Sherritt International (S) Q4 2023 earnings summary

Executive summary

• 2023 highlights included a 31% YoY increase in electricity production, phase one of the Moa expansion completed on time and below budget, and a mine plan extending Moa’s life to 2048.

• Falling nickel prices, weaker demand and sales, operational interruptions, lower fertilizer prices and sales, and higher maintenance costs pressured results; cost mitigation and cash conservation continued.

• 2024 priorities include higher metals and power production, lower Metals NDCC, tighter spending and improved liquidity.

Financial highlights

• Q4 revenue was $34.8M vs $48.6M YoY; combined revenue was $140.5M vs $234.6M. FY revenue was $223.3M vs $178.8M; combined revenue was $652.9M vs $834.7M.

• Q4 continuing-operations net loss was $53.4M vs earnings of $8.4M; adjusted net loss was $27.9M vs adjusted earnings of $8.4M. FY net loss was $64.3M vs earnings of $63.7M; adjusted net loss was $28.1M vs adjusted earnings of $112.7M.

• Adjusted EBITDA was a Q4 loss of $7.0M, including $2.3M of inventory write-downs, vs earnings of $35.5M; FY adjusted EBITDA was $46.2M vs $233.1M.

• Year-end cash was $119.1M and total available liquidity was $160.6M, including $41.5M of available credit; Canadian available liquidity was $63.0M.

Outlook and guidance

• 2024 guidance: finished nickel 30,000–32,000 tonnes and finished cobalt 3,100–3,400 tonnes, both on a 100% basis; electricity 775–825 GWh on a 33⅓% basis.

• Metals NDCC guidance is US$5.50–US$6.00/lb vs US$7.22/lb in 2023; expected to start above range in Q1 and be below or within range in subsequent quarters.

• Electricity unit operating cost guidance is $32.50–$34.00/MWh, reflecting planned gas-turbine maintenance; 2023 production was 745 GWh and unit cost was $27.70/MWh.

• 2024 spending-on-capital guidance is $60.5M: $40.0M Metals sustaining, $5.5M Power sustaining and $15.0M Metals growth; 2023 actual was $65.9M.

• Sales are expected to exceed production, reducing finished nickel inventory; fertilizer by-product credits are expected to be higher in Q2 and Q4. Phase two of the Moa expansion targets year-end 2024 completion and 2025 commissioning and ramp-up.