Higher Nickel, Cobalt and Fertilizer Prices Drive Sherritt’s Strong Second Quarter Results
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE U.S.
TORONTO–(BUSINESS WIRE)–Sherritt International Corporation (“Sherritt”, the “Corporation”, the “Company”) (TSX: S), a world leader in the mining and hydrometallurgical refining of nickel and cobalt from lateritic ores, today reported its financial results for the three and six months ended June 30, 2022. All amounts are in Canadian currency unless otherwise noted.
“Strong long-term fundamentals for our nickel, cobalt and fertilizer products gave us the confidence to use some of our available cash to deleverage our balance sheet by repurchasing almost $60 million principal amount of our outstanding notes,” said Leon Binedell, President and CEO of Sherritt International Corporation. “On the strength of commodity prices in the quarter, our Adjusted EBITDA increased by more than 460% compared to the same quarter last year and almost doubled our first quarter of the year. Our NDCC at the Moa JV of US$2.19/lb was the lowest since Q3 2018, notably due to higher fertilizer by-product credits, and we received $19 million in distributions from the Moa JV during the quarter.”
Mr. Binedell added, “Despite some steady headwinds moving into Q3 as nickel and cobalt prices come off recent highs, we continue to be encouraged by long-term market fundamentals and will continue to make progress towards our expansion targets and further strengthening our balance sheet through increased distributions from our Moa JV during the balance of the year.”
SELECTED Q2 2022 DEVELOPMENTS
- As part of its priority of strengthening its balance sheet, Sherritt successfully purchased an aggregate of $59.2 million of Sherritt’s 8.5% second lien secured notes and 10.75% unsecured PIK option notes at a total 24% discount which will result in a reduction in annualized interest expense of approximately $5.5 million.
- Net earnings from continuing operations were $81.5 million, or $0.21 per share, compared to a net loss from continuing operations of $10.4 million, or $0.03 per share, in Q2 2021.
- Adjusted EBITDA(1) was $102.0 million compared to $18.0 million in Q2 2021. The improved Adjusted EBITDA was driven by higher nickel, cobalt, and fertilizer realized prices which offset lower sales volumes and higher input commodity prices. This quarter’s results also include a share-based compensation recovery of $17.2 million due to the impact of a reduction in Sherritt’s share price during the quarter. This compares to a $9.4 million share-based compensation expense in Q2 2021. Excluding the impact of share-based compensation in administrative expense, Q2 2022 administrative expenses were 27% lower than Q2 2021.
- Sherritt’s share of finished nickel and cobalt production at the Moa Joint Venture (Moa JV) were 3,704 tonnes and 396 tonnes, respectively. Finished production was lower in the current year period primarily due to timing of the planned annual maintenance shutdown. Last year, the plant maintenance shutdown occurred in Q3.
- Finished nickel and cobalt sales volumes for the three months ended June 30, 2022 were lower than production primarily due to logistics-related challenges in transporting finished product to customers and the deferral of orders by certain customers that were impacted by the slowdown of economic activity in China as a result of the country’s zero-COVID policies and recent global economic headwinds. The affected sales orders were partially offset by higher netback sales to other markets and sales to new customers, with a portion of the new customer contracts finalizing after quarter end. Subsequent to period end, additional sales of nickel and cobalt continue to reduce inventory towards more typical levels.
- Net direct cash cost (NDCC)(1) at the Moa JV was US$2.19/lb, the lowest since Q3 2018. During the current quarter, significantly increased cobalt and fertilizer by-product credits more than offset higher input and maintenance costs. Input commodity costs reflect a 178% increase in global sulphur prices, 102% increase in natural gas prices and 75% increase in fuel oil prices. Sherritt’s Q2 2022 NDCC continued to rank in the lowest cost quartile of all nickel producers according to annualized information tracked by Wood Mackenzie.
