NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN
THE UNITED STATES
Sherritt International Corporation ("Sherritt" or the "Corporation") (TSX:S)
today announced third-quarter 2009 results.
-- Net earnings for third-quarter 2009 were $55.9 million ($0.19 per
share), compared to net earnings of $133.1 million ($0.45 per share) for
third-quarter 2008. Net earnings of $37.4 million ($0.13 per share) for
the first nine months of 2009 compared to $302.4 million ($1.11 per
share, fully diluted) in the prior-year period.
-- Consolidated cash, cash equivalents and short-term investments were $1.3
billion at September 30, 2009, an increase of $0.3 billion from June 30,
2009. Of the cash balance, $47.3 million (50% basis) was held by the Moa
Joint Venture and $646.9 million (100% basis) was held by the Ambatovy
Joint Venture. The cash increase was mainly due to the receipt of
Ambatovy Project funding at the end of the quarter. The Project cash is
expected to be substantially utilized to satisfy expenditure obligations
for the remainder of the year.
-- Cash flow from operations was $198.5 million for third-quarter 2009,
after a working capital decrease of $78.5 million. This compares to
operating cash flow of $42.5 million for third-quarter 2008, net of a
working capital increase of $112.5 million.
-- Capital expenditures were $397.0 million for third-quarter 2009, of
which 84% ($330.9 million) related to the Ambatovy Project (100% basis).
Sherritt's 40% share of capital expenditures ($132.4 million) was
primarily funded through loans from the Ambatovy Partners and senior
project financing.
-- Total long-term debt was $3.4 billion at September 30, 2009, of which
approximately 50% ($1.7 billion, 100% basis) was related to the
limited-recourse Ambatovy senior project finance and approximately 12%
($0.4 billion) to non-recourse partner loans to Sherritt.
Summary Financial and Sales Data (unaudited)
Nine months ended
September 30
Q3 2009 Q3 2008 2009 2008
----------------------------------------------------------------------------
Financial Data (millions of dollars,
except per share amounts
and ratios)
Revenue $ 389.6 $ 478.3 $ 1,097.7 $ 1,236.2
EBITDA(1) 136.5 214.1 344.4 579.5
Operating earnings 70.2 143.7 149.6 405.3
Net earnings 55.9 133.1 37.4 302.4
Basic earnings per share 0.19 0.45 0.13 1.12
Diluted earnings per share 0.19 0.45 0.13 1.11
Net working capital(2) 1,041.3 842.6 1,401.3 842.6
Capital expenditures 397.0 479.7 1,202.1 1,561.2
Total assets 10,171.5 8,821.2 10,171.5 8,821.2
Shareholders' equity 3,464.5 3,995.0 3,464.5 3,995.0
Long-term debt to capitalization(3) 36% 29%
Weighted average number of shares
(millions)
Basic 293.1 291.9 293.1 268.8
Diluted 296.2 295.8 296.0 273.2
Sales Volumes (units as noted)
Nickel (thousands of pounds, 50%
basis) 9,779 9,762 28,097 26,324
Cobalt (thousands of pounds, 50%
basis) 1,002 936 3,078 2,758
Thermal coal - Prairie Operations
(millions of tonnes)(4) 8.9 8.6 25.5 26.1
Thermal coal - Mountain Operations
(millions of tonnes, 50% basis) 0.6 0.5 1.4 1.3
Oil (boepd, net working-interest
production) 12,875 16,797 13,319 17,737
Electricity (GWh, 100% basis) 588 577 1,644 1,742
Average Realized Prices (units as
noted)
Nickel ($/lb) $ 8.78 $ 9.16 $ 7.16 $ 11.28
Cobalt ($/lb) 18.19 33.64 17.00 41.74
Thermal coal - Prairie Operations
($/tonne) 14.07 15.54 14.47 14.59
Thermal coal - Mountain Operations
($/tonne) 70.06 87.19 83.27 80.93
Oil ($/boe) 50.07 72.20 42.63 61.84
Electricity ($/MWh) 45.07 42.32 47.83 41.25
1. EBITDA is a non-GAAP measure. See the "Non-GAAP Measures" section at the
end of this release.
2. Net working capital is calculated as total current assets less total
current liabilities.
