Sherritt International Corp T.S

A simple man view on the cobalt swap

[FrozenInOntario]

A simple man view on the Cobalt dividend
4 takes extremely important on the Cobalt dividend from the conference call.

1. Monthly
   1. We  learned that we should receive the cobalt dividend/ar repayment monthly.
   2. How much should we receive : roughly 174 tons per months : 87 tons dividend and 87 tons to be applied about the receivable as the deals calls for distribution of 2082 tons per year.
2. January – Accounting impact
   1. We received 760 tons.    Way more than 174 tons.  Some of that stuff was from inventory at year end as Moa produces between  260-300 tons per month in total.    Note that Moa produced 846 tons in the last quarter.    How many tons were from inventory : I would venture 450 tons.    This 2023 inventory credit should have an interesting accounting impact on the NDCC for the first quarter that you can estimate based on its valuations at 47 000/ton.   I am calculating a 10+ million favorable impact on the first quarter
3. Cash impact
   1. We know that the dividend from Moa after 1 month is valued at 18 mm (50% of the 760 tons of cobalt received valued at 36 mm).
   2. Last year they did receive 15.9 mm for their first quarter distribution.    I would say that the tempo of the distribution is increasing.
   3. Furthermore, in one month, this represents 39% of what they should receive for the whole year !!!  While I do expect the delivery to track production more closely, it means that these distributions are front loaded : they will receive the cash sooner be it for their dividend but also for the Receivable Repayment.  This is excellent new as the receivable is non interest bearing.  The sooner you receive the cash, the better.
4. Protection
   1. The value of the cobalt depends on the selling price.   Cobalt is selling at a lower price than when the swap was concluded.  We just learned during the conference call that any shortfall would be compensated by cash.   This is excellent news and a big positive for that deal.
5. Risk
   1. The main risk with this deal : Sherritt assumes the price risk between the moment the cobalt is delivered and the one it is sold to a third party.   In the long run, it should all equals out.

So the cobalt swap was transformational for Sherritt.    As the year progresses, we should reap more benefits.
GLTA

[Nickbull]

Know this the fort site produces 10 tons of cobalt daily 50% is 5 tons 5 x 2200 x 30 x 23$= 7.5 mil per month .02$ per share cobalt swap is worth .24$ a share per year there is no deliver since the cobalt is already refined in the fort. price risk on the swap cobalt or sherrits 50% is all the same there is no need to complicate this. you are correct that if cobalt price is lower then the

[FrozenInOntario]

Hey Nick, Remember that per the agreement, the JV partners will not received all the cobalt produced as dividend but only 60% of it.    Of course, in the end, the will also benefit from the cobalt sold by the JV accounting wise.  Sherrit will receive more cash if the price of cobalt goes higher.   Management has indicated that this agreement could lead to the debt