Sherritt International Corporation · TSX:S
Sherritt International — Q2 2018 Earnings Presentation
26 slides from Sherritt International's earnings presentation, Aug 1, 2018
Slide 1: Q2 Earnings Call
SHERRITT THE NAME IN NICKEL Q2 Earnings Call August 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: Q2 2018 highlights
Q2 2018 highlights 1 Impact of heavy rainfall at Moa and rail delays in Q1 fully resolved 2 Highest nickel reference price since 2013 3 Moa’s NDCC in lowest quartile for 5th consecutive quarter 4 Moa JV to pay dividends in Q3 following repayment of $45M loan 4
Slide 5: Market environment
Market environment 5
Slide 6: Favorable nickel and cobalt price trends
Favorable nickel and cobalt price trends Nickel vs. 90-Day Moving Average (DMA) Cobalt vs. 90-Day Moving Average (DMA) $8.00 $45 Avg. reference price Avg. reference price Q2 2018: US$6.56 $40 Q2 2018: US$42.93 $7.00 $35 $6.00 $30 $5.00 $25 $20 $4.00 $15 $3.00 $10 Nickel 90-DMA Cobalt 90-DMA Market f
Slide 7: YTD base metals price performance
0% 10% 20% 30% (30%) (10%) (20%) 1/2/2018 1/9/2018 1/16/2018 1/23/2018 1/30/2018 2/6/2018 2/13/2018 2/20/2018 2/27/2018 3/6/2018 3/13/2018 3/20/2018 3/27/2018 4/3/2018 4/10/2018 4/17/2018 4/24/2018 5/1/2018 5/8/2018 5/15/2018 YTD base metals price performance 5/22/2018 5/29/2018 6/5/2018 6/12/2018 6
Slide 8: Nickel inventories are declining
Nickel inventories are declining 600 500 400 ’000s tonnes 300 200 100 0 LME Inventories SHFE Total stocks have decreased by over 30% since the beginning of the year 8
Slide 9: Nickel demand will accelerate with EV revolution
Nickel demand will accelerate with EV revolution Global EV sales actuals(1) EV production forecasts 0 20 40 60 80 100 120 140 16 ’000s 14 Million vehicles produced/Yr China +130% 12 Europe +39% 10 8 US +31% 6 Japan 4 +29% 2 ROW +17% 0 China Europe USA RoW Q1 2018 Q1 2017 2016 2020 2025 2030 EV sales
Slide 10: Operations
Operations 10
Slide 11: Metals highlights - Moa JV
Metals highlights - Moa JV Production(1) (tonnes) NDCC (US$/lb) Nickel Cobalt 3,739 3,749 $2.55 436 388 $1.68 Q2 2017 Q2 2018 Q2 2017 Q2 2018 Q2 2017 Q2 2018 • Heavy rains and rail delays of Q1 resolved • Lower unit costs driven by 51% improvement in • Production impacted by planned annual shutdown
Slide 12: Metals highlights - Ambatovy JV
Metals highlights - Ambatovy JV Production(1) (tonnes) NDCC (US$/lb) Nickel Cobalt $3.66 $3.14 1,147 99 1,033 81 Q2 2017 Q2 2018 Q2 2017 Q2 2018 Q2 2017 Q2 2018 • Q2 improvements reflect efforts to increase acid plant • Lower unit costs mostly driven by 45% reliability and production stability impro
Slide 13: Sherritt is a low cost nickel producer
Sherritt is a low cost nickel producer 2018 Nickel industry NDCC* 10 Q2 2018 avg. reference price US$6.56/lb. C1 Cash Costs (US$/lb) Ambatovy = US$3.85 5 (YTD 2018) Moa = US$1.84 (YTD 2018) 0 25th percentile 50th percentile US$1.84 US$4.15 (5) 0 1,000 2,000 3,000 4,000 Mlbs Moa’s NDCC in lowest cost
Slide 14: Oil and Gas highlights
Oil and Gas highlights Oil Production (total NWI, boepd) Unit operating costs (Cuba GWI, $/bbl) 8,805 $16.10 $9.95 1,821 Q2 2017 Q2 2018 Q2 2017 Q2 2018 • Q2 2018 production decrease due to expiration of • Increase in unit production costs due to lower Varadero West PSC and natural reservoir decline
Slide 15: Power highlights
Power highlights Electricity production (331/3%, GWh) Unit operating costs ($/MWh) 220 $21.36 204 $18.57 Q2 2017 Q2 2018 Q2 2017 Q2 2018 • Production was lower due to reduced natural gas • Unit operating costs decline due to lower supply volume, timing of maintenance activities and strengthening of
Slide 16: Financial highlights
Financial highlights 16
Slide 17: Consolidated cash from March 31, 2018 to June 30, 2018
Consolidated cash from March 31, 2018 to June 30, 2018 $ millions 237.3 9.0 (2.3) (15.8) (12.3) 0.6 197.2 (10.0) (9.3) March 31, 2018 Adj. continuing Interest paid on Payment WC change Repurchase of Capex Other June 30, 2018 operating cash debentures received on Moa debentures flow WC facility Cash
Slide 18: Debt reduction in perspective
Debt reduction in perspective Net debt ($M)(1) Net debt / LTM EBITDA 48.4x $1,938 $653 $541 4.4x 3.2x 12/31/2016 12/31/2017 6/30/2018 12/31/2016 12/31/2017 6/30/2018 Sherritt has reduced debt by $130M in 2018 and $2B since 2014 (1) Net debt is defined as debt due within one year plus the face value
Slide 19: Status of scheduled Cuban energy receivables
Status of scheduled Cuban energy receivables Q2 progress US$M Q1 overdue Expected/due Received Q2 overdue Oil & Gas receivables $35.5 $18.3 ($13.5) $40.3 Power receivables $91.2 $17.1 ($11.7) $96.6 Total Cuban energy $126.7 $35.4 ($25.2) $136.9 receivables • Overdue receivables have always fluctuate
Slide 20: Updates to 2018 forecasts
Updates to 2018 forecasts Ambatovy1 Oil & Gas Production2 NDCC 41,500 Capex (US$M) 36,500 $3.25 $2.75 39 25 3,650 3,250 Old New Nickel Cobalt Old New Old New - New estimates driven by efforts to - Adjustment due to lowered - New estimate reflects the deferral of improve acid plant reliability and pr
Slide 21: Recent developments and outlook
Recent developments and outlook 21
Slide 22: Update on Block 10
Update on Block 10 SW NE CUPEY-1X • Drilling resumed July 1 • Preliminary results Upper Vega expected in Fall 2018 Alta Upper Veloz • US$14 million in spend 9 5/8” shoe 3318mMD Lost Circulation Zone budgeted Tested Oil First Well Lower LT-100 ST6 Well Plan First Well Vega 7” Liner Second Well Alta A
Slide 23: New available technology
New available technology 1 Using the existing wellbore Drill and set expandable liner at least 100 meters 2 below the loss circulation zone Another liner would be set if an unexpected loss 3 circulation zone is encountered Set the last liner as part of the completion of the well in 4 the Lower Veloz
Slide 24: Sherritt bitumen upgrade process addresses industry need
Sherritt bitumen upgrade process addresses industry need Bitumen Sherritt Process • Eliminates need for diluent addition • Leverages 60+ years of hydrometallurgical processes and use of autoclaves • Pilot-scale demonstration successfully completed • Opportunity to commercialize technology Traditiona
Slide 25: Q&A Discussion
Q&A Discussion 25
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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