- Received $19.2 million (US$15 million) as its share of Moa JV distributions in Q2 to bring total distributions received in the year to $43.4 million (US$34 million) which exceeds the total amount of distributions received in all of 2021. Given prevailing nickel and cobalt prices, planned spending on capital, including growth capital, working capital needs, and other expected liquidity requirements, Sherritt continues to anticipate higher distributions in the second half of 2022 compared to the first half of the year.
-
The Moa JV advanced its expansion strategy aimed at growing annual nickel and cobalt production by 15 to 20% from the combined 34,710 tonnes produced in FY2021 once all projects are completed, and extending the life of mine at Moa beyond 2040. The first phase of this expansion, the slurry preparation plant at Moa, continues under construction and remains on budget and on schedule for completion in early 2024. Sherritt continues to evaluate its growth capital spend estimates in light of supply chain challenges and inflationary price pressures on construction materials, equipment, and labour costs. Additional engineering and design work continues and will facilitate more accurate cost estimates. The most recent assessment of expansion capital costs continues to indicate that costs are expected to be approximately US$25,000 per tonne of new nickel capacity consistent with previous disclosure. Progress in Q2 2022 included:
- ongoing construction of the slurry preparation plant with 50% of civil construction complete, 85% of the contracts for supply of materials and services awarded, and completed slurry pipeline design and ordered all materials;
- completed a feasibility study for the leach plant sixth train at Moa and confirmed previously installed equipment is in an acceptable condition for use;
- continued with basic engineering on the acid plants at Moa to meet the acid requirements from the expansion projects; and
- continued with basic engineering on de-bottlenecking projects at the refinery.
Sherritt expects to provide an update on the rollout and spending on capital related to the expansion strategy with each of its quarterly results with full project approval expected in the second half of 2022.
- Completed the first of the London Metal Exchange’s (LME) Responsible Sourcing requirements for LME-Listed Brands. The Corporation completed a LME-conformant Red Flag Assessment of its mineral supply chain and did not identify any red flags such as human rights violations, association with conflict, financial crimes or corruption. Independent LME-approved auditors validated this assessment and recommended that the LME confirm Sherritt’s conformance with its responsible sourcing requirements.
| (1) |
Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. |
Q2 2022 FINANCIAL HIGHLIGHTS
|
|
For the three months ended |
|
|
|
For the six months ended |
|
|
|||||||||
|
|
2022 |
|
2021 |
|
|
|
2022 |
|
2021 |
|
|
|||||
|
$ millions, except per share amount |
June 30 |
|
June 30 |
|
Change |
|
June 30 |
|
June 30 |
|
Change |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
65.9 |
|
$ |
31.0 |
|
113% |
|
$ |
100.0 |
|
$ |
52.9 |
|
89% |
|
|
Combined revenue(1) |
|
221.5 |
|
|
152.3 |
|
45% |
|
|
423.7 |
|
|
294.0 |
|
44% |
|
|
Earnings (loss) from operations and joint venture |
|
74.0 |
|
|
(7.3) |
|
nm(2) |
|
|
97.5 |
|
|
(1.2) |
|
nm |
|
|
Net earnings (loss) from continuing operations |
|
81.5 |
|
|
(10.4) |
|
884% |
|
|
97.9 |
|
|
(12.3) |
|
896% |
|
|
Net earnings (loss) for the period |
|
81.1 |
|
|
(10.7) |
|
858% |
|
|
96.8 |
|
|
(16.3) |
|
694% |
|
|
Adjusted EBITDA(1) |
|
102.0 |
