Q3 Results-More cash flow from Nickel, Oil & Gas. It seems positive news. Lets see how the Stock price reacts to it.
TORONTO, ON--(Marketwired - October 25, 2016) -
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES
Sherritt International Corporation ("Sherritt" or the "Corporation") (TSX:S.TO), the world leader in the mining and refining of nickel from lateritic ores, today reported its financial results for the three and nine months ended September 30, 2016.
"The nickel and oil price rally and strong Cuban energy receipts contributed to a $33 million increase in our ending cash balance since last quarter. We concluded September with $345 million, even after cash consent fees and other transaction expenses of around $15 million related to our bond maturity extension," said David Pathe, President and CEO, Sherritt International. "We also had two remarkable safety achievements in the quarter, as Ambatovy has now been Lost Time Injury-free for a year, and our Moa Joint Venture operations and surrounding communities in Cuba came through Hurricane Matthew with zero casualties and no material production impact expected."
Q3 HIGHLIGHTS(1)
- Nickel prices rebounded sharply in the third quarter to an average reference price of US$4.66/lb compared to US$4.00/lb last quarter. This 17% change in the quarter is one of the strongest in the base metals complex, compared to copper remaining virtually flat over the same period. Cobalt prices also increased by 14% over last quarter's average. News of Philippine mine shutdowns that have already been implemented or are expected continue to protect the downside in daily price fluctuation. Gulf Coast Fuel Oil 6 prices increased by another 12% in the third quarter compared to second quarter, and are now up 65% from the average reference price in the first quarter this year.
- Cash, cash equivalents and short-term investments at the end of the third quarter improved to $345.2 million, despite transaction costs of approximately $14.6 million incurred on the debenture maturity extension. The main drivers of the cash increase were the receipt of cash for overdue Cuban Oil & Gas receivables (US$38.9 million reduction in overdue receivables from the end of June to the end of September), seasonal receipt of fertilizer pre-buys and the impact from higher nickel and oil prices.
- Net direct cash costs (NDCC) of US$3.55/lb at the Moa JV and US$4.67/lb at Ambatovy in the quarter are an improvement for Ambatovy from the second quarter levels, and are higher for Moa but consistent with normal seasonality in fertilizer sales and receipt of cash. Ambatovy's quarterly production was negatively impacted by the tailings pipe blockage and total shutdown that occurred in June and July this year, followed by a weak production month in August. September monthly production of 4,185 tonnes finished nickel is the highest recorded so far this year.
- Oil drilling commenced on Block 10, with the first well spud in mid-August. Drilling is expected to continue throughout the balance of the year.
- The three publicly traded debenture maturities were extended following a near unanimous bondholder vote in favour of a three-year extension to each maturity, with $220 million principal value maturing in 2021, $250 million in 2023 and $250 million in 2025.
- September 28, 2016 marked a one-year anniversary for Ambatovy of recording zero Lost-Time Injuries. Sherritt is proud of the turnaround in safety culture of this large and complex operation, with over 7,000 employees and contractors working on site.
OUTLOOK AND SIGNIFICANT ITEMS
- The Moa Joint Venture operations returned to full capacity after the passage of Hurricane Matthew, and the production outlook remains unchanged.
- Full-year finished nickel production at Ambatovy is now expected to be 40,000 - 42,000 tonnes (100% basis), a 2,000 tonne reduction to the lower end of the guidance range last quarter, reflecting the slow ramp up to production after the shutdown. Cobalt production guidance remains unchanged.
- During the quarter, Sherritt recognized an impairment loss of $6.6 million (after tax) for the write-down of the Puerto Escondido/ Yumuri production-sharing contract (PSC) extension to a negligible recoverable amount, after the shut-in of two wells due to continuing low production. Only three wells remain in production on the PSC extension areas. Puerto Escondido and Yumuri production from the 43 wells in the original PSC areas continues in line with guidance.
All amounts are Canadian dollars unless otherwise indicated.
(1) For additional information see the Non-GAAP measures section of this press release.
