Sherritt International Corporation · TSX:S
Sherritt International — Investor Presentation (December 2017)
31 slides from Sherritt International's investor presentation, December 2017
Slide 1: Sherritt: The Name in Nickel - Investor Presentation
SHERRITT THE NAME IN NICKEL INVESTOR PRESENTATION December 2017 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: Sherritt investment highlights
Sherritt investment highlights 1 Well positioned to capitalize on EV battery demand 2 Low cost producer of high purity nickel and cobalt 3 Energy assets add cash flow diversity Ambatovy JV restructuring and Block 10 drill results are 4 near-term catalysts Balance sheet and liquidity initiatives are
Slide 4: Electric vehicles start with nickel and cobalt
Electric vehicles start with nickel and cobalt 4
Slide 5: Auto industry is undergoing dramatic changes
Auto industry is undergoing dramatic changes* 2019 2020 2025 2030 - China begins EV - 100% of Jaguar Land - Norway’s ban of ICE - VW Group will have 80 production quotas at Rover’s fleet will be vehicles take effect new EV models 10% of all vehicles electric - Ford to release 13 EV - Paris’s ban of
Slide 6: Electric vehicles driving cobalt demand
Electric vehicles driving cobalt demand Cobalt demand from electric vehicles* 2016-26 60 CAGR: 50 40 30 Kt +20% 20 10 +16% 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Cobalt demand for EVs Cobalt demand for plug-in hybrid and hybrid vehicles Sherritt ranks in top 10 of finished cobalt p
Slide 7: Cobalt supply marked by jurisdictional risk
Cobalt supply marked by jurisdictional risk Cobalt sources Mine production by country (2017): total = 113 kt 2% Canada: 3% Russia: 5% 37% Cuba: 4% 61% (3% Sherritt) * Philippines: DRC: 62% 4% Copper mines by-product Australia: 5% Nickel mines by-product Madagascar: 3% * Primary cobalt mines Other: 1
Slide 8: EV batteries will increasingly rely on nickel
EV batteries will increasingly rely on nickel Kg Content for 50k Wh NMC Battery Changes driven by: 24.1 - Cobalt supply constraints Nickel 32.4 - Commodity pricing 34.4 environment Manganese 24.1 - Surging end-product 10.8 demand Cobalt 24.1 4.3 10.8 4.3 Today 2025 Nickel’s ability to maintain energ
Slide 9: Nickel supply deficit is looming
Nickel supply deficit is looming Global nickel supply/demand market balance (kt) 200 600 150 Nickel inventories 450 Inventories (kt) Nickel supply (kt) 100 300 50 150 0 0 (50) (150) (100) (300) 2014 2015 2016 2017 2018 2019 2020 2021 Nickel supply/demand balance New supply constrained by pricing env
Slide 10: Not all nickel is the same
Not all nickel is the same Differences in nickel supply and uses 3.5 >70% 3.0 Stainless steel 2.5 Low purity 2.0 Class II – Mt Nickel Pig Iron & 1.5 Ferro-nickel Stainless steel with high purity nickel Of all nickel supply 1.0 High purity is unsuitable for EV Non-stainless exc. Cathode Class I – bat
Slide 11: Sherritt is well positioned to capitalize on strong outlook
Sherritt is well positioned to capitalize on strong outlook 1 Low cost; high purity producer of nickel and cobalt 2 High cobalt to nickel production ratio 90-year track record of innovative technology & 3 processing 4 Strong relationships with battery manufacturers 11
Slide 12: Operations
Operations 12
Slide 13: Moa Joint Venture
Moa Joint Venture Moa JV Cuba Fort Site Alberta • 50/50 partnership with Cuba • Refining of Moa and other mixed sulphides completed Includes fertilizer • Mining and processing of nickel and business, utilities and storage facilities cobalt from lateritic ore bodies • Produces finished nickel and cob
Slide 14: Moa JV and Fort Site - collaborative production
Moa JV and Fort Site - collaborative production NDCC costs (US$/lb) • A vertically integrated mining, processing $3.55 and refining enterprise: $1.94 − 60+ years HPAL experience at Moa − Class I refinery at Fort Site Q3 2016 Q3 2017 • Lowest cost HPAL asset globally Production (100%, tonnes) • >15 y
Slide 15: Ambatovy Joint Venture
Ambatovy Joint Venture NDCC costs (US$/lb) • Partnership with Sumitomo and Kores $4.67 $4.27 • Integrated mining, processing and refining plant in Madagascar • 60,000 tonnes/yr production capacity Q3 2016 Q3 2017 • Class 1 nickel and high purity cobalt Production (100%, tonnes) production Nickel Cob
Slide 16: Sherritt is a low cost nickel producer