|
|
18.0 |
|
467% |
|
|
160.5 |
|
|
48.2 |
|
233% |
|
|
Net earnings (loss) from continuing operations ($ per share) |
|
0.21 |
|
|
(0.03) |
|
800% |
|
|
0.25 |
|
|
(0.03) |
|
933% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided (used) by continuing operations for operating activities |
|
25.6 |
|
|
1.5 |
|
nm |
|
|
31.2 |
|
|
(1.5) |
|
nm |
|
|
Combined free cash flow(1) |
|
23.5 |
|
|
2.6 |
|
nm |
|
|
21.8 |
|
|
21.6 |
|
1% |
|
|
Average exchange rate (CAD/US$) |
|
1.277 |
|
|
1.228 |
|
4% |
|
|
1.272 |
|
|
1.247 |
|
2% |
|
| (1) |
Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. |
||
| (2) |
Not meaningful (nm). |
|
|
2022 |
2021 |
|
|||||
|
$ millions, as at |
June 30 |
December 31 |
Change |
|||||
|
|
|
|
|
|
|
|||
|
Cash and cash equivalents |
$ |
124.6 |
$ |
145.6 |
(14%) |
|||
|
Loans and borrowings |
|
393.4 |
|
444.5 |
(11%) |
|||
Cash and cash equivalents at June 30, 2022 were $124.6 million, down from $145.5 million at March 31, 2022. The reduction in cash was primarily due to the $44.8 million used to repurchase notes, $15.2 million in interest payments on the 8.50% second lien secured notes and $3.3 million of capital expenditures, partially offset by $19.2 million of distributions received from the Moa JV and strong fertilizer receipts.
Total distributions from the Moa JV to the end of the second quarter 2022 totaled $43.4 million (US$34 million) which exceeds the total amount of distributions received in all of 2021. Distributions from the Moa JV are determined based on available cash in excess of liquidity requirements, including anticipated nickel and cobalt prices, planned capital spend, working capital needs, and other expected liquidity requirements. Sherritt continues to expect distributions to be higher in the second half of the year than the first.
Sherritt also received US$12.2 million ($15.6 million) from Energas in Q2 which was used to facilitate foreign currency payments for the Energas operations. Total overdue receivables at June 30, 2022 were unchanged during the quarter at US$153.1 million. Collections on overdue amounts from Sherritt’s Cuban energy partners continue to be adversely impacted by Cuba’s reduced access to foreign currency as a result of ongoing U.S. sanctions and the global pandemic’s impact on tourism. Sherritt continues to work with its Cuban partners to accelerate receipt of payments on overdue amounts.
Of the $124.6 million of cash and cash equivalents, $28.6 million was held in Canada, down from $50.4 million as at March 31, 2022, and $91.8 million was held at Energas, up from $81 million as at March 31, 2022. The remaining amounts were held in Cuba and other countries.
Mandatory redemptions of the Corporation’s 8.5% second lien secured notes, as at the interest payment date in April 2022, was not required for the two-quarter period ended December 31, 2021 as the conditions pursuant to the redemption provisions of the indenture agreement were not met. For the two-quarter period ended June 30, 2022, excess cash flow, as defined in the indenture agreement, was $11.0 million. Subject to the minimum liquidity condition as defined in the indenture agreement, at the interest payment date in October 2022 the Corporation will be required to redeem, at par, total second lien secured notes equal to 50% of excess cash flow, or $5.5 million. In determining the minimum liquidity amounts in October 2022, the $44.8 million of cash used to repurchase second lien secured notes and unsecured PIK option notes during the three months ended June 30, 2022 will be added back in the calculation of minimum liquidity before and after any such redemption.