3. Calculated as long-term debt divided by the sum of total long-term debt,
non-controlling interests and shareholders' equity. For purposes of this
calculation, total long-term debt does not include other long-term
liabilities.
4. Prairie Operations volumes presented on a 100% basis for each period.
Review of Operations
Metals
Nine months ended
September 30
----------------------------------------------------------------------------
Q3 2009 Q3 2008 2009 2008
----------------------------------------------------------------------------
Production (tonnes, 50% basis)
Mixed sulphides 4,647 4,350 13,971 12,997
Nickel 4,341 4,415 12,675 11,867
Cobalt 489 438 1,428 1,250
Sales (thousands of pounds, 50%
basis)
Nickel 9,779 9,762 28,097 26,324
Cobalt 1,002 936 3,078 2,758
Reference prices (US$/lb)
Nickel $ 7.99 $ 8.61 $ 6.23 $ 11.09
Cobalt (1) 17.30 32.54 15.10 41.49
Realized prices ($/lb)
Nickel $ 8.78 $ 9.16 $ 7.16 $ 11.28
Cobalt 18.19 33.64 17.00 41.74
Unit operating costs (US$/lb)
Mining, processing and
refining costs $ 4.47 $ 7.12 $ 4.59 $ 6.59
Third-party feed costs 0.11 0.54 0.19 0.94
Cobalt by-product credits (1.70) (3.10) (1.60) (4.30)
Other 0.01 (0.06) 0.05 (0.09)
----------------------------------------
Net direct cash costs of
nickel(2) $ 2.89 $ 4.50 $ 3.23 $ 3.14
----------------------------------------
Revenue ($ millions)
Nickel $ 85.9 $ 89.4 $ 201.3 $ 296.9
Cobalt 18.2 31.5 52.3 115.1
Fertilizer and other 10.2 16.6 51.5 65.5
----------------------------------------
$ 114.3 $ 137.5 $ 305.1 $ 477.5
EBITDA ($ millions)(3) $ 45.0 $ 39.1 $ 70.1 $ 199.6
Operating earnings ($ millions) $ 37.6 $ 32.3 $ 48.8 $ 182.1
Capital expenditures ($ millions)
Moa Joint Venture (50%
basis) $ 7.3 $ 66.3 $ 20.1 $ 181.2
Ambatovy Joint Venture
(100% basis) 330.9 366.5 1,034.6 1,251.1
----------------------------------------
$ 338.2 $ 432.8 $ 1,054.7 $ 1,432.3
1. Average Metal Bulletin: Low Grade cobalt published price.
2. Net direct cash cost of nickel after cobalt and by-product credits.
3. EBITDA is a non-GAAP measure. See the "Non-GAAP Measures" section at the
end of this release. EBITDA excludes depreciation of $4.1 million and
$4.5 million in the three-month periods ended September 30, 2009 and
September 30, 2008 and $15.0 million and $11.0 million in the nine-month
periods ended September 30, 2009 and September 30, 2008.
Mixed sulphides production for third-quarter 2009 was 9,293 tonnes (100% basis),
up 7% (593 tonnes) from third-quarter 2008. The year-over-year increase reflects
the impact of Hurricane Ike on production in September 2008.
Finished nickel production of 8,681 tonnes (100% basis) was relatively unchanged
from the prior-year period, and finished cobalt production of 979 tonnes (100%
basis) was up 12% compared to the same period last year. Year-over-year
production level differences reflected the impact of the Phase 1 Expansion
contribution in 2009 and a lower nickel-to-cobalt ratio in feed in third-quarter
2009, which increased cobalt production relative to nickel production.
Nickel sales volumes of 9.8 million pounds (50% basis) for third-quarter 2009
were similar to the prior- year period. Cobalt sales volumes of 1.0 million
pounds (50% basis), were up 7% (0.1 million pounds) from third-quarter 2008,
reflecting increased cobalt production.
Average metal reference prices in third-quarter 2009 were down relative to the
prior year period, with the average nickel reference price down 7% (US$0.62/lb)
and the average cobalt reference price down 47% (US$15.24/lb). Price declines
were largely due to the impact of relatively weakened global industrial demand
on the base metals market. Realized metal prices reflected the impact of the
market price decline.