Sherritt is a low cost nickel producer 2017 Nickel industry NDCC (YTD) 10 25th percentile 50th percentile US$2.53 US$3.77 C1 Cash Costs (US$/lb) YTD avg. reference 5 price US$4.55/lb Moa = US$2.53 Ambatovy = US$3.96 (YTD 2017) (YTD 2017) 0 (5) 0 1,000 2,000 3,000 4,000 Mlbs Moa ranked in lowest cost
Slide 17: Sherritt's global operations
Sherritt’s global operations Global operations Metals Oil and Gas Power Commercial operations developed with Sherritt technologies • 35+ commercial operations globally have utilized Sherritt technology and know-how • Sherritt technology is used in 100% of all nickel and cobalt briquettes produced gl
Slide 18: Oil and Gas operations
Oil and Gas operations Largest independent oil producer in Cuba Total production (NWI, boepd) • 20+ year history in the country 8,719 7,658 • 209 wells drilled since 1992, 86% found oil • > 210 million barrels produced • Vertically integrated, own and operate 2 rigs Q3 2016 Q3 2017 Strong financial
Slide 19: Power
Power Power generation (331/3% basis, GWh) Largest independent power producer in Cuba 226 • Operates through a 331/3% interest in Energas S.A. 210 • Aggregate net power capacity of 506MW with 3 facilities: Varadero West, Puerto Escondido and Boca de Jaruco Strong financial contributions Q3 2016 Q3 2
Slide 20: Recent progress & Upcoming catalysts
Recent progress & Upcoming catalysts 20
Slide 21: Status of debt position
Status of debt position Balance sheet initiatives 2021 2023 2025 2014 - 2017 - Sold non-core coal assets for - $220M in 8% - $250M in 7.5% - $250M in 7.875% $946M and repaid $425M in debentures due Q4 debentures due Q3 debentures due Q4 debentures - US$101M in - Repurchased $30M of Ambatovy partner
Slide 22: Q3 highlights
Q3 highlights 1 Increased cash position to $291M 2 Reduced NDCC at Moa to $1.94/lb – lowest since Q4 2004 3 Improving commodity prices and outlook Safety & shutdown procedures limited Hurricane Irma’s 4 impact Sherritt is well positioned for improving market fundamentals 22
Slide 23: Upcoming catalysts
Upcoming catalysts - Ambatovy JV restructuring expected in Q4 - Block 10 drill results expected by year end Opportunity to build on recent momentum 23
Slide 24: Post-Ambatovy JV restructuring impact
Post-Ambatovy JV restructuring impact • Sherritt ownership reduced to12% • No cash in/out in near term • Sherritt retains option to repay partner loan in equity • Sherritt will serve as operator through at least 2024 • JV restructuring will eliminate $1.3B in debt from Sherritt’s balance sheet Sherr
Slide 25: Status of Block 10 drilling
Status of Block 10 drilling Oil fields Havana Moa Nickel • Drilling at 2nd well underway • Target based on successful 1994 well • Results expected by Dec. 31 Sherritt has played a major role in Cuba’s oil discoveries 25
Slide 26: Sherritt investment highlights
Sherritt investment highlights 1 Well positioned to capitalize on EV battery demand 2 Low cost producer of high purity nickel and cobalt 3 Energy assets add cash flow diversity Ambatovy JV restructuring and Block 10 drill results are 4 near-term catalysts Balance sheet and liquidity initiatives are
Slide 27: Appendix
Appendix 27
Slide 28: Nickel and cobalt price trends from 2015 to date
Nickel and cobalt price trends from 2015 to date Nickel vs. 90-Day Moving Average (DMA) Cobalt vs. 90-Day Moving Average (DMA) +15% in +80% in (42%) in 2015 +18% in 2016 (24%) in 2015 +37% in 2016 $8.00 2017 $30 2017 $7.50 $7.00 $25 $6.50 $6.00 $20 $5.50 $5.00 $15 $4.50 $4.00 Avg. reference price $1
Slide 29: Sensitivity to nickel and cobalt prices
Sensitivity to nickel and cobalt prices LTM Adj. EBITDA sensitivity to nickel prices(1) LTM Adj. EBITDA sensitivity to cobalt prices(2) 120 80 $75 $100 70 100 $61 60 $78 Adj. EBITDA (C$ M) Adj. EBITDA (C$ M) 80 50 $46 60 40 $38 $46 $38 30 40 $22 20 $14 20 $8 $8 10 0 0 LTM avg realized price US$1/lb
Slide 30: 2017 Targets
2017 Targets Guidance at Actual Updated Guidance at 2017 2017 2017 Production volumes, unit operating costs and spending on capital June 30 September 30 September 30 Production volumes Nickel, finished (tonnes, 100% basis) Moa Joint Venture 31,500-32,500 23,256 Unchanged Ambatovy Joint Venture 40,00
Slide 31: Sherritt International Corporation
Sherritt International Corporation 181 Bay Street, 26th Floor, Brookfield Place Toronto, Ontario, Canada M4T 2Y7 Investor Relations Joe Racanelli Telephone: 416.935.2467 Toll-Free: 1.800.704.6698 Email: investor@sherritt.com Website: www.sherritt.com 31
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