Q3 2016 FINANCIAL HIGHLIGHTS
|
|
For the three months ended |
|
|
|
|
|
For the nine months ended |
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
| $ millions, except per share amount |
|
September 30 |
|
|
September 30 |
|
|
Change |
|
|
September 30 |
|
|
September 30 |
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
|
58.5 |
|
|
76.9 |
|
|
(24 |
%) |
|
$ |
191.8 |
|
|
$ |
259.4 |
|
|
(26 |
%) |
| Combined Revenue(1) |
|
184.5 |
|
|
246.5 |
|
|
(25 |
%) |
|
|
579.9 |
|
|
|
793.2 |
|
|
(27 |
%) |
| Net loss for the period |
|
(120.8 |
) |
|
(210.0 |
) |
|
42 |
% |
|
|
(272.2 |
) |
|
|
(319.4 |
) |
|
15 |
% |
| Adjusted EBITDA(1) |
|
11.5 |
|
|
22.6 |
|
|
(49 |
%) |
|
|
2.6 |
|
|
|
107.0 |
|
|
(98 |
%) |
| Cash provided by operating activities |
|
60.3 |
|
|
68.5 |
|
|
(12 |
%) |
|
|
24.2 |
|
|
|
53.7 |
|
|
(55 |
%) |
| Combined free cash flow (1) |
|
20.3 |
|
|
(7.5 |
) |
|
371 |
% |
|
|
(66.4 |
) |
|
|
(74.2 |
) |
|
11 |
% |
| Net loss from continuing operations per share |
|
(0.41 |
) |
|
(0.72 |
) |
|
43 |
% |
|
|
(0.93 |
) |
|
|
(1.07 |
) |
|
13 |
% |
| Combined adjusted operating cash flow per share (1) |
|
0.03 |
|
|
0.04 |
|
|
(25 |
%) |
|
|
(0.18 |
) |
|
|
0.31 |
|
|
(158 |
%) |
|
|
|
| (1) |
|
For additional information, see the Non-GAAP measures section of this release. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
|
2015 |
|
|
|
|
| $ millions, except as noted, as at |
|
|
|
|
|
|
|
|
|
|
|
|
September 30 |
|
|
December 31 |
|
|
Change |
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|
|
|
|
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|
|
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|
|
|
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|
|
| Cash, cash equivalents and short term investments |
|
|
|
|
|
|
|
|
|
|
|
|
345.2 |
|
|
435.4 |
|
|
(21 |
%) |
| Non-recourse loans and borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
1,284.0 |
|
|
1,303.2 |
|
|
(1 |
%) |
| Other loans and borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
857.2 |
|
|
959.9 |
|
|
(11 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Sherritt has expended $62.4 million this year in repurchasing debt and repaying credit facilities. This is the main use of cash year to date, as the cash, cash equivalents and short term investments balance has declined by $90.2 million to $345.2 million at September 30, 2016. Although the change from the end of last year to September 30 is a use of cash, cash balances increased by $32.6 million from the end of the second quarter of 2016, despite consent fees and other transaction costs of $14.6 million incurred on the debenture extension. During the third quarter of 2016, US$59.6 million of Cuban energy payments were received. These payments were primarily directed towards Oil & Gas and resulted in a US$38.9 million reduction in overdue Oil & Gas receivables from US$70.5 million overdue at June 30, 2016 to US$31.6 million overdue at September 30, 2016. The Cuban partners have prioritized reducing the Oil & Gas receivables, with only $3.6 million interest received on the Energas CSA during the quarter, and no principal repayment. Discussions continue to address the timing of ongoing Cuban payments; however the significant change in the overdue Oil & Gas balance is a positive indicator for future energy receipts.
Fertilizer prepayments received in the third quarter for future fertilizer deliveries also contributed to the increased cash position, and are consistent with seasonality in fertilizer. Cash receipts generally come in the second half of the year, while sales seasonality is generally the second and fourth quarter of the year.
Adjusted earnings (loss) from continuing operations(1)
|
|
|
|
|
|
2016 |
|
|
2015 |
|
| For the three months ended September 30 |
|
September 30 |
|
|
September 30 |
|
|
|
$ millions |
|
|
$/share |
|
|
$ millions |
|
|
$/share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss from continuing operations |
|
(120.8 |
) |
|
(0.41 |
) |
|
(210.0 |
) |
|
(0.71 |
) |
| Adjusting Items, net of tax |
|
16.5 |
|
|
0.06 |
|
|
118.6 |
|
|
0.40 |
|
| Adjusted net loss from continuing operations |
|
(104.3 |
) |
|
(0.35 |
) |
|
(91.4 |
) |
|
(0.31 |
) |
|
|
|
|
|
|
2016 |
|
|
2015 |
|
| For the nine months ended September 30 |
|
September 30 |
|
|
September 30 |
|
|
|
$ millions |
|
|
$/share |
|
|
$ millions |
|
|
$/share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss from continuing operations |
|
(272.2 |
) |
|
(0.93 |
) |
|
(314.4 |
) |
|
(1.07 |
) |
| Adjusting Items, net of tax |
|
(75.8 |
) |
|
(0.26 |
) |
|
76.8 |
|
|
0.26 |
|
| Adjusted net loss from continuing operations |
|
(348.0 |
) |
|
(1.19 |
) |
|
(237.6 |
) |
|
(0.81 |
) |
|
|
|
| (1) |
|
For additional information, see the Non-GAAP measures section of this release. |
|
|
|
During the third quarter, $16.5 million or $0.06 per share in adjusting items occurred, primarily a $12.8 million loss on unrealized foreign exchange with the weakening of the Canadian dollar, and the $6.6 million impairment expense. These were offset to some degree by a $2.9 million gain for VAT payments received.