The net direct cash cost of nickel for the quarter was US$2.89/lb, similar to
second-quarter 2009 (US$2.85/lb) and 36% (US$1.61/lb) lower than the prior-year
period. The year-over-year decline was due to lower mining, processing and
refining costs that benefited from lower commodity input prices and the
favourable foreign exchange impact on refining costs, as well as lower
third-party feed costs that resulted from increased availability of mixed
sulphides and the impact of lower market reference prices.
Sustaining capital expenditures for third-quarter 2009 were 67% ($10.4 million,
50% basis) lower than the prior-year period, commensurate with lower metals
prices in 2009. Expansion capital expenditures in the Moa Joint Venture during
third-quarter 2009 were 96% ($48.6 million, 50% basis) lower than the prior-year
period due to the suspension of the Phase 2 Expansion and Moa Acid Plant in
fourth-quarter 2008. Current expansion expenditures in the Moa Joint Venture
mainly relate to the capitalization of interest associated with the financing of
the Phase 2 Expansion and the Moa Acid Plant.
The Ambatovy Project
Ambatovy Project capital expenditures for third-quarter 2009 were $330.9 million
(100% basis). Total project expenditures as at September 30, 2009 were US$3.1
billion. Construction activities during the quarter continued with the
installation of mechanical equipment and piping at both the minesite and
plantsite. All major foundation work has been completed and the hydrotest of the
first boiler in the Power Plant was completed successfully. Construction will
continue to ramp up through the next two quarters with the peak of activity
expected in second-quarter 2010. The Project, which is expected to produce
60,000 tonnes (100% basis) of nickel and 5,600 tonnes (100% basis) of cobalt
annually, is scheduled for mechanical completion in the latter part of 2010.
During third-quarter 2009, US$523.0 million (100% basis) was drawn against the
senior project financing and Sherritt borrowed US$98.8 million on partner loans,
pursuant to an agreement between Sherritt and its Ambatovy partners. As at
September 30, 2009, $1.7 billion had been drawn on the senior project financing
and $0.4 billion had been drawn on the partner loans.
Coal
Nine months ended
September 30
Q3 2009 Q3 2008 2009 2008
----------------------------------------------------------------------------
Production (millions of tonnes)
Prairie Operations(1) 9.0 8.8 25.8 26.4
Mountain Operations(2) (50%
basis) 0.5 0.5 1.5 1.3
Sales (millions of tonnes)
Prairie Operations(1) 8.9 8.6 25.5 26.1
Mountain Operations(2) (50%
basis) 0.6 0.5 1.4 1.3
Realized prices, excluding royalties
($/tonne)
Prairie Operations(1) $ 14.07 $ 15.54 $ 14.47 $ 14.59
Mountain Operations(2) 70.06 87.19 83.27 80.93
Nine months ended
September 30
Q3 2009 Q3 2008 2009 2008
----------------------------------------------------------------------------
Unit operating costs ($/tonne)
Prairie Operations(1) $ 11.28 $ 12.26 $ 11.37 $ 11.44
Mountain Operations(2) 68.99 64.51 64.34 63.82
Revenue ($ millions)
Prairie Operations(1)
Mining revenue $ 124.5 $ 133.1 $ 369.1 $ 380.4
Coal royalties 13.2 12.5 39.3 32.0
Potash royalties 1.8 5.0 8.4 13.1
Mountain Operations and
Other Assets(2),(3)
(50% basis) 41.7 39.3 119.0 104.4
----------------------------------------
$ 181.2 $ 189.9 $ 535.8 $ 529.9
EBITDA ($millions)(4)
Prairie Operations(1) $ 36.4 $ 46.8 $ 115.0 $ 117.8
Mountain Operations and
Other Assets(2), (3)
(50% basis) - 9.4 23.3 20.3
----------------------------------------
$ 36.4 $ 56.2 $ 138.3 $ 138.1
Operating earnings ($ millions) $ 9.1 $ 25.6 $ 61.8 $ 50.9
Capital expenditures ($ millions)
Prairie Operations(1) $ 13.4 $ 1.7 $ 38.4 $ 13.2
Mountain Operations(2)(5)
(50% basis) 1.6 1.3 8.3 2.4
Activated Carbon Project
(50% basis) 7.6 - 13.2 -
Obed Mountain mine(6) (50%
basis) 1.9 - 10.9 -
----------------------------------------
$ 24.5 $ 3.0 $ 70.8 $ 15.6
1. Prairie Operations are presented on a 100% basis. Sherritt
equity-accounted for these operations up to the date of the acquisition
of Royal Utilities Income Fund in May 2008.
