How do a simple man value SherrittWhy do I own Sherritt should be the question every shareholder ask himself.
For myself, I own them because of their 50% JV in Moa and its allocated production of 16,000 MT of Nickel per year AND I believe that Nickel is going higher. So, for me, Sherritt is worth more than $ 500 mm, their current enterprise value.
Agree with E&B : earnings are not the most important figure for Sherritt. And it will never be. For exemple, one would assume that the Cobalt-Swap was a bad deal for them as they booked a 40 mm loss when they did it. All of this because of the embedded notional interest on the debt. Really. Have you look at the calculation of their income taxes ? A joke but so detailed to keep accoutants happy. BTW, this is another hidden asset for Sherritt, the NOL. Hey, Enron was booking nice profits until they went bankrupt.
So what is important ? Cash flows. They do not lie (almost never should I say). Else, how on earth do they get the cash to they buy back their debt ? Moa is cash flowing a lot at current nickel price. Enough to run rate an annual dividend of 114 mm last quarter. They can repay all the debt this year for some. Probably. Make your own mind. So if you believe this, and the current enterprise value (Debt + market cap) is 500 mm, one should believe that it will also be worth 500 mm after they repay the debt. With 400 mm shares O/S, simple maths gives you a value of 1.25 per share.
So this is my first target for Sherritt. Not too bad for a $0.56 stock. A no brainer. Afterward, it will depend on what management does with the extra cash, if one of the free kickers (power – technology) pays out, how nickel trades, etc… There is a tendancy for management to piss away the cash when it accumulates in the treasury. So far, Binedell does not look this way. Will reassess as the story unfolds.
GLTA