Post by
rkhosla on Jan 26, 2021 11:40am
Whole TD report - will comment separately
Event Sherritt reported final 2020 production, and production, opex, and capex guidance for 2021.
Impact: NEUTRAL
Finished nickel production at the Moa JV was 31,506 tonnes in 2020 on a 100% basis, largely in line with guidance of 32,000–33,000 tonnes for the year. Finished cobalt production at the Moa JV was 3,370 tonnes in 2020 on a 100% basis, consistent with guidance for the year. Production for Q4/20 was slightly better than TD forecasts.
Sherritt's attributable nickel and cobalt production for the quarter were 4,020 tonnes and 451 tonnes, respectively (TD forecasts: 3,927 tonnes and 419 tonnes, respectively). In 2021, nickel and cobalt production at the Moa JV are forecast to be between 32,000 and 34,000 tonnes and 3,300 and 3,600 tonnes, respectively (100% basis).
The Power business is forecast to produce between 450 and 500 gigawatt hours of electricity in 2021. The forecast for 2021 is lower than guidance for 2020 (500-550 GWh) due to planned maintenance activities previously deferred in 2020. Sherritt did not provide 2021 guidance for the Cuban oil and gas business, which we expect to wind down by mid-year.
Net direct cash costs (NDCC) at the Moa JV are forecast at between US $4.25 and US$4.75 per pound of finished nickel sold, marginally above 2020 guidance due to higher forecast input commodity prices. 2021 NDCC guidance assumes an average cobalt price of US$15.58/lb and a delivered sulphur price of US$145/t. TD's previous NDCC forecast for 2021 was ~US$4.15/lb.
Sherritt’s share of capital spending at the Moa JV and at the Fort Saskatchewan site in Canada is forecast at US$44 million in 2021 (TD's previous forecast: ~US $30 million). Capital spending in 2021 is planned for the continued replacement of mine and plant equipment. In addition, power capex is projected at US$1 million.
TD Investment Conclusion We are maintaining our HOLD rating and $0.45 target price. Our NAV-8% has increased slightly on minor changes to our capex and opex assumptions. We note that Sherritt has strong leverage to nickel and cobalt prices. A 10% change in our long-term nickel-price assumption (US$7/lb starting in 2025) affects our NAV-8% by ~55%.
Comment by
oceaneleven on Jan 26, 2021 11:49am
Batter up at 45 cents.......