Adjusted net earnings (loss) from continuing operations(1)
|
|
|
|
2022 |
|
|
2021 |
||||||
|
For the three months ended June 30 |
$ millions |
$/share |
$ millions |
$/share |
||||||||
|
|
|
|
|
|
|
|
|
|
||||
|
Net earnings (loss) from continuing operations |
$ |
81.5 |
$ |
0.21 |
$ |
(10.4) |
$ |
(0.03) |
||||
|
|
|
|
|
|
|
|
|
|
||||
|
Adjusting items: |
|
|
|
|
|
|
|
|
||||
|
Sherritt – Unrealized foreign exchange gain – continuing operations |
|
(3.8) |
|
(0.01) |
|
(8.6) |
|
(0.02) |
||||
|
Corporate – Gain on repurchase of notes |
|
(13.8) |
|
(0.03) |
|
(0.8) |
|
– |
||||
|
Corporate – Transaction finance charges on repurchase of notes |
|
1.2 |
|
– |
|
– |
|
– |
||||
|
Corporate – Severance and other contractual benefits expense |
|
– |
|
– |
|
2.4 |
|
0.01 |
||||
|
Corporate – Unrealized losses on commodity put options |
|
– |
|
– |
|
3.7 |
|
0.01 |
||||
|
Oil and Gas and Power – ACL revaluation |
|
1.2 |
|
– |
|
(0.1) |
|
– |
||||
|
Other(2) |
|
– |
|
– |
|
0.8 |
|
– |
||||
|
Total adjustments, before tax |
$ |
(15.2) |
$ |
(0.04) |
$ |
(2.6) |
$ |
– |
||||
|
Tax adjustments |
|
(0.3) |
|
– |
|
– |
|
– |
||||
|
Adjusted net earnings (loss) from continuing operations |
$ |
66.0 |
$ |
0.17 |
$ |
(13.0) |
$ |
(0.03) |
||||
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
2022 |
|
|
|
|
|
2021 |
|
|
For the six months ended June 30 |
$ millions |
|
$/share |
|
$ millions |
|
$/share |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from continuing operations |
$ |
97.9 |
|
$ |
0.25 |
|
$ |
(12.3) |
|
$ |
(0.03) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusting items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sherritt – Unrealized foreign exchange gain – continuing operations |
|
(4.9) |
|
|
(0.02) |
|
|
(11.2) |
|
|
(0.03) |
|
|
Corporate – Gain on repurchase of notes |
|
(13.8) |
|
|
(0.03) |
|
|
(2.1) |
|
|
(0.01) |
|
|
Corporate – Transaction finance charges on repurchase of notes |
|
1.2 |
|
|
– |
|
|
– |
|
|
– |
|
|
Corporate – Severance and other contractual benefits expense |
|
– |
|
|
– |
|
|
2.4 |
|
|
0.01 |
|
|
Corporate – Unrealized losses on commodity put options |
|
(0.9) |
|
|
– |
|
|
4.3 |
|
|
0.01 |
|
|
Corporate – Realized losses on commodity put options |
|
0.9 |
|
|
– |
|
|
– |
|
|
– |
|
|
Oil and Gas – Gain on disposal of property, plant and equipment |
|
(1.3) |
|
|
– |
|
|
– |
|
|
– |
|
|
Oil and Gas and Power – ACL revaluation |
|
1.5 |
|
|
– |
|
|
1.5 |
|
|
– |
|
|
Other(2) |
|
0.5 |
|
|
– |
|
|
2.6 |
|
|
0.01 |
|
|
Total adjustments, before tax |
$ |
(16.8) |
|
$ |
(0.05) |
|
$ |
(2.5) |
|
$ |
(0.01) |
|
|
Tax adjustments |
|
(0.4) |
|
|
– |
|
|
(0.5) |
|
|
– |
|
|
Adjusted net loss from continuing operations |
$ |
80.7 |
|
$ |
0.20 |
|
$ |
(15.3) |
|
$ |
(0.04) |
|
| (1) |
A non-GAAP financial measure. For additional information see the Non-GAAP and other financial measures section of this press release. |
||
| (2) |
Other items primarily relate to losses in net finance (expense) income and inventory obsolescence. |
METALS MARKET
Nickel
Following extreme volatility and multi-year highs experienced in the first quarter of 2022, the second quarter nickel prices experienced a period of reasonably stable prices before they declined towards the end of the quarter, with prices ending Q2 at US$10.48/lb, down from US$15.15/lb at the end of Q1. The nickel price averaged US$13.13/lb for Q2 2022, compared to US$11.97/lb for Q1 2022, a 10% increase. Reduced volatility on the London Metal Exchange (LME), continuing COVID-19 restrictions in China, inflationary pressures, and global economic recession concerns have all played a role in tempering the nickel price. Since the beginning of Q3, prices have continued to decline to US$9.66/lb at July 27.
