Sherritt International (S) Q3 2024 earnings summary

Executive summary

• Achieved record or highest production in mixed sulfides, finished nickel, cobalt, fertilizers, and electricity in Q3 2024, with lowest NDCC in two years, despite multi-year low nickel and cobalt prices.

• Maintained positive margins and cash flows, with available liquidity in Canada increasing 28% to $71.4 million, supported by strong fertilizer sales and nickel put option settlements.

• Operations in Cuba restored to full capacity after a nationwide power outage and hurricane disruptions.

• Workforce reductions and cost initiatives are expected to yield $17.2 million in annualized savings.

• Moa JV expansion phase two is on track for commissioning and ramp-up in H1 2025, targeting a 20% increase in mixed sulphide production.

Financial highlights

• Combined revenue was $126.4 million in Q3 2024, down 1% year-over-year; net earnings from continuing operations were $1.8 million, a turnaround from a $24.8 million loss in Q3 2023.

• Adjusted EBITDA improved to $10.5 million from $(2.2) million year-over-year, driven by cost reductions and higher volumes.

• Adjusted net loss from continuing operations was $11.5 million, primarily excluding a non-cash $11.5 million revaluation gain on the Cobalt Swap.

• Cash provided by continuing operations was $20.4 million in Q3 2024, up from $4.4 million in Q3 2023.

• Available liquidity in Canada ended at $71.4 million, up 28% during the quarter.

Outlook and guidance

• 2024 guidance for production, unit operating costs, and capital spending remains unchanged.

• NDCC is expected to remain within the guidance range for the year.

• Cobalt Swap distributions and increased Energas dividends are expected in Q4 2024, with up to $50 million targeted based on H1 2024 metal prices.

• Moa JV expansion phase two commissioning and ramp-up scheduled for H1 2025.

• Focus remains on maximizing cash flows from inventory sales and optimizing distributions under the cobalt swap agreement.