery
Q2 marked by cobalt price recovery 20% 15% Cobalt +15% 10% 5% 0% Nickel (5%) -4% 1-Apr 2-Apr 3-Apr 4-Apr 5-Apr 6-Apr 7-Apr 8-Apr 9-Apr 10-Apr 11-Apr 12-Apr 13-Apr 14-Apr 15-Apr 16-Apr 17-Apr 18-Apr Higher cobalt prices being driven by renewed consumer buying Source: Capital IQ 9
Slide 10: Operations
Operations 10
Slide 11: Metals highlights - Moa JV
Metals highlights - Moa JV Production(1) (tonnes) NDCC (US$/lb) Nickel Cobalt $4.53 4,397 426 336 2,854 $2.06 Q1 2018 Q1 2019 Q1 2018 Q1 2019 Q1 2018 Q1 2019 • New record Q1 total nickel and cobalt production • Q1 2019 NDCC impacted by 70% reduction in • Growth driven by new mining equipment and ope
Slide 12: Operational excellence initiatives at Moa JV
Operational excellence initiatives at Moa JV Improve mining equipment availability • Goal is to increase production • 24 new mining trucks acquired in Q1 2019 • Benefits include reduced maintenance and CAPEX costs Increase ore stockpiles • Goal is to mitigate the impact of the rainy season Improve m
Slide 13: Oil and Gas highlights
Oil and Gas highlights Oil Production (total NWI, boepd)(1) Unit operating costs (Cuba GWI, $/bbl)(2) $20.83 $21.19 3,916 1,776 Q1 2018 Q1 2019 Q1 2018 Q1 2019 • Production decrease due to natural reservoir declines • Cost increase due to lower production volumes and reduction in profit oil percenta
Slide 14: Power highlights
Power highlights Electricity production (33⅓% GWh(1)) Unit operating costs ($/MWh(2)) $20.28 202 $17.22 173 Q1 2018 Q1 2019 Q1 2018 Q1 2019 • Production impacted by reduced natural gas • Unit costs increased due to lower production supply and scheduled maintenance activities total and stronger $U.S.
Slide 15: Financial highlights
Financial highlights 15
Slide 16: Impact of lower cobalt prices
Impact of lower cobalt prices Cobalt reference prices $US/lb Cobalt realized prices $CDN/lb $39.01 $48.47 $18.53 $14.62 Q1 2018 Q1 2019 Q1 2018 Q1 2019 • 52% decline year-over-year • 70% decline year-over-year • Driven by inventory de-stocking by consumers and • Includes settlement of Q4 2018 provis
Slide 17: Adjusted EBITDA waterfall from Q4 2018 to Q1 2019
Adjusted EBITDA waterfall from Q4 2018 to Q1 2019 (1) Adjusted EBITDA impacted by 70% lower cobalt realized prices 1. For additional information see Non-GAAP measures section 17 2. Adjusted to exclude Ambatovy JV Adjusted EBITDA of $5.3 million
Slide 18: Change in consolidated cash in Q1
Change in consolidated cash in Q1 Cash position impacted by working capital changes and timing of CAPEX spend 18
Slide 19: Ambatovy non-funding implications
Ambatovy non-funding implications Immediate Ownership Economic Operator Disclosure impacts interest interest status - Loss of voting - Potential for equity - New funding provided by - Sherritt continues to - Ambatovy is no rights and ownership dilution Ambatovy JV serve as operator longer an operati
Slide 20: Recent developments and outlook
Recent developments and outlook 20
Slide 21: Status of Helms-Burton Act
Status of Helms-Burton Act 1 Title III takes effect for first time on May 2nd 2 No legal precedent 3 Helms-Burton and Title III are unenforceable in Canada 4 Sherritt maintains no U.S. operations or assets Sherritt’s Cuban operations continue to run business as usual 21
Slide 22: International response to Title III
International response to Title III 22
Slide 23: Status of scheduled Cuban energy receivables
Status of scheduled Cuban energy receivables US$M Q4 2018 Q1 2019 overdue Expected/due Received overdue Oil & Gas - Trade receivables $37.7 $4.8 $(3.7) $38.8 Power Trade receivables/other $13.3 $5.8 $(2.0) $17.1 Energas CSA $101.5 $14.2 -- $115.7 Total Cuban energy $152.5 $24.8 $(5.7) $171.6 receiva
Slide 24: Update on Block 10
Update on Block 10 • Drilling resumed on April 1st • 3rd party experts assisted with data analysis and development of new drilling parameters • Drilling to make use of casing while drilling • Completion is expected in Q2 Prudent drilling and capital spending driven by complex geological formation 24
Slide 25: Current drilling on Block 10
Current drilling on Block 10 Drilling is taking advantage of technology investments and 3rd party expertise 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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