2. Mountain Operations include the results of the Coal Valley and Obed
mines, which are primarily involved in the export of thermal coal, and
are presented on a 50% basis.
3. Other Assets include certain undeveloped reserves that produce coal-bed
methane and technologies under development, including the
Dodds-Roundhill Coal Gasification Project, and are presented on a 50%
basis.
4. EBITDA is a non-GAAP measure. See the "Non-GAAP Measures" section at the
end of this release. EBITDA excludes depreciation of $16.4 million and
$12.6 million for the three-month periods ended September 30, 2009 and
September 30, 2008, and $46.2 million and $23.7 million for the
nine-month periods ended September 30, 2009 and September 30, 2008.
5. The nine-month period ended September 30, 2009 includes$3.6 million of
equipment financed through a bank credit facility that ordinarily would
have been acquired under a capital lease.
6. The nine-month period ended September 30, 2009 includes $2.9 million of
equipment financed through a bank credit facility that ordinarily would
have been acquired under a capital lease.
Production volumes at the Prairie and Mountain Operations were relatively
unchanged from the prior-year period. Sales volumes at both operations showed
increases over the prior-year period, with Prairie Operations up by 3% (0.3
million tonnes) and Mountain Operations up by over 30% (0.1 million tonnes 50%
basis). Production commenced at the Obed Mountain mine in July 2009. During
third-quarter 2009, Coal Valley Resources Inc. (CVRI), a subsidiary of the Coal
Valley Partnership (in which the Corporation has a 50% interest and owns the
Obed Mountain mine), issued a Demand to Arbitrate to its counterparty in an
off-take contract. The contract, signed in 2008 for 100% of the increase in
Mountain Operations production resulting from the re-opening of the Obed
Mountain mine, provides a guaranteed floor price for three years with a sharing
of the price upside. In September 2009, the counterparty refused to take
delivery of coal under this contract. CVRI will be seeking full compensation for
any and all costs or lost profits that result from having to sell the coal to
other customers. If arbitration on the contract proceeds, CVRI will seek to
mitigate its losses by selling the coal to other existing customers or on the
spot market.
Realized pricing was down in both the Prairie and Mountain Operations. Prairie
Operations average realized pricing (excluding royalties) was down 9%
($1.47/tonne) from the prior-year period, reflecting index-adjustments in
pricing at owned mines and lower cost and capital recoveries at the contract
mines. Mountain Operations average realized pricing was 20% ($17.13/tonne) lower
than third-quarter 2008, mainly the result of relative settlement price changes
in the export thermal coal markets between the periods.
Unit operating costs at the Prairie Operations were 8% ($0.98/tonne) lower than
third-quarter 2008 due to the decline in diesel and other commodity input
prices. Unit operating costs at Mountain Operations were up 7% ($4.48/tonne) due
to temporary fluctuations in the coal quality at the Coal Valley mine, which
impacted plant yield, as well as the start-up of operations at the Obed Mountain
mine.
Total royalties of $15.0 million for third-quarter 2009, were down 14% over the
prior-year period as the increase in coal royalty prices and volumes, resulting
from a change in mining sequence in royalty assessable areas, was more than
offset by declining potash demand and pricing.
Sustaining capital expenditures for Coal were $15.0 million for third-quarter
2009. The majority of the $12.0 million increase was not the result of a marked
increase in spending, but rather the result of reduced market capacity of lease
finance on acceptable terms. Sustaining capital expenditures in Mountain
Operations were directed at infrastructure development, as Coal Valley prepared
to enter new mining areas. During third-quarter 2009, $7.6 million in capital
spending was directed to the Activated Carbon Project and $1.9 million to the
Obed Mountain mine. The Obed Mountain mine re-opening is now complete and
production commenced in July 2009.
