Sherritt International (S) Q3 2024 earnings summary

Executive summary

• Achieved highest quarterly finished nickel production in two years and record electricity output in nine years, with strong fertilizer and cobalt production, despite multi-year low nickel and cobalt prices.

• Net direct cash cost (NDCC) for nickel improved 29% year-over-year to US$5.16/lb, the lowest in two years.

• Available liquidity in Canada increased 28% during the quarter to $71.4 million, supported by strong operating cash flows, fertilizer sales, and nickel put option settlements.

• Net earnings from continuing operations were $1.8 million, with adjusted net loss from continuing operations at $11.5 million.

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

Financial highlights

• Combined revenue was $126.4 million in Q3 2024, down 1% year-over-year; nine-month revenue was $417.3 million, down 19%.

• Adjusted EBITDA reached $10.5 million, up from a loss of $2.2 million in Q3 2023, driven by cost reductions and higher volumes.

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

• Combined free cash flow for Q3 was $10.2 million, compared to negative $11.7 million in Q3 2023.

• Cash and cash equivalents at quarter-end were $148.6 million, up 25% from December 2023.

Outlook and guidance

• 2024 guidance for Metals and Power production volumes, NDCC, electricity unit operating costs, and capital spending remains unchanged.

• Significant Cobalt Swap and Power distributions are expected in Q4 2024, with Cobalt Swap targeting up to $50 million based on H1 2024 prices.

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

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