Sherritt International Corporation · TSX:S
Sherritt International — Investor Presentation (October 2017)
38 slides from Sherritt International's investor presentation, October 2017
Slide 1: Investor presentation October 2017
Investor presentation October 2017 SHERRITT INTERNATIONAL CORPORATION 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: Electric vehicles start with nickel and cobalt
Electric vehicles start with nickel and cobalt SHERRITT INTERNATIONAL CORPORATION 3
Slide 4: Auto industry is undergoing dramatic changes
Auto industry is undergoing dramatic changes Demand driven by: 54%Of all new vehicles will be electric by - - - - - Reduced emissions requirements Coming bans on fossil fuel cars Production quotas in China Vehicle affordability & reliability Increased energy storage capacity 2040* EV revolution will
Slide 5: Nickel supply deficit is looming
Nickel supply deficit is looming Nickel market balance 200 700 150 600 • Demand is tied to battery Market balance (kt) 100 500 requirements Stocks (kt) 50 400 0 300 • Nickel is a key component for (50) 200 battery cathodes (100) 100 (150) 0 2014 2015 2016 2017 2018 2019 2020 2021 Market balance Glob
Slide 6: Shortage of Class I nickel is expected in 2025
Shortage of Class I nickel is expected in 2025 Nickel market balance in 2025 3.5 3.0 Overall nickel Stainless steel market deficit 2.5 2.0 Stainless steel with high Mt Class II quality nickel required 1.5 Class I nickel deficit 1.0 Non-stainless exc. batteries 0.5 Class I Batteries 0.0 2025 supply 2
Slide 7: Electric vehicles also driving cobalt demand
Electric vehicles also driving cobalt demand Cobalt demand from electric vehicles 2016-26 60 CAGR: 50 40 30 +20% Kt 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 Cobalt prices increased +85% YTD Source:
Slide 8: Cobalt supply also marked by jurisdictional risk
Cobalt supply also 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 Nickel mines by-product Australia: 5% Madagascar: 3% Primary cobalt mines Sherrit
Slide 9: Sherritt is well positioned to capitalize on growing nickel and cobalt demand
Sherritt is well positioned to capitalize on growing nickel and cobalt demand 1 Low cost; high purity producer 2 2 long-life assets in mining friendly jurisdictions 3 Innovative technology and processing capabilities 4 Highest cobalt to nickel production ratio SHERRITT INTERNATIONAL CORPORATION 9
Slide 10: A 90 year track record with unique operating capabilities
A 90 year track record with unique operating capabilities SHERRITT INTERNATIONAL CORPORATION 10
Slide 11: Sherritt's production and processing capabilities
Sherritt’s production and processing capabilities Moa JV 50% Fort Site 100% Ambatovy 40% • 50/50 partnership with Cuba • Refining of Moa and other mixed • Joint venture with Sumitomo and sulphides completed in Alberta Kores • Mining and processing refining of nickel and cobalt from lateric ore • Inc
Slide 12: Moa JV and Fort Site - Collaborative production
Moa JV and Fort Site - Collaborative production • A vertically integrated mining, processing Unit operating costs (US$/lb) and refining enterprise: 3.15 2.94 2.86 2.55 − 60+ years HPAL experience at Moa − Class I refinery at Fort Site • Lowest cost HPAL asset globally Q2 2016 Q2 2017 6m 2016 6m 2017
Slide 13: Ambatovy - A long life asset
Ambatovy - A long life asset Unit operating costs (US$/lb) • World’s largest finished nickel laterite 5.12 4.75 project 3.66 3.79 • 25+ years mine life remaining • LME specification nickel and cobalt Q2 2016 Q2 2017 6m 2016 6m 2017 • Agreement in principle announced in Production (100%, tonnes) May