In April 2009, a subsidiary in Prairie Operations signed a letter of intent to
establish a new $17.2 million non-revolving, term credit facility to finance
certain equipment. The first draw on the facility of $4.6 million occurred in
October. A fixed interest rate of 9.85% applies to all borrowings under the
facility.
At September 30, 2009, CVRI was not in compliance with a financial covenant
applicable to the $38.0 million (100% basis) 3-year non-revolving term facility
used to finance the re-opening of the Obed Mountain mine. The covenant requires
CVRI to maintain a current ratio of not less than 1:1. CVRI's working capital
balance was reduced as it was unable to record expected levels of revenue
related to production from the re-opening of the Obed Mountain mine. CVRI was
granted a waiver of this covenant for third-quarter 2009.
Oil and Gas
Nine months ended
June 30
Q3 2009 Q3 2008 2009 2008
----------------------------------------------------------------------------
Production (boepd)(1), (2)
Gross working interest -
Cuba(3), (5) 22,031 28,952 21,296 31,248
Net working interest(4)
Cuba - cost recovery(5) 5,345 6,878 6,694 6,748
Cuba - profit oil(5) 6,807 9,082 5,939 10,125
----------------------------------------
Cuba - total 12,152 15,960 12,633 16,873
Spain(4) 373 447 318 473
Pakistan(4) 350 390 368 391
----------------------------------------
Total net working-interest
production 12,875 16,797 13,319 17,737
Reference prices (US$/bbl)
US Gulf Coast Fuel Oil
No. 6 $ 63.30 $ 95.25 $ 51.33 $ 83.48
Brent crude 68.46 114.41 57.44 112.98
Realized prices
Cuba ($/bbl) $ 50.54 $ 72.51 $ 43.01 $ 61.68
Spain ($/bbl) 74.14 117.26 67.36 112.84
Pakistan ($/boe) 8.07 7.61 8.30 7.35
Nine months ended
September 30
Q3 2009 Q3 2008 2009 2008
----------------------------------------------------------------------------
Unit operating costs
Cuba ($/bbl) $ 6.63 $ 5.97 $ 7.88 $ 5.86
Spain ($/bbl) 48.15 32.75 60.14 31.82
Pakistan ($/boe) 0.50 0.78 0.99 0.92
Revenue ($ millions) $ 59.9 $ 112.9 $ 156.7 $ 304.9
EBITDA ($ millions)(6) $ 42.8 $ 96.2 $ 103.6 $ 250.7
Operating earnings ($ millions) $ 20.3 $ 72.0 $ 33.6 $ 173.6
Capital expenditures ($ millions) $ 22.1 $ 32.6 $ 44.5 $ 87.7
1. Production figures exclude production from wells for which commerciality
has not been established.
2. Oil production is stated in barrels per day ("bpd"). Natural gas
production is stated in barrels of oil equivalent per day ("boepd"),
which is converted at 6,000 cubic feet per barrel.
3. In Cuba, Oil and Gas delivers all of its gross working-interest oil
production to CUPET at the time of production. Gross working-interest
oil production excludes (i) production from wells for which
commerciality has not been established in accordance with
production-sharing contracts; and (ii) working interests of other
participants in the production-sharing contracts.
4. Net production (equivalent to net sales volume) represents the
Corporation's share of gross working-interest production. In Spain and
Pakistan, net oil production volumes equal 100% of gross
working-interest production volumes.
5. Gross working-interest oil production is allocated between Oil and Gas
and CUPET in accordance with production-sharing contracts. The
Corporation's share, referred to as 'net oil production', includes (i)
cost recovery oil (based upon the recoverable capital and operating
costs incurred by Oil and Gas under each production-sharing contract)
and (ii) a percentage of profit oil (gross working-interest production
remaining after cost recovery oil is allocated to Oil and Gas). Cost
recovery pools for each production-sharing contract include cumulative
recoverable costs, subject to certification by CUPET, less cumulative
proceeds from cost recovery oil allocated to Oil and Gas. Cost recovery
revenue equals capital and operating costs eligible for recovery under
the production-sharing contracts. Therefore, cost recovery oil volumes
increase as a result of higher capital expenditures and decrease when
selling prices increase. When oil prices increase, the resulting
reduction in cost recovery oil volumes is partially offset by an
increase in profit oil barrels.