Inventory levels on the LME and Shanghai Futures Exchange (SHFE) continued to decrease in Q2 with the LME inventory falling from 72,570 tonnes to 66,780 tonnes and the SHFE from 6,097 tonnes to 958 tonnes.
Near-term visibility of market fundamentals, including inventory levels, beyond 2022 is limited given the uncertainty caused by a number of recent geopolitical and macroeconomic developments relating to Russia’s invasion of Ukraine, slower than expected resumption of demand from China, the ongoing impacts caused by COVID-19, continued global logistics issues, inflationary pressures and global economic recession concerns.
The long-term outlook for nickel remains positive on account of the strong demand expected from the stainless steel sector, the largest market for nickel, and the rapidly growing electric vehicle (EV) battery market. Some market observers, such as Wood Mackenzie, have forecast a prolonged nickel supply deficit beginning in 2026 due to strong demand from the electric vehicle market and insufficient nickel production coming on stream in the near term.
According to Wood Mackenzie in June 2022, they estimated nickel demand to increase by 41% between 2021 and 2026 and increase to 2040 at a compound annual growth rate (CAGR) of 4%, with EV battery and storage accounting for 38% of nickel demand in 2040 a CAGR of 10.5%.
As a result of its unique properties, high-nickel cathode formulations remain the dominant choice for long-range and high performance electric vehicles manufactured by automakers. Sherritt is particularly well positioned to meet Class 1 demand given its production capabilities and the fact that Cuba possesses the world’s fourth largest nickel reserves. The adoption of lithium iron phosphate (LFP) cathode battery chemistry, which is less expensive than nickel-manganese-cobalt (NMC) cathode chemistry but with lower energy density and less vehicle range, may soften nickel demand from this segment of the market.
Cobalt
Cobalt prices experienced a steady decline during the quarter due to concerns relating to the slow rate of full reopening of the Chinese economy, global inflation and economic recession concerns.
While the average price for Standard Grade cobalt in Q2 2022 of US$38.19/lb was 6.3% higher than Q1 2022’s average of US$35.90/lb, according to data collected by Fastmarkets MB, cobalt prices steadily declined from US$39.35/lb at the end of Q1 to close at US$32.25/lb, down 18%. Since the beginning of Q3, prices continued to fall to US$25.70/lb at July 27.
Near term visibility on cobalt prices are limited for much of the same reasons as nickel and the ongoing logistics issues relating the transportation of cobalt hydroxide from the Democratic Republic of Congo (DRC), the world’s largest supply market.
Longer-term, the demand for cobalt is forecast to be positive as cobalt is a significant component in electric vehicle battery chemistries. Given the expected increase in EV adoption in the coming years, cobalt demand is expected to increase despite the EV industry’s efforts to minimize cobalt content to reduce battery cost. According to CRU in June 2022, they estimated that cobalt demand is expected to increase at a CAGR of 13% over the next five years (from 173 thousand tonnes in 2021 to 320 thousand tonnes in 2026), with EV battery driving much of this increase with a forecast CAGR of 23%.
