Sherritt International Corporation · TSX:S
Sherritt International — Q2 2023 Earnings Presentation
35 slides from Sherritt International's earnings presentation, Jul 27, 2023
Slide 1: Q2 Earnings Call: Review of Financial and Operational Results
Q2 Earnings Call Review of Financial and Operational Results July 27, 2023 New slurry preparation plant Moa Cuba
Slide 2: Presenters
Presenters Leon Binedell President & CEO Yasmin Gabriel CFO
Slide 3: Forward-Looking Statements
Forward-Looking Statements This presentation contains certain forward-looking statements. Forward-looking uncertainties and other factors include, but are not limited to, security market and/or partners; successfully attracting required financing; successfully developing and statements can generally
Slide 4: Q2 Highlights
Q2 Highlights Received all cobalt and $64 million top-up distribution to fulfill first year Cobalt Swap receipts Ended Q2 with $125 million liquidity in Canada 29% increase in electricity production on increased equipment availability and receipt of additional gas Strong sales volumes offset by lowe
Slide 5: 2023 Strategic Priorities
2023 Strategic Priorities Leading Green Metals Achieve Balance Sheet Leverage Technologies Producer Strength for Growth • Execute on Moa JV • Effectively leverage collections ✓ ✓• Support Moa JV expansion, expansion on Cobalt Swap operational improvements and Life of Mine extension • Rank in lowest
Slide 6: Review of operations
Review of operations Acid Plant Moa Cuba 6
Slide 7: Health and Safety
Health and Safety Tragically had two fatalities during the quarter at the Moa mine site • Working with our Cuban partners, immediate actions were taken to: • Support families and coworkers • Reinvigorate training and compliance with fatality prevention standards • Compete an ICAM(1) investigation to
Slide 8: Moa JV Highlights – Q2 Production
Moa JV Highlights – Q2 Production Finished Nickel(1) Finished Cobalt(1) -12% -16% • Blending challenges from Q1 resolved at Moa • Lower mixed sulphide (MSP) feed availability at 3,704 refinery due to unplanned maintenance in the 3,268 hydrogen plant at Moa limiting production capacity • Production e
Slide 9: Moa JV Highlights – Q2 NDCC
Moa JV Highlights – Q2 NDCC(1) NDCC (US$/lb of nickel sold) Mining, processing and refining ➢ Higher costs due to lower nickel production volumes and higher cobalt sales volume, partly offset by lower input commodity prices Cobalt by-product credit ➢ Realized price 63% lower ➢ Sales volume (Sherritt
Slide 10: Moa JV Expansion update
Moa JV Expansion update Low capital intensity of US$13k per additional tonne of contained nickel • Structural steel and field assembly on SPP(1) complete • Piping, electrical, and slurry/water return piping all on schedule • 53% of all contracts awarded for Sixth Leach Train and are within budget, i
Slide 11: Power Highlights – Q2
Power Highlights – Q2 Electricity production Unit operating costs(2) (33⅓% GWh(1)) ($/MWh(1)) +29% • Began receiving gas from two new wells • Unit cost increase due to timing of 172 $34.13 maintenance activities 133 • Energas net capacity up 32% $20.10 • Continuing to investigate additional gas feed
Slide 12: Financial Highlights
Financial Highlights Electrical Power Plant Boca Cuba 12
Slide 13: Key Financial Metrics
Key Financial Metrics Net earnings from Adjusted EBITDA(1) ($M) continuing operations ($M) • Lower average-realized price(1) for nickel, cobalt and fertilizer: $102.0 ➢ Nickel price 20% lower $81.5 ➢ Cobalt price 63% lower ➢ Fertilizer price 35% lower • Higher MPR and maintenance costs • Lower stock
Slide 14: Cobalt Swap Update
Cobalt Swap Update Cobalt (tonnes (t)) Cash ($M)(1) • Received 802 tonnes to fulfill maximum cobalt 2,082 2,082 $152M quantity (2,082 tonnes) for the year Balance Balance 208 $21M • Received cash top-up dividend of $64 million Top up • Sold – 90% - 1,874 tonnes of cobalt – $73M dividend Received $64
Slide 15: Available liquidity in Canada