6. EBITDA is a non-GAAP measure. See the "Non-GAAP Measures" section at the
end of this release.
Gross working-interest (GWI) production in 2009 reflects the loss of Block 7
production in Cuba resulting from the premature termination of the
production-sharing contract earlier in the year. Excluding Block 7,
third-quarter GWI production was 6% higher (1,180 bpd) than the prior-year
period, and reflected the success of drilling activity in 2009 and the impact of
two hurricanes in third-quarter 2008. Excluding Block 7, net working-interest
production in Cuba for the quarter of 12,152 bpd was relatively unchanged from
the prior-year period (12,115 bpd).
Average realized prices in third-quarter 2009 were lower than the prior-year
period, reflecting the impact of substantially lower reference pricing. While
reference prices declined by 34% (US$31.95) for Cuban production and 40%
(US$45.95/bbl) for Spanish production, the decline in realized prices was
slightly less dramatic, at 30% ($21.97/bbl) and 37% ($43.12/bbl) respectively,
as a result of the partially offsetting impact of foreign exchange.
Third-quarter 2009 unit operating costs in Cuba increased 11% ($0.66/bbl)
compared to the prior-year period, mainly due to fixed operating costs being
applied against a smaller production base, following the premature termination
of the Block 7 production-sharing contract and higher treatment and
transportation rates. Unit operating costs in Spain were 47% ($15.40/bbl) higher
than third-quarter 2008 due to increased workover activity during 2009.
Third-quarter 2009 capital expenditures were 32% ($10.5 million) lower than in
the prior-year period, as there was no Block 7 drilling activity in 2009.
Exploration activities during the quarter related mainly to a gas well completed
in Turkey, which did not yield commercial quantities of gas and was subsequently
shut-in. In third-quarter 2009, one development well was initiated and two
development wells were completed.
Power
Nine months ended
September 30
Q3 2009 Q3 2008 2009 2008
----------------------------------------------------------------------------
Electricity sold (GWh, 100% basis) 588 577 1,644 1,742
Realized price ($/MWh) $ 45.07 $ 42.32 $ 47.83 $ 41.25
Unit cash operating cost ($/MWh) $ 11.82 $ 11.89 $ 14.82 $ 10.71
Net capacity factor 79% 76% 74% 77%
Revenue ($ millions) $ 30.6 $ 30.9 $ 89.6 $ 91.0
EBITDA ($ millions)(1) $ 22.0 $ 23.7 $ 61.4 $ 70.4
Operating earnings ($ millions) $ 14.2 $ 16.4 $ 38.3 $ 48.4
Capital expenditures ($ millions)
Cuba $ 4.4 $ 4.9 $ 18.6 $ 16.2
Madagascar (0.3) - 4.5 -
----------------------------------------
$ 4.1 $ 4.9 $ 23.1 $ 16.2
(1) EBITDA is a non-GAAP measure. See the "Non-GAAP Measures" section at the
end of this release.
Electricity production and the net capacity factor for third-quarter 2009 were
up slightly (11 GWh and 3%, 100% basis), due to higher gas availability relative
to the prior-year period. Unit cash operating costs remained relatively
unchanged from the prior-year quarter.
Sustaining capital expenditures in third-quarter 2009 of $1.6 million were 129%
($0.9 million) higher than the prior-year period due to infrastructure projects
initiated in the quarter. Expansion capital expenditures were $2.5 million for
third-quarter 2009, 40% ($1.7 million) lower than the prior-year period due to
reduced spending on the 150 MW Combined Cycle Project in Cuba as a result of the
ongoing review of the Project.
Cash, Debt and Financing
Cash, cash equivalents and short-term investments were $1.3 billion at September
30, 2009. Of that amount, 4% ($47.3 million, 50% basis) was held by the Moa
Joint Venture and 50% ($646.9 million, 100% basis) was held by the Ambatovy
Joint Venture. These funds are for the use of each joint venture, respectively.
No new drawings under the Ambatovy senior project financing are expected in
fourth- quarter 2009, as the majority of the Ambatovy Project cash balance is
expected to be utilized to meet expenditure obligations.