REVIEW OF OPERATIONS
METALS
| $ millions except as otherwise noted, for the three months ended September 30 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
|
|
|
|
Moa JV & |
|
|
Ambatovy |
|
|
|
|
|
|
|
|
Moa JV and |
|
|
Ambatovy |
|
|
|
|
|
|
|
|
|
|
|
Fort Site(1) |
|
|
JV |
|
|
Other(2) |
|
|
Total |
|
|
Fort Site(1) |
|
|
JV |
|
|
Other(2) |
|
Total |
|
|
Change |
|
|
|
(50%) |
|
|
(40%) |
|
|
|
|
|
|
|
|
(50%) |
|
|
(40%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| FINANCIAL HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
|
$ |
80.6 |
|
|
$ |
51.0 |
|
|
$ |
11.4 |
|
|
$ |
143.0 |
|
|
$ |
97.6 |
|
|
$ |
80.8 |
|
|
$ |
15.0 |
|
$ |
193.4 |
|
|
(26 |
%) |
| (Loss) earnings from operations |
|
|
(4.0 |
) |
|
|
(38.5 |
) |
|
|
0.3 |
|
|
|
(42.2 |
) |
|
|
(7.7 |
) |
|
|
(55.0 |
) |
|
|
0.7 |
|
|
(62.0 |
) |
|
32 |
% |
| Adjusted EBITDA(3) |
|
|
7.5 |
|
|
|
(4.5 |
) |
|
|
0.3 |
|
|
|
3.3 |
|
|
|
2.2 |
|
|
|
(2.5 |
) |
|
|
0.3 |
|
|
- |
|
|
- |
|
| Cash provided (used) by operations |
|
|
25.6 |
|
|
|
(11.4 |
) |
|
|
(5.4 |
) |
|
|
8.8 |
|
|
|
22.3 |
|
|
|
(21.8 |
) |
|
|
0.4 |
|
|
0.9 |
|
|
878 |
% |
| Spending on capital |
|
|
11.1 |
|
|
|
9.5 |
|
|
|
- |
|
|
|
20.6 |
|
|
|
19.6 |
|
|
|
3.3 |
|
|
|
- |
|
|
22.9 |
|
|
(10 |
%) |
| Free cash flow(3) |
|
|
17.3 |
|
|
|
(21.8 |
) |
|
|
(5.4 |
) |
|
|
(9.9 |
) |
|
|
3.1 |
|
|
|
(38.0 |
) |
|
|
0.4 |
|
|
(34.5 |
) |
|
71 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| PRODUCTION VOLUMES (tonnes) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mixed Sulphides |
|
|
4,496 |
|
|
|
3,821 |
|
|
|
- |
|
|
|
8,317 |
|
|
|
4,596 |
|
|
|
5,625 |
|
|
|
- |
|
|
10,221 |
|
|
(19 |
%) |
| Finished Nickel |
|
|
4,295 |
|
|
|
3,669 |
|
|
|
- |
|
|
|
7,964 |
|
|
|
4,521 |
|
|
|
5,209 |
|
|
|
- |
|
|
9,730 |
|
|
(18 |
%) |
| Finished Cobalt |
|
|
489 |
|
|
|
270 |
|
|
|
- |
|
|
|
759 |
|
|
|
491 |
|
|
|
392 |
|
|
|
- |
|
|
883 |
|
|
(14 |
%) |
| Fertilizer |
|
|
66,893 |
|
|
|
12,106 |
|
|
|
- |
|
|
|
78,999 |
|
|
|
66,744 |
|
|
|
16,071 |
|
|
|
- |
|
|
82,815 |
|
|
(5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NICKEL RECOVERY (%) |
|
|
89 |
% |
|
|
81 |
% |
|
|
|
|
|
|
|
|
|
|
89 |
% |
|
|
88 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| SALES VOLUMES (tonnes) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Finished Nickel |
|
|
4,218 |
|
|
|
3,168 |
|
|
|
- |
|
|
|
7,386 |
|
|
|
4,549 |
|
|
|
4,976 |
|
|
|
- |
|
|
9,525 |
|
|
(22 |
%) |
| Finished Cobalt |
|
|
418 |
|
|
|
229 |
|
|
|
- |
|
|
|
647 |
|
|
|
506 |
|
|
|
332 |
|
|
|
- |
|
|
838 |
|
|
(23 |
%) |
| Fertilizer |
|
|
30,167 |
|
|
|
9,126 |
|
|
|
- |
|
|
|
39,293 |
|
|
|
32,892 |
|
|
|
15,832 |
|
|
|
- |
|
|
48,724 |
|
|
(19 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AVERAGE EXCHANGE RATE (CAD/USD) |
|
|
|
|
|
|
|
|
|
|
|
1.305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.309 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AVERAGE REFERENCE PRICES(US$ per pound) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nickel |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4.66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4.78 |