Available liquidity in Canada(1) Net increase includes: $125M • Receipts on Cobalt Swap ~$100 million Available Credit • Fort Site operating activity used $18M $42M • Payment of interest on debt - $9M C$ millions $82M • Repurchase $7M principal of PIK Notes - $5M Available Credit $37M Cash in Subseq
Slide 16: PIK Notes
PIK Notes PIK Notes (Principal) • Repurchased $7M in Q2 ($11M YTD) at a discount $71M • Paid cash interest in July: $63M • Two consecutive PIK interest payments provides the ability to make restricted payments under the terms of the 2LN(1) Indenture ($114M June 30th capacity) • Stops increase of deb
Slide 17: Outlook
Outlook 17
Slide 18: 2023 Guidance
2023 Guidance Moa JV and Fort Site Production guidance unchanged Production (100% basis) & Unit Costs ➢ At low end of range supplemented with third-party Finished nickel 30,000 – 32,000 tonnes feed in H2 Finished cobalt 3,100 – 3,400 tonnes NDCC guidance increased Net direct cash cost(1) US$6.75 - $
Slide 19: Take aways
Take aways • Strong liquidity as a result of year-one fulfillment of the Cobalt Swap • New gas wells increase power generation and guidance • Lower average-realized prices(1) of nickel, cobalt and fertilizer impacted Adjusted EBITDA(1) despite higher sales volumes • NDCC(1) guidance update primarily
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 Investor Relations Telephone: (416) 935 -2451 I Toll -Free: 1 (800) 704 -6698 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 2022 Adjustment for Moa Techno- Oil and Joint Metals(1) Power logies Gas Corporate Venture Total Earnings (loss) from operations and joint venture per financial statements $ 77.8 $ 2.3 $ (2.9) $ (2.3) $ 8.9 $ (9.8) $ 74.0 Add: Dep
Slide 26: Adjusted EBITDA, cont.
Adjusted EBITDA, cont. $ millions, for the six months ended June 30 2022 Adjustment for Moa Techno- Oil and Joint Metals(1) Power logies Gas Corporate Venture Total Earnings (loss) from operations and joint venture per financial statements $ 144.9 $ 2.8 $ (6.9) $ (0.7) $ (14.7) $ (27.9) $ 97.5 Add (
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 2022 Metals Adjustment for Moa Joint Nickel Cobalt Fertilizer Power Other(1) Venture Total Revenue per financial statements $ 118.0 $ 24.1 $ 54.5 $ 8.6 $ 16.3 $ (155.6) $ 65.9
Slide 29: Average-realized price, cont.
Average-realized price, cont. $ millions, except average-realized price and sales volume, for the six months ended June 30 2022 Metals Adjustment for Moa Joint Nickel Cobalt Fertilizer Power Other(1) Venture Total Revenue per financial statements $ 241.0 $ 60.7 $ 75.1 $ 17.6 $ 29.3 $ (323.7) $ 100.0
Slide 30: 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 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 three months ended June 30 2022 Adjustment for Moa Metals Power Other(1) Joint Venture Total Cost of sales per financial statements $ 128.7 $ 6.5 $ 10.2 $ (96.9) $ 48.5 Less: Depletion, depreciati
Slide 32: 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 2022 Adjustment for Moa Metals Power Other(1) Joint Venture Total Cost of sales per financial statements $ 247.3 $ 12.5 $ 16.9 $ (197.7) $ 79.0 Less: Depletion, depreciati
Slide 33: 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
Slide 34: Spending on capital, cont.
Spending on capital, cont. $ millions, for the three months ended June 30 2022 Total Adjustment derived from Combined for Moa financial Metals Power Other(1) total Joint Venture statements Property, plant and equipment expenditures (2) $ 12.2 $ - $ -$ 12.2 $ (8.7) $ 3.5 Intangible asset expenditures
Slide 35: Spending on capital, cont.
Spending on capital, cont. $ millions, for the six months ended June 30 2022 Total Adjustment derived from Combined for Moa financial Metals Power Other(1) total Joint Venture statements Property, plant and equipment expenditures (2) $ 22.9 $ 0.5 $ -$ 23.4 $ (15.8) $ 7.6 Intangible asset expenditure
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