At June 30, 2009, the amount of credit available under various credit
facilities, inclusive of approximately US$0.5 billion (100% basis) under the
Ambatovy senior project financing, was $0.9 billion.
Outlook
Sherritt's production volumes, royalties and capital expenditures for the first
nine months of 2009 and projections for the year 2009 are shown below:
Actual for Projected
the nine for the
months year
ended ending
September December
30, 2009 31, 2009
----------------------------------------------------------------------------
Production
Mixed sulphides (tonnes, 100% basis) 27,942 37,000
Nickel (tonnes, 100% basis) 25,350 33,500
Cobalt (tonnes, 100% basis) 2,856 3,700
Coal - Prairie Operations (millions of tonnes) 25.8 35
Coal - Mountain Operations (millions of tonnes, 100%
basis) 2.9 4.3
Oil - Gross working interest (Cuba) (bpd) 21,296 21,000
Oil - Net working-interest production, all operations
(boepd)(1) 13,319 12,600
Power - Electricity (GWh) 1,644 2,100
Royalties
Coal ($ millions) 39 48
Potash ($ millions) 8 11
Capital Expenditures ($ millions, unless otherwise
noted)
Metals - Moa Joint Venture (50% basis) 20 39
Coal - Prairie Operations(2) 38 35
Coal - Mountain Operations (50% basis) 8 9
Coal - Activated Carbon Project (50% basis) 13 25
Coal - Obed Mountain mine (50% basis)(3) 8 9
Oil and Gas - Cuba 31 59
Oil and Gas - Other 13 14
Power - Cuba 19 28
Power - Madagascar 4 5
----------------------
154 223
Metals - Ambatovy (100% basis, US$ millions) 882 1,400
1. Net oil production is predicated on the WTI/Fuel Oil No.6 price
differential remaining consistent with historical levels.
2. For the nine months ended September 30, 2009, includes equipment that is
expected to be financed through new borrowings in fourth- quarter 2009.
These anticipated new borrowings have been reflected in the projected
annual amount.
3. Excludes equipment financed through a bank credit facility.
-- In Metals, the net direct cash cost of nickel for 2009 is expected to
remain near the average for the first nine months of 2009 if the current
level of commodity input prices and cobalt prices continues through the
fourth quarter. The staged maintenance approach has proven successful in
terms of minimizing the impact on production, and production levels are
expected to be at capacity for the year. The capital expenditure
guidance for Metals in 2009 remains unchanged from last quarter.
-- In the Ambatovy Project, the previous 2009 capital expenditure estimate
of US$1.8 billion has been revised to US$1.4 billion, reflecting the
impact of the Project review early in 2009 that slowed the rate of
expenditures.
-- In Coal, estimated annual production levels at Prairie Operations are
consistent with the estimate provided in the second quarter. In Mountain
Operations, production volumes for 2009 on a 100% basis are expected to
be down slightly from the previous estimate of 4.4 million tonnes to 4.3
million tonnes, due to lower-than-projected production volumes in the
third quarter. In Mountain Operations, with the exception of the
disputed guaranteed floor price contract, contract prices have been
established for the balance of the year, but realized prices will
fluctuate with foreign exchange rate changes as settlement pricing for
exports is denominated in U.S. dollars. In order to mitigate the impact
of the disputed guaranteed floor price contract, CVRI will use its best
efforts to sell the volumes committed under that contract to other
customers at prevailing contract or market prices, which are expected to
be lower than the guaranteed floor price. Royalties are expected to be
slightly lower than previously estimated, as the impact of lower potash
royalties, due to declining pricing and production is expected to be
largely offset by more robust coal royalties resulting from the mining
sequence in royalty assessable areas. The commissioning of the first
Activated Carbon plant is on schedule for early 2010.
-- In Oil and Gas, the capital expenditure estimate for 2009 has been
revised to reflect planned drilling activity for the remainder of 2009.
Cuban receivables continue to be received on a consistent basis. At
September 30, 2009 receivables of $26.1 million were overdue, a decrease
of $14 million since June 30, 2009.