Slide 14: Cash cost drivers for Moa and Ambatovy
Cash cost drivers for Moa and Ambatovy Moa Ambatovy NDCC NDCC Q1 2017: US$3.25/lb Q1 2017: US$3.93/lb Q2 2017: US$2.55/lb Q2 2017: US$3.66/lb 2017e: US$2.80-3.30/lb 2017e: US$3.10-3.40/lb Mining, processing and refining costs Mining, processing and refining costs Diesel 5% 5% Diesel 3% 4% 10% 10% 20
Slide 15: Sherritt is a low cost nickel producer
Sherritt is a low cost nickel producer 2017 Nickel industry NDCC 10 25th percentile 50th percentile US$2.86 US$3.79 C1 Cash Costs (US$/lb) 5 YTD avg. reference price US$4.43/lb Ambatovy = US$3.79 Moa = US$2.86 (YTD 2017) 0 (YTD 2017) Moa guidance: 2.80-3.30 (5) Ambatovy guidance: 3.10-3.40 0 1,000 2
Slide 16: Sherritt's complementary operations
Sherritt’s complementary 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 prod
Slide 17: Sherritt is Cuba's largest independent oil producer
Sherritt is Cuba’s largest independent oil producer and most efficient power producer SHERRITT INTERNATIONAL CORPORATION 17
Slide 18: Energy operations provide strong EBITDA contributions
Energy operations provide strong EBITDA contributions Oil & Gas Power • 8,848 boepd (NWI) / 14,877 bopd (GWI - Cuba) • 437 GWh generated in the first 6 months of 2017 produced on average in the first 6 months of 2017 YTD Performance as of June 30, 2017(1)(2) 6% 15% 20% 43% Total Total Total Total Ad
Slide 19: Oil and Gas Operations
Oil and Gas Operations Largest independent oil producer in Cuba Total production (NWI, boepd) • 20+ year history in the country 10,567 10,537 8,805 8,848 • 209 wells drilled since 1992, 86% found oil • Approximately 676,000 m drilled since 1992 • > 210 million barrels produced Q2 2016 Q2 2017 6m 201
Slide 20: Sherritt has played a major role in Cuba's oil discoveries
Sherritt has played a major role in Cuba’s oil discoveries Oil fields Havana 1- Boca de Jaruco 2 - Santa Cruz 7 - Varadero West Moa Nickel • Enhanced recovery • Since 1998 project ended in • 2005 (ended 2009) 2007 • Sherritt PSC 1 2 3 4 5 6 7 3 - Canasí 4 - Puerto Escondido 5 - Yumurí 6 - Seboruco •
Slide 21: Power
Power Largest independent power producer in Cuba Power generation (331/3% basis, GWh) • Sherritt Power operates in Cuba through its 331/3% interest 444 437 in Energas S.A. 227 220 • Aggregate net power capacity of 506MW with 3 facilities: Varadero West, Puerto Escondido and Boca de Jaruco Q2 2016 Q2
Slide 22: Recent balance sheet initiatives
Recent balance sheet initiatives SHERRITT INTERNATIONAL CORPORATION 22
Slide 23: 1. Ambatovy joint venture restructuring
1. Ambatovy joint venture restructuring Rationale • $1.4 billion in debt to be eliminated from Sherritt’s balance sheet • Sherritt to retain 12% of total project equity and subordinated loans advanced to Ambatovy • Sherritt to remain as operator until at least 2024 Estimated costs • At closing, Sher
Slide 24: 2. Extension of Sherritt's bonds to Q4 2021
2. Extension of Sherritt’s bonds to Q4 2021 Liquidity Strategy • Q2 2017 liquidity: $274 million cash and short -term investments • Operate Metals and Power businesses to be free cash flow neutral or better Debenture/Notes Maturity Schedule ($ M) Bond Extension Completed in 2016 250 250 3-year exten
Slide 25: Balance sheet cash from Dec. 31, 2016 to June 30, 2017
Balance sheet cash from Dec. 31, 2016 to June 30, 2017 In million of dollars 31.8 309.6 (6.2) 8.6 (30.0) 274.2 (27.0) (11.0) (1.6) Dec. 31, 2016 - Adjusted Working capital Interest paid on Receipt of Repayment of Capital Other June 30, 2017 - Cash, cash operating cash change debentures advances borr