|
|
(3 |
%) |
| Cobalt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.32 |
|
|
(7 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AVERAGE-REALIZED PRICES(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nickel ($ per pound) |
|
$ |
5.91 |
|
|
$ |
5.85 |
|
|
|
|
|
|
$ |
5.88 |
|
|
$ |
6.31 |
|
|
$ |
6.02 |
|
|
|
|
|
$ |
6.16 |
|
|
(5 |
%) |
| Cobalt ($ per pound) |
|
|
15.20 |
|
|
|
17.04 |
|
|
|
|
|
|
|
15.78 |
|
|
|
16.44 |
|
|
|
15.55 |
|
|
|
|
|
|
16.08 |
|
|
(2 |
%) |
| Fertilizer ($ per tonne) |
|
|
288 |
|
|
|
161 |
|
|
|
|
|
|
|
260 |
|
|
|
359 |
|
|
|
201 |
|
|
|
|
|
|
308 |
|
|
(16 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
| UNIT OPERATING COSTS(3) (US$ per pound) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nickel - net direct cash cost |
|
$ |
3.55 |
|
|
$ |
4.67 |
|
|
|
|
|
|
|
4.03 |
|
|
$ |
4.07 |
|
|
$ |
4.24 |
|
|
|
|
|
|
4.16 |
|
|
(3 |
%) |
|
|
|
| (1) |
|
Includes results for certain 100% owned assets at Fort Saskatchewan plant. |
| (2) |
|
Includes results for Sherritt's marketing organizations for certain Ambatovy and Moa Joint Venture sales. |
| (3) |
|
For additional information, see the Non-GAAP measures section of this release. |
|
|
|
null
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ millions, except as otherwise noted, for the nine months ended September 30 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
|
|
|
|
Moa JV and |
|
|
Ambatovy |
|
|
|
|
|
|
|
|
Moa JV and |
|
|
Ambatovy |
|
|
|
|
|
|
|
|
|
|
|
Fort Site(1) |
|
|
JV |
|
|
Other(2) |
|
|
Total |
|
|
Fort Site(1) |
|
|
JV |
|
|
Other(2) |
|
Total |
|
|
Change |
|
|
|
(50%) |
|
|
(40%) |
|
|
|
|
|
|
|
|
(50%) |
|
|
(40%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| FINANCIAL HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Revenue |
|
$ |
246.8 |
|
|
$ |
176.6 |
|
|
$ |
33.1 |
|
|
$ |
456.5 |
|
|
$ |
311.5 |
|
|
$ |
262.1 |
|
|
$ |
47.7 |
|
$ |
621.3 |
|
|
(27 |
%) |
| Adjusted EBITDA(3) |
|
|
14.0 |
|
|
|
(31.4 |
) |
|
|
0.6 |
|
|
|
(16.8 |
) |
|
|
34.6 |
|
|
|
0.1 |
|
|
|
0.5 |
|
|
35.2 |
|
|
(148 |
%) |
| Cash provided (used) by operations |
|
|
14.2 |
|
|
|
(33.8 |
) |
|
|
(0.2 |
) |
|
|
(19.8 |
) |
|
|
32.3 |
|
|
|
(2.0 |
) |
|
|
2.7 |
|
|
33.0 |
|
|
(160 |
%) |
| Spending on Capital(4) |
|
|
30.3 |
|
|
|
14.1 |
|
|
|
- |
|
|
|
44.4 |
|
|
|
43.6 |
|
|
|
18.8 |
|
|
|
- |
|
|
62.4 |
|
|
(29 |
%) |
| Free cash flow(3) |
|
|
(13.3 |
) |
|
|
(45.3 |
) |
|
|
(0.2 |
) |
|
|
(58.8 |
) |
|
|
(10.3 |
) |
|
|
(33.8 |
) |
|
|
2.7 |
|
|
(41.4 |
) |
|
(42 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| PRODUCTION VOLUMES (tonnes) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Mixed Sulphides |
|
|
13,249 |
|
|
|
12,235 |
|
|
|
- |
|
|
|
25,484 |
|
|
|
14,174 |
|
|
|
14,556 |
|
|
|
- |
|
|
28,730 |
|
|
(11 |
%) |
| Finished Nickel |
|
|
12,682 |
|
|
|
11,731 |
|
|
|
- |
|
|
|
24,413 |
|
|
|
12,755 |
|
|
|
14,023 |
|
|
|
- |
|
|
26,778 |
|
|
(9 |
%) |
| Finished Cobalt |
|
|
1,465 |
|
|
|
905 |
|
|
|
- |