-- In Power, the 25 MW facility in Madagascar is complete and, in
accordance with the relevant agreements, was turned over to the
state-run electricity company early in the fourth quarter of 2009. A
maintenance turnaround on the steam turbine at the Varadero facility is
scheduled for the fourth quarter and as a result approximately 70 MW of
capacity will not be available for an estimated 40 day period. As with
Oil and Gas, regular receivables payments in Cuba continue to be
received. The 150 MW Boca de Jaruco Combined Cycle Project continues to
be reviewed, and the Project option value will be maintained through the
continuation of progress payments.
Non-GAAP Measures
The Corporation discloses EBITDA in order to provide an indication of revenue
less cash operating expenses. Operating earnings is a measure used by Sherritt
to evaluate the operating performance of its businesses as it excludes interest
charges, which are a function of the particular financing structure for the
business, and certain other charges. EBITDA and operating earnings do not have
any standardized meaning prescribed by Canadian generally accepted accounting
principles and, therefore, they may or may not be comparable with similar
measures presented by other issuers.
About Sherritt
Sherritt is a diversified natural resource company that produces nickel, cobalt,
thermal coal, oil, gas and electricity. It also licenses its proprietary
technologies to other metals companies. Sherritt's common shares are listed on
the Toronto Stock Exchange under the symbol "S".
Forward-looking Statements
This press release contains certain forward-looking statements. Forward-looking
statements generally can be identified by the use of statements that include
words such as "believe", "expect", "anticipate", "intend", "plan", "forecast",
"likely", "may", "will", "could", "should", "suspect", "outlook", "projected",
"continue" or other similar words or phrases. Similarly, statements with respect
to expectations concerning assets, prices, costs, dividends, foreign-exchange
rates, earnings, production, market conditions, capital expenditures, commodity
demand, risks, availability of regulatory approvals, the impact of investments
in Master Asset Vehicles, corporate objectives and plans or goals, are or may be
forward-looking statements. These forward-looking statements are not based on
historic facts, but rather on current expectations, assumptions and projections
about future events. There is significant risk that predictions, forecasts,
conclusions or projections will not prove to be accurate, that those assumptions
may not be correct and that actual results may differ materially from such
predictions, forecasts, conclusions or projections. Sherritt cautions readers of
this press release not to place undue reliance on any forward-looking statements
as a number of factors could cause actual future results, conditions, actions or
events to differ materially from the targets, expectations, estimates or
intentions expressed in the forward-looking statements. By their nature,
forward-looking statements require Sherritt to make assumptions and are subject
to inherent risks and uncertainties. Key factors that may result in material
differences between actual results and developments and those contemplated by
this press release include global economic conditions, business, economic and
political conditions in Canada, Cuba, Madagascar, and the principal markets for
Sherritt's products.
Other such factors include, but are not limited to, uncertainties in the
development and construction of large mining projects; risks related to the
availability of capital to undertake capital initiatives; changes in capital
cost estimates in respect of the Corporation's capital initiatives; risks
associated with Sherritt's joint venture partners; future non-compliance with
financial covenants; potential interruptions in transportation; political,
economic and other risks of foreign operations; Sherritt's reliance on key
personnel and skilled workers; the possibility of equipment and other unexpected
failures; the potential for shortages of equipment and supplies; risks
associated with mining, processing and refining activities; uncertainties in oil
and gas exploration; risks related to foreign-exchange controls on Cuban
government enterprises to transact in foreign currency; risks associated with
the United States embargo on Cuba and the Helms-Burton legislation; risks
related to the Cuban government's ability to make certain payments to the
Corporation; development programs; uncertainties in reserve estimates;
uncertainties in asset retirement and reclamation cost estimates; Sherritt's
reliance on significant customers; foreign exchange and pricing risks;
uncertainties in commodity pricing; credit risks; competition in product
markets; Sherritt's ability to access markets; risks in obtaining insurance;
uncertainties in labour relations; uncertainties in pension liabilities; the
ability of Sherritt to enforce legal rights in foreign jurisdictions; the
ability of Sherritt to obtain government permits; risks associated with
government regulations and environmental health and safety matters; and other
factors listed from time to time in Sherritt's continuous disclosure documents.
Further, any forward-looking statement speaks only as of the date on which such
statement is made, and except as required by law, Sherritt undertakes no
obligation to update any forward-looking statements.
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