Sherritt International Corp. press release
Sherritt Reports First Quarter 2025 Results; Completed Strategic Transactions to Strengthen Capital Structure; Moa JV Expansion Phase Two Commissioning Underway
TSX - Toronto Stock Exchange · Nickel · Cobalt · Sulfur · Copper · Zinc · Natural Gas · Oil · Canada
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Sherritt International Corporation (“Sherritt”, the “Corporation”) (TSX: S), a world leader in using hydrometallurgical processes to mine and refine nickel and cobalt – metals deemed critical for the energy transition – today reported its financial results for the three months ended March 31, 2025. All amounts are in Canadian dollars unless otherwise noted.
Leon Binedell, President and CEO of Sherritt commented, “We kicked off this year delivering key strategic initiatives that will drive significant long-term value and strengthen Sherritt’s position as a leader in innovative processing solutions and critical minerals production. We successfully strengthened our balance sheet, reducing our outstanding debt obligations, decreasing our annual interest expense and extending our debt maturity to late 2031. We began commissioning phase two of our Moa JV expansion program that will ramp up later this year and increase our annual production of mixed sulphide precipitate. Once the ramp up is complete, we expect to see our refinery filled to nameplate capacity, maximizing profitability from the joint venture’s own mine feed and opening up new opportunities to expand the refinery. We also advanced our midstream refinery MHP project focused on developing new refining capacity for the electric vehicle supply chain, leveraging Sherritt’s differentiated technical processing expertise. Completion of these milestones enables us to deliver near-term growth and substantial long-term value creation.”
Mr. Binedell added, “During the quarter, the operating environment in Cuba became more difficult due to increasing pressure from U.S. sanctions which impacted Cuba’s foreign currency availability and adversely affected the provision of goods and services in the country and to the Moa JV. Operating in Cuba for over 30 years we have navigated these challenges in various ways including through our Cobalt Swap and Moa Swap transactions which mitigate foreign currency risk. We are continuing to work with our Cuban partners to successfully navigate the complex operating environment we face. We maintain our expectation for stronger operating results in the second half of the year and despite the near-term challenges, our sound liquidity management and low net direct cash cost demonstrates the sustainability of our Moa JV through the cyclical lows in nickel and cobalt prices.”
FIRST QUARTER 2025 SELECTED DEVELOPMENTS
Finished nickel and cobalt production at the Moa Joint Venture (“Moa JV”) in Q1 2025 was 2,947 tonnes and 323 tonnes, respectively (Sherritt’s share (1) ). Finished nickel sales were 3,439 tonnes. Finished cobalt sales were 456 tonnes and included all remaining cobalt received by Sherritt in Q4 2024 under the Cobalt Swap (2) agreement. Net direct cash cost (“NDCC”) (3) was US$5.95/lb. NDCC (3) benefited from higher fertilizer and other by-product credits and lower combined mining, processing and refining and third-party feed costs per pound. Electricity production was 170 GWh, with the Varadero facility operating in frequency control as expected throughout the quarter and lower gas from a legacy Unión Cubapetróleo (“CUPET”) gas well. Energas S.A. (“Energas”) expects to be fully compensated for the Varadero facility operating in frequency control throughout most of 2025 and therefore Sherritt expects there will be no impact to Power’s Adjusted EBITDA (3) , earnings from operations or dividends from Energas to Sherritt in Canada. Electricity unit operating cost (3) was $37.50/MWh reflecting timing of planned maintenance which was completed during the quarter and the impact of lower electricity production and sales. Net loss from continuing operations was $40.6 million, or $(0.10) per share. Adjusted net loss from continuing operations (3) was $22.8 million or $(0.06) per share which primarily excludes a $15.7 million non-cash loss on rehabilitation provisions as a result of updates to costs and valuation assumptions for contractually obligated environmental rehabilitation costs on legacy Oil and Gas assets in Spain. Adjusted EBITDA (3) was $4.4 million. Available liquidity in Canada as at March 31, 2025 was $55.7 million. Phase two of the Moa JV expansion was substantially completed with all remaining growth capital spending committed and expected to be incurred concurrent with commissioning activities. Full ramp up remains expected for H2 2025.
| (1) | | References to operating and financial metrics in this press release, unless otherwise indicated, are to “Sherritt’s share” which is consistent with the Corporation’s definition of reportable segments for financial statement purposes. Sherritt’s share of “Metals” includes the Corporation’s 50% interest in the Moa JV, its 100% interest in the utility and fertilizer operations in Fort Saskatchewan (“Fort Site”) and its 100% interests in subsidiaries established to buy, market and sell certain of the Moa JV’s nickel and cobalt production and the Corporation’s cobalt inventory received under the Cobalt Swap agreement (“Metals Marketing”). Sherritt’s share of Power includes the Corporation’s 33⅓% interest in Energas. References to Corporate and Other and Oil and Gas includes the Corporation’s 100% interest in these businesses. Corporate and Other refers to the Corporate head office and growth and market development support. Fort Site refers to the Corporation’s 100% interest in the utility and fertilizer operations. | | (2) | | For additional information on the Cobalt Swap, see Note 12 – Advances, loans receivable and other financial assets of the consolidated financial statements for the year ended December 31, 2024. | | (3) | | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. |
DEVELOPMENTS SUBSEQUENT TO THE QUARTER
Transactions to strengthen capital structure
In March 2025, the Corporation announced a transaction to be implemented pursuant to a plan of arrangement (the “CBCA Plan”) under the Canada Business Corporations Act (the “CBCA”) that proposed exchanging the Corporation’s existing notes obligations, comprised of the 8.50% second lien secured notes due 2026 (“Second Lien Notes”), the 10.75% unsecured PIK option notes due 2029 (“PIK Notes”), for amended 9.25% senior second lien secured notes due November 30, 2031 (the “Amended Senior Secured Notes”) and certain early consent consideration. The Corporation also announced a subsequent exchange transaction (the “Subsequent Exchange Transaction”) with certain holders of Second Lien Notes (the “Subsequent Exchange Noteholders”) involving the exchange of a portion of the Amended Senior Secured Notes for up to 99 million common shares of the Corporation to be issued from treasury and commitments for subsequent scheduled repurchases of Amended Senior Secured Notes totaling $45.0 million of such notes from 2025 to 2028. These transactions collectively comprise the Corporation’s “Debt and Equity Transactions”.