Slide 26: Upcoming catalysts
Upcoming catalysts 1 Restructuring of Ambatovy JV – Q3/Q4 2017 2 Block 10 drill results – Q4 2017 SHERRITT INTERNATIONAL CORPORATION 26
Slide 27: Key investment highlights
Key investment highlights 1 Sherritt is a low cost; high purity nickel and cobalt producer 2 Energy assets provide optionality and steady cash flow 3 Balance sheet initiatives strengthen positioning Block 10 drill results and oil production lease extension provide 4 upside potential SHERRITT INTERNA
Slide 28: Appendix
Appendix SHERRITT INTERNATIONAL CORPORATION 28
Slide 29: Capital structure
Capital structure Ownership structure Key facts Prices Institutions Shares outstanding c. 295 million 27.1% Share price 52-week (low / high): $0.74 - $1.67 Insiders 0.3% Analyst coverage Public and National Bank Don DeMarco other 72.6% Paradigm Capital David Davidson Scotiabank Orest Wowkodaw • Top
Slide 30: The nickel and cobalt price trends from 2015 to date
The nickel and cobalt price trends from 2015 to date Nickel vs. 200-Day Moving Average (DMA) Cobalt vs. 200-Day Moving Average (DMA) +17% in +85% in (42%) in 2015 +18% in 2016 (24%) in 2015 +37% in 2016 $8.25 2017 $29 2017 $7.75 $27 Avg. reference price 2015: US$12.99 $7.25 $25 2016: US$11.77 Q2 201
Slide 31: Cobalt in selected consumer goods
Cobalt in selected consumer goods iPhone 7 Tablet Laptop 10g 35g 40g Hybrid vehicle Electric vehicles Toyota Prius Chevrolet Bolt Tesla Model X <1kg 13kg 15kg Consumers of cobalt should be able to manage higher prices as the price of cobalt has little effect on the end-product price SHERRITT INTERNA
Slide 32: 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 $74 $100 70 100 $61 60 $79 Adj. EBITDA (C$ M) Adj. EBITDA (C$ M) 80 50 $46 60 40 $38 $46 $38 30 40 $21 20 $13 20 $8 $8 10 0 0 LTM avg realized price US$1/lb
Slide 33: Overview of Block 10
Overview of Block 10 Varadero West Block Varadero oil field Hicacos Peninsula Cardenas Bay Block 10 264km² Mean Sea Level -0 CUPEY-1X - 400 - 800 Vertical Depth (metres) - 1,200 - 1,400 - 2,000 - 2,400 - 2,800 - 3,200 - 3,600 - 4,000 0 2 4 6 8 10 12 14 16 18 20 22 24 26 Horizontal Distance (kilometr
Slide 34: Block 10 - Second well trajectory
Block 10 - Second well trajectory Second well to be drilled results expected by the end of the year SHERRITT INTERNATIONAL CORPORATION 34
Slide 35: Updated guidance
Updated guidance Revised 2017 2017 YTD guidance Production volumes Nickel, finished (tonnes, 100% basis) Moa Joint Venture 15,158 31,500-32,500 Ambatovy Joint Venture 18,150 40,000-43,000 Total 33,308 71,500-75,500 Cobalt, finished (tonnes, 100% basis) Moa Joint Venture 1,744 3,500-3,800 Ambatovy Jo
Slide 36: Nickel content increases as battery chemistry migrates towards 8:1:1
Nickel content increases as battery chemistry migrates from the current ratio towards 8:1:1 Cathode Nickel Content (%) Cobalt Content (%) Cobalt g/Wh Nickel g/Wh LCO (used in portable 0.0% 60.2% 1.15 0.00 electronic devices) NMC (1:1:1) 20.2% 20.3% 0.45 0.45 NMC (4:4:2) 24.4% 12.3% 0.30 0.00 NMC (5:
Slide 37: Mining friendly jurisdictions
Mining friendly jurisdictions Cuba • +20 year successful partnership between Sherritt and the Cuban Government • Sherritt is the largest foreign investors in the country Madagascar • Diplomatic relations with international community restored and foreign aid resumed • Key achievement in June with IMF
Slide 38: 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:jracanelli@sherritt.com SHERRITT Website:INTERNATIONAL www.sherritt.comCORPORATION 38
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