Sherritt SP Target Old $0.70 New $0.80
NDCC Q3E $6.27 2022E $4.46
Adjusted EBITDA Q3E lowered from C$48mil to C$46mil
Adjusted EBITDA 2022E raised from C$248mil to C$262mil
Adjusted EBITDA 2023E no change C$189mil
Adjusted EPS/S Q3 no change C$.04
Adjusted EPS/S 2022E increase from C $0.23 to $0.27
Adjusted EPS/S 2023E increase from C $0.02 to $0.03
CFPS Q3 no change C$0.08
CFPS 2022E increase from C$0.14 to C$0.018
CFPS 2023E no change C$(0.04)
NAVPS decrease from $1.64 to $1.61
- Sherritt jfinalized a cobalt-swap agreement with Cuban partners to settle $362 mln of outstanding receivables over the next 5 years which we have included into our model.
- We anticipate a negative non-cash adjustment related to restructuring accounts payable from Energas into cobalt forward sales agreement.
- We expect lower fertilizer and cobalt sales as well as inflationary pressures impacting NDCC's; S continues to benefit from elevated by-product fertilizer and cobalt prices (both >50% above pre-COVID levels).
Metals in general:
Q3/22 Base Metal Producer Preview
Looking for Signs of Peak Inflation and Operational Improvements into 2023
Key Themes:
Q3 to Represent the Worst Quarter from a Unit Cost Basis. While H1/22 costs were elevated, higher diesel and other consumables didn’t truly start taking effect until mid-Q2 with higher priced consumables flowing through Q3 results. Names where we're above 2022 annual cost guidance and could anticipate an increase include: CMMC, FM, LUN and TECK/B (coal).
Companies That Can Highlight Improving Cost Structure Into 2023 via Operational Improvements may Offset any Negative Market Reaction to Elevated Costs in the Quarter. Examples of operational improvements that could be highlighted along Q3 results include: CMMC (improving grades and throughput at Copper Mountain Mine beginning in Q4/22), CS (ramp-up of Mantos Blancos, securing lower-cost sulphuric acid beginning in Q4
and highlighting future synergies in its Chilean operations), HBM (higher grades at Pampacancha begin in Q4/22; reduced contractor costs and higher throughput at Lalor are also planned throughout 2023) and TKO (improving grade profile at Gibraltar is expected to lead to improved production profile beginning in Q3/22).
Persistent Volatility Means Negative Provisional Pricing Adjustments (PPA) to Weigh on Some Concentrate Producers. Copper prices averaged 5% lower than provisionally priced sales as of June 30th and were down as much as 13% throughout July when these sales were being settled. Historically, Consensus doesn't tend to be conservative enough when accounting for these impacts on reported revenue in volatile periods - we could see some disappointing top-line numbers as a result. The biggest PPA accounted for within NBF coverage include: CMMC (11% of Q3 revenue), LUN (7%), TECK/B (5%), ERO (4%) and CS (4%).