Subsequent to period end, in April 2025, the CBCA Plan received approval by noteholders and by the Ontario Superior Court of Justice and the Debt and Equity Transactions were completed.
As a result, all of the outstanding Second Lien Notes in the principal amount of $221.3 million and all of the outstanding PIK Notes in the principal amount of $70.3 million were exchanged and extinguished and the Corporation recognized Amended Senior Secured Notes with a fair value and principal amount of $266.1 million. In addition, accrued interest on the Second Lien Notes of $8.7 million was paid and no mandatory redemptions were required to be made as the Second Lien Notes were extinguished prior to April 30, 2025.
Holders of the PIK Notes that had voted in favour of the CBCA Plan by the early consent deadline received additional Amended Senior Secured Notes in a principal amount equal to 5% of the outstanding principal amount of PIK Notes, which is included in the $266.1 million above. In addition, holders of Second Lien Notes that had voted in favour of the CBCA Plan by the early consent deadline received early cash consent consideration of $6.5 million.
Following the recognition of the Amended Senior Secured Notes, $17.1 million of Amended Senior Secured Notes held by the Subsequent Exchange Noteholders were exchanged for 99 million common shares of the Corporation issued from treasury with a fair value of $13.9 million.
In aggregate, the Debt and Equity Transactions significantly improved the Corporation’s capital structure having reduced the Corporation’s outstanding debt by a principal amount of $42.6 million, eliminated the $25.0 million premium payable at maturity of the Second Lien Notes, extended the maturities of the Corporation’s notes obligations to November 2031 and will reduce annual interest expense by approximately $3.0 million.
During the three months ended March 31, 2025, transaction costs of $4.9 million were incurred and additional transaction costs of $11.0 million were incurred subsequent to period end and will be recognized as part of the approximate $33.0 million gain on Debt and Equity Transactions, net of transaction costs.
On April 17, 2025, Sherritt received a copy of an Application for Review submitted by SC2 Inc. (“SC2“) to the Ontario Capital Markets Tribunal. The application sought to overturn the Toronto Stock Exchange’s decision to approve the listing of the common shares issuable by Sherritt pursuant to the Subsequent Exchange Transaction, along with other alternative relief. Sherritt considered SC2’s position and the relief requested as being entirely without merit. On May 2, 2025, SC2 filed a notice of withdrawal and on May 5, 2025, the Ontario Securities Commission announced that the hearing scheduled for May 28 and 29, 2025 would not proceed. SC2 is affiliated with Seablinc Canada Inc., a significant supplier to Sherritt’s Moa Joint Venture in Cuba.
Organizational restructuring and cost reduction initiatives
In April 2025, the Corporation’s Senior Vice President, General Counsel and Corporate Secretary departed the organization to pursue other interests and the Corporation does not anticipate immediately filling the role. This reduces the executive management team from seven members at the start of 2024 to five members currently, aligning with ongoing efforts to optimize costs and improve efficiency. These efforts build on the organizational restructuring and cost reduction initiatives implemented in 2024, which are expected to generate annualized savings of approximately $17.0 million.
Board appointment
On April 29, 2025, Sherritt announced the appointment of Richard Moat to its Board of Directors. Mr. Moat joins the Board as part of the investor rights agreement with a shareholder holding more than 10% of the Corporation’s outstanding common shares. He will succeed Steven Goldman who is not seeking re-election at the Corporation’s upcoming 2025 shareholder meeting on June 10, 2025.
Nickel Mark certification
In May 2025, Sherritt received confirmation it became a Participant of the Copper Mark as it aims to obtain The Nickel Mark award for its refinery in Fort Saskatchewan. The Nickel Mark is part of the Copper Mark assurance framework that supports responsible production practices and demonstrates commitment to the green transition across the value chains of copper, nickel, molybdenum and zinc. For Sherritt, participation in this assurance process is an essential part of its strategic focus to build customer and key stakeholder value in the critical minerals industry.
Q1 2025 FINANCIAL HIGHLIGHTS
| $ millions, except as otherwise noted, for the three months ended March 31 | | 2025 | | | 2024 | | | Change | | | | | | | | | | | | | | | | | | | | | | Revenue | | | | $ | 38.4 | | | $ | 28.8 | | | 33 | % | | Combined revenue (1) | | | | | 125.7 | | | | 127.7 | | | (2 | %) | | Loss from operations and joint venture | | | | | (31.8 | ) | | | (22.4 | ) | | (42 | %) | | Net loss from continuing operations | | | | | (40.6 | ) | | | (40.9 | ) | | 1 | % | | Net loss for the period | | | | | (40.6 | ) | | | (40.5 | ) | | - | | | Adjusted EBITDA (1) | | | | | 4.4 | | | | (6.5 | ) | | 168 | % | | Adjusted net loss from continuