GuruFocus -
- Nickel Reference Price: Decreased by 12% during the third quarter.
- NDCC (Net Direct Cash Costs): USD 5.16 per pound, a decrease of almost 30% year-over-year.
- Electricity Production: Reached a nine-year high.
- Available Liquidity in Canada: Increased by 28% during the quarter.
- Finished Nickel Sales: 24% higher year-over-year.
- Fertilizer Sales: Increased by 46% year-over-year.
- Combined Revenue: USD 126.4 million, relatively unchanged from USD 128 million in Q3 2023.
- Adjusted EBITDA: USD 10.5 million, significantly higher year-over-year.
- Net Earnings from Continuing Operations: Improved to USD 1.8 million.
- Available Liquidity in Canada: USD 71 million, a 28% increase during the quarter.
- Cash Provided by Operating Activities at Fort Site: USD 35.9 million.
- Nickel Put Options: USD 5 million received to date.
- Annualized Savings from Cost Optimizations: Approximately USD 17 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sherritt International Corp (SHERF) delivered strong operational performance with increased production of mixed sulfides, finished nickel, cobalt, and fertilizers.
- The company's net direct cash costs (NDCC) declined to USD 5.16 per pound, marking the best quarterly result in two years.
- Electricity production at the Power division reached a nine-year high, supported by the completion of a new gas well.
- Available liquidity in Canada increased by 28% during the quarter, driven by strong operating performance.
- Fertilizer sales increased by 46% year-over-year, benefiting from higher production and operating improvements.
- The average reference price of nickel decreased by 12% during the quarter, reaching its lowest level since Q4 2020.
- Cobalt prices were also at their lowest since Q2 2016, impacting byproduct credits negatively.
- Finished nickel and cobalt sales were below production due to seasonal factors and logistical disruptions.
- The company faced higher unit operating costs due to planned maintenance activities.
- The challenging market conditions with oversupply and decreasing prices for nickel and cobalt continue to pose a significant challenge.
A: (Leon Binedell, President, CEO) We expect similar levels of input pricing going into Q4 as what we've achieved year-to-date, with slight movements up or down depending on the specific input.
Q: Are you being conservative by not adjusting your cost guidance for the year despite stable input costs?
A: (Leon Binedell, President, CEO) We expect our guidance to remain relevant given the circumstances, despite negative impacts from cobalt byproduct credits, which we've offset with improved operations and lower maintenance costs.
Q: Can you provide a range for the expected receipts from the Cobalt Swap in Q4?
A: (Leon Binedell, President, CEO) The Cobalt Swap is driven by the overall liquidity within the Moa joint venture, which is influenced by both nickel and cobalt pricing. We focus on maximizing cash flows to achieve the USD 57 million target annually, regardless of whether it comes in cobalt or cash.
Q: Will the USD 57 million from the Cobalt Swap be fully received in Q4, or could it spill over into next year?
A: (Leon Binedell, President, CEO) The full amount may not be received in Q4 due to current low pricing environments, but we anticipate recovering the full quantum over the life of the instrument, potentially with a price recovery.
Q: How does the increased liquidity from the Cobalt Swap affect potential mandatory redemptions of the second lien notes?
A: (Leon Binedell, President, CEO) Mandatory redemptions depend on cash generated and available liquidity meeting minimum thresholds. Given the tough market and current pricing environment, it is difficult to see much of that happening in the current six-month window.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.