Investors applaud Sherritt’s pace building world’s biggest nickel mine, stock jumps 10%

Frik Els | October 26, 2011 | 4:45 pm Base Metals Battery Metals Energy Africa Canada Europe Coal Cobalt Nickel 

Canada’s number one coal producer and world-leading nickel miner, Sherritt jumped 10.2% on Wednesday after reporting a doubling of quarterly net earnings and good progress at its massive Ambatovy project in Madagascar.

Sherritt will start production at Ambatovy in the first quarter of next year. The company has already spent more than 90% of the planned $5.5 billion to build what will be the world’s biggest nickel mine with the capacity to produce 60,000 tonnes of nickel and 5,600 of cobalt a year. Sherritt and its Asian partners have made the largest investment in the island’s history and will make nickel the country’s number one export for the next 27 years.

    Earnings highlights:

  • Net earnings for third-quarter 2011 were up 102% to $45.5 million ($0.16 per share, basic), compared to net earnings of $22.5 million ($0.07 per share, basic) for third-quarter 2010.
  • Sales volumes for third-quarter 2011 (Sherritt’s share) totaled 9.4 million pounds of nickel, 1.1 million pounds of cobalt, 9.1 million tonnes of thermal coal, 1.1 million barrels of oil and 159 GWh of electricity.
  • Cash, cash equivalents and short-term investments were $586.6 million at September 30, 2011, including $18.2 million (50% basis) held by the Moa Joint Venture. Cash held by the Ambatovy Project is included in “Investment in an Associate” and was $12.1 million (40% basis) as at September 30, 2011.
  • Operating cash flow for third-quarter 2011 was $95.8 million, compared to $91.3 million in third-quarter 2010.
  • Spending on capital and intangibles relating to existing operations totaled $36.8 million for third-quarter 2011 (excluding accruals and capital leases), unchanged compared to third-quarter 2010. Spending on capital in the Ambatovy Project was $322.7 million (100% basis) for third-quarter 2011, 60% higher than the prior-year period.
  • Primary construction of the Ambatovy Project is complete with all 56 major process plant modules turned over to commissioning teams. All areas of the Project are either in pre-commissioning, commissioning, or start-up. Two of the three power plant units are operating reliably and provide sufficient power for commissioning activities and start-up. The start-up sequencing has begun on the first systems of the pressure acid leach circuits, including the first autoclave and the ammonia storage facility. Commissioning is complete on many ancillary operations and systems including the acid plants, air separation plant, and limestone plant. The Project is scheduled to produce first metal in first-quarter 2012.
  • At September 30, 2011, total available liquidity was approximately $1.0 billion. During third-quarter 2011, the borrowing under the US$2.1 billion (100% basis) Ambatovy Joint Venture senior project financing was completed. Total long-term debt at September 30, 2011 was $1.6 billion, including approximately $0.8 billion related to non-recourse Ambatovy partner loans to Sherritt.

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