Sherritt International Corporation · TSX:S
Sherritt International — Q2 2022 Earnings Presentation
32 slides from Sherritt International's earnings presentation, Jul 28, 2022
Slide 1: Q2 Earnings Call: Review of Financial and Operational Results
Q2 Earnings Call Review of Financial and Operational Results July 28, 2022
Slide 2: Participants
Participants Leon Binedell President & CEO Yasmin Gabriel CFO
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation contains certain forward-looking statements. Forward-looking statements can growth opportunities; risk of future non-compliance with debt restrictions and covenants; that any opportunity will be successful, commercially viable, completed on time or on bud
Slide 4: Q2 Highlights
Q2 Highlights 1. Repurchased an aggregate $59 million of second lien and PIK option notes at a 24% discount 2. Strong Adjusted EBITDA(1) on high nickel, cobalt and fertilizer prices 3. NDCC(1) of US$2.19 ranked in the lowest cost quartile 4. Received $19.2 million of distributions from the Moa JV 5.
Slide 5: Review of operating results and expansion project update
Review of operating results and expansion project update 5
Slide 6: Moa JV highlights – Q2 Production
Moa JV highlights – Q2 Production Finished Nickel(1) (tonnes) Finished Cobalt(1) (tonnes) 476 4,230 396 3,704 Q2 2022 Q2 2021 Q2 2022 Q2 2021 • Decrease driven by timing of annual planned maintenance shutdown (Q2 2022 vs Q3 2021) • On track for guidance for 2022 – cobalt production volume at lower e
Slide 7: Moa JV highlights – Q2 Production/Sales volume
Moa JV highlights – Q2 Production/Sales volume Finished Nickel(1) (tonnes) Finished Cobalt(1) (tonnes) 3,704 396 3,148 248 Production Sales Production Sales • Lower sales than production primarily due to: • logistics-related challenges • deferral of orders due to slowdown of economic activity in Chi
Slide 8: Q2 2022 NDCC highlights
Q2 2022 NDCC(1) highlights Q2 2022 NDCC – US$2.19/lb • Benefitted from high average-realized prices(1) • Cobalt +94% US$/lb of nickel sold • Fertilizer +167% • Partly offset by • Lower sales volumes • Cobalt -45% • Fertilizer -23% • Higher input costs • Sulphur +178% • Natural gas +102% • Fuel oil +
Slide 9: Current expansion projects
Current expansion projects Phase 1 Moa - Slurry Prep Plant Moa – Processing and Reserves Fort Site Refinery Construction continued • Completed leach plant 6th train • Continuing basic engineering on • 50% of civil construction complete feasibility study; previously installed several debottlenecking
Slide 10: Upcoming milestones
Upcoming milestones In H2 2022 we expect to: • Continue fabrication and assembly on SPP • Complete basic engineering and plant capacity assessments at Moa • Obtain approval of next phase of expansion • Provide full update on project scope and estimated cost • Complete new life of mine plan and updat
Slide 11: Power highlights
Power highlights (1) Electricity production (33⅓% GWh ) Unit operating costs(2)($/MWh(3)) 133 115 $21.03 $20.10 Q2 2022 Q2 2021 Q2 2022 Q2 2021 • Production impacted by timing of maintenance • Unit costs improved due to increased production activities deferred to H2 • Discussions with Cuban partners
Slide 12: Financial Highlights
Financial Highlights sherritt
Slide 13: Repurchase of second lien and PIK option notes
Repurchase of second lien and PIK option notes $438 M PIK option $87M $378 M • Repurchased an aggregate of $59.2 million Principal amount of notes ($ millions) PIK option $69M of notes • 24% total discount • Recognized a gain of $13.8 million Second lien Second lien $351M $310M • Will reduce annual
Slide 14: Improved Adjusted EBITDA and net earnings
Improved Adjusted EBITDA and net earnings Adjusted EBITDA(1) ($ millions) Net earnings from continuing operations ($ millions) $102.0 $81.5 $18.0 Q2 2022 Q2 2021 $(10.4) Q2 2022 Q2 2021 • Improvement driven primarily by higher nickel, cobalt and fertilizer prices Q2 2022 Adjusted EBITDA nearly doubl
Slide 15: Outlook for Moa JV distributions is strong
Outlook for Moa JV distributions is strong 2019 – US$32.5M 2020 – US$30M 2021 – US$29M YTD 2022– US$34M $12.5M $20M $14M $15M $10M $11M $10M $10M $9M $6.5M(1) $5M $2.5M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 Distributions (US$,
Slide 16: Liquidity in perspective
Liquidity in perspective $237M $216M Available • Reduction primarily a result of cash used to Credit $92M Available repurchase notes and pay interest on Credit $92M second lien notes Other $14M Other $4M • Continued distributions from the Moa JV will Energas strengthen cash in Canada $81M Energas $9