REVIEW OF OPERATIONS
Moa Joint Venture (50% interest) and Fort Site (100%)
|
|
For the three months ended |
|
For the six months ended |
|
||||||||||||
|
|
|
2022 |
|
2021 |
|
|
2022 |
|
2021 |
|
||||||
|
$ millions (Sherritt’s share), except as otherwise noted |
June 30 |
June 30 |
Change |
June 30 |
June 30 |
Change |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
FINANCIAL HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
||||||
|
Revenue(1) |
$ |
205.7 |
$ |
142.2 |
45% |
$ |
391.3 |
$ |
268.5 |
46% |
||||||
|
Cost of Sales(1) |
|
125.7 |
|
120.2 |
5% |
|
241.7 |
|
216.6 |
12% |
||||||
|
Earnings from operations |
|
78.4 |
|
19.7 |
298% |
|
146.1 |
|
47.5 |
nm(2) |
||||||
|
Adjusted EBITDA(2) |
|
91.9 |
|
34.1 |
170% |
|
173.1 |
|
75.8 |
128% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
CASH FLOW |
|
|
|
|
|
|
|
|
|
|
||||||
|
Cash provided by continuing operations for operating activities |
$ |
41.7 |
$ |
21.6 |
93% |
$ |
65.9 |
$ |
45.1 |
46% |
||||||
|
Free cash flow(2) |
|
29.5 |
|
13.8 |
114% |
|
43.0 |
|
32.7 |
31% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
PRODUCTION VOLUMES (tonnes) |
|
|
|
|
|
|
|
|
|
|
||||||
|
Mixed Sulphides |
|
3,906 |
|
4,020 |
(3%) |
|
8,032 |
|
7,951 |
1% |
||||||
|
Finished Nickel |
|
3,704 |
|
4,230 |
(12%) |
|
7,579 |
|
8,418 |
(10%) |
||||||
|
Finished Cobalt |
|
396 |
|
476 |
(17%) |
|
842 |
|
953 |
(12%) |
||||||
|
Fertilizer |
|
61,965 |
|
69,516 |
(11%) |
|
125,052 |
|
133,308 |
(6%) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
NICKEL RECOVERY(3) (%) |
|
89% |
|
85% |
5% |
|
89% |
|
84% |
6% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
SALES VOLUMES (tonnes) |
|
|
|
|
|
|
|
|
|
|||||||
|
Finished Nickel |
|
3,148 |
|
4,268 |
(26%) |
|
6,906 |
|
8,445 |
(18%) |
||||||
|
Finished Cobalt |
|
248 |
|
452 |
(45%) |
|
646 |
|
929 |
(30%) |
||||||
|
Fertilizer |
|
49,951 |
|
64,722 |
(23%) |
|
81,390 |
|
91,833 |
(11%) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
AVERAGE-REFERENCE PRICE (USD) |
|
|
|
|
|
|
|
|
|
|
||||||
|
Nickel (US$ per pound)(4) |
$ |
13.13 |
$ |
7.87 |
67% |
$ |
12.54 |
$ |
7.92 |
58% |
||||||
|
Cobalt (US$ per pound)(5) |
|
38.19 |
|
21.06 |
81% |
|
37.00 |
|
21.38 |
73% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
AVERAGE-REALIZED PRICE (CAD)(2) |
|
|
|
|
|
|
|
|
|
|
||||||
|
Nickel ($ per pound) |
$ |
16.99 |
$ |
9.46 |
80% |
$ |
15.83 |
$ |
9.71 |
63% |
||||||
|
Cobalt ($ per pound) |
|
44.16 |
|
22.82 |
94% |
|
42.62 |
|
22.35 |
91% |
||||||
|
Fertilizer ($ per tonne) |
|
1,090.96 |
|
409.06 |
167% |
|
922.38 |
|
380.50 |
142% |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
UNIT OPERATING COST(2) (US$ per pound) |
|
|
|
|
|
|
|
|
|
|
||||||
|
Nickel – net direct cash cost |
$ |
2.19 |
$ |
4.58 |
(52%) |
$ |
2.85 |
$ |
4.20 |
(32%) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
SPENDING ON CAPITAL(2) |
|
|
|
|
|
|
|
|
|
|
||||||
|
Sustaining |
$ |
12.5 |
$ |
7.7 |
62% |
$ |
28.2 |
$ |
12.4 |
127% |
||||||
|
Growth |
|
0.8 |
|
– |
– |
|
1.1 |
|
– |
– |
||||||
|
|
$ |
13.3 |
$ |
7.7 |
73% |
$ |
29.3 |
$ |
12.4 |
136% |
||||||
| (1) |
Revenue and Cost of sales of Moa Joint Venture and Fort Site is composed of revenue/cost of sales, respectively, recognized by the Moa Joint Venture at Sherritt’s 50% share, which is equity-accounted and included in share of earnings (loss) of Moa Joint Venture, net of tax, and revenue/cost of sales recognized by Fort Site, which is included in consolidated revenue. For a breakdown of revenue between Moa Joint Venture and Fort Site see the Combined revenue section in the Non-GAAP and other financial measures section of this press release. |
||
| (2) |
Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. |
||
| (3) |
The nickel recovery rate measures the amount of finished nickel that is produced compared to the original nickel content of the ore that was mined. |
||
| (4) |
The average nickel reference price for the six months ended June 30, 2022 was impacted by the suspension of nickel trading and disruption events on the LME in March 2022. The calculation of the average nickel reference price for the six months ended June 30, 2022 is based on LME guidance for disruption events, which uses the next available price after a disruption event. |
||
| (5) |
Average standard grade cobalt published price per Fastmarkets MB. |
Revenue in Q2 2022 increased by 45% to $205.7 million from $142.2 million last year. The revenue increase was largely attributable to higher average-realized prices(1) for nickel, cobalt, and fertilizer which were up 80%, 94%, and 167%, respectively, which more than offset lower sales volumes compared to Q2 2021.
Mixed sulphides production at the Moa JV in Q2 2022 was 3,906 tonnes, down 3% from the 4,020 tonnes produced in Q2 2021. The variance was primarily due to limited access to planned mining faces and reduced Leach Plant capacity due to unplanned maintenance.
Sherritt’s share of finished nickel production in Q2 2022 totaled 3,704 tonnes, down 12% from the 4,230 tonnes produced in Q2 2021 while finished cobalt production for Q2 2022 was 396 tonnes, down 17% from the 476 tonnes produced in the same period last year. Lower finished metals production in Q2 2022 was primarily a result of timing of the annual maintenance shutdown. All work has been completed and full production has resumed. In 2021, the annual shutdown was moved to Q3 due to the impact of COVID-19 and contractor availability. Guidance for nickel and cobalt production remains unchanged; however, based on the expected nickel to cobalt ratio in the ore, finished cobalt production is estimated to be at the lower end of the 3,400 – 3,700 tonne range.
Finished nickel and cobalt sales volumes for the three months ended June 30, 2022 were lower than production primarily due to logistics-related challenges in transporting finished product to customers and the deferral of orders by certain customers that were impacted by the slowdown of economic activity in China as a result of the country’s zero-COVID policies and recent global economic headwinds. The affected sales orders were partially offset by higher netback sales to other markets and sales to new customers, with a portion of the new customer contracts finalizing after quarter end. Subsequent to period end, additional sales of nickel and cobalt continue to reduce inventory towards more typical levels.
Fertilizers production for the three months ended June 30, 2022 was lower compared to the same period in the prior year in line with lower metals production. Fertilizer sales volume was lower as a result of lower production and reduced demand caused by wet weather conditions in western Canada including flooding in Manitoba.
Mining, processing and refining (MPR) costs per pound of nickel sold in Q2 2022 were up 29% from Q2 2021.
Contacts
For further investor information contact:
Mark Preston, Investor Relations
Telephone: (416) 935-2406
Toll-free: 1 (800) 704-6698
E-mail: investor@sherritt.com
Sherritt International Corporation
Bay Adelaide Centre, East Tower
22 Adelaide St. West, Suite 4220
Toronto, ON M5H 4E3
www.sherritt.com