Slide 17: Outlook and summary
Outlook and summary sherritt
Slide 18: 2022 Moa JV guidance
2022 Moa JV guidance Production & Unit Costs • Production and NDCC unchanged. Finished nickel 32,000 – 34,000 tonnes Finished cobalt 3,400 – 3,700 tonnes • Cobalt production estimated at lower end of range Net direct cash cost(1): US$4.00 - $4.50/lb(2) • NDCC estimated at higher end of range Spendin
Slide 19: Q2 Summary
Q2 Summary • Reduced debt obligations by $59 million and annual interest expense by $5.5 million • Strong Q2 results were driven by higher nickel, cobalt and fertilizer prices • Long-term outlook for nickel and cobalt remains favourable • Progress is being made on our expansion strategy Balanced app
Slide 20: Q&A Discussion
Q&A Discussion sherritt
Slide 21: Sherritt International Corporation contact details
Sherritt International Corporation 22 Adelaide West, 42nd Floor Toronto, Ontario, Canada M5H 4E3 Mark Preston, Investor Relations Telephone: (416) 935 -2406 I Toll -Free: 1 (800) 704 -6698 Email: mark.preston@sherritt.com I Website: www.sherritt.com
Slide 22: Appendix
Appendix 22
Slide 23: Non-GAAP and other financial measures
Non-GAAP and other financial measures 23
Slide 24: Adjusted EBITDA
Adjusted EBITDA The Corporation defines Adjusted EBITDA as earnings (loss) from operations and joint venture, which excludes net finance expense and loss from discontinued operations, net of tax, as reported in the financial statements for the period, adjusted for: depletion, depreciation and amorti
Slide 25: Adjusted EBITDA, cont.
Adjusted EBITDA, cont. $ millions, for the three months ended June 30 2021 Adjustment for Moa Moa JV and Metals Oil and Techno- Joint Fort Site(1) Other Gas Power logies Corporate Venture Total Earnings (loss) from operations and joint venture per financial statements $ 19.7 $ (0.5) $ (5.0) $ (0.2)
Slide 26: Adjusted EBITDA, cont.
Adjusted EBITDA, cont. $ millions, for the six months ended June 30 2021 Adjustment for Moa Moa JV and Metals Oil and Techno- Joint Fort Site(2) Other Gas Power logies Corporate Venture Total Earnings (loss) from operations and joint venture per financial statements $ 47.5 $ (1.1) $ (8.9) $ (1.3) $
Slide 27: Average-realized price
Average-realized price Average-realized price is generally calculated by dividing revenue by sales volume for the given product in a given division. The average-realized price for power excludes by-product revenue, as this revenue is not earned directly for power generation. Transactions by a Moa Jo
Slide 28: Average-realized price, cont.
Average-realized price, cont. $ millions, except average-realized price and sales volume, for the three months ended June 30 2021 Moa Joint Venture and Fort Site Adjustment for Moa Joint Nickel Cobalt Fertilizer Power Other(1) Venture Total Revenue per financial statements $ 89.0 $ 22.7 $ 26.4 $ 7.0
Slide 29: Unit operating costs/Net direct cash cost
Unit operating costs/Net direct cash cost With the exception of the Moa Joint Venture, which uses NDCC, unit operating cost is generally calculated by dividing cost of sales as reported in the financial statements, less depreciation, depletion and amortization in cost of sales, the impact of impairm
Slide 30: Unit operating costs/Net direct cash cost, cont.
Unit operating costs/Net direct cash cost, cont. $ millions, except unit cost and sales volume, for the three months ended June 30 2021 Adjustment Moa JV and for Moa Fort Site Power Other(1) Joint Venture Total Cost of sales per financial statements $ 120.2 $ 6.2 $ 11.1 $ (97.2) $ 40.3 Less: Depleti
Slide 31: Unit operating costs/Net direct cash cost, cont.
Unit operating costs/Net direct cash cost, cont. $ millions, except unit cost and sales volume, for the six months ended June 30 2021 Adjustment Moa JV and for Moa Fort Site Power Other(1) Joint Venture Total Cost of sales per financial statements $ 216.6 $ 12.6 $ 25.9 $ (184.4) $ 70.7 Less: Depleti
Slide 32: Spending on capital
Spending on capital The Corporation defines spending on capital for each segment as property, plant and equipment and intangible asset expenditures on a cash basis adjusted to the accrual basis in order to account for assets that are available for use by the Corporation and the Moa Joint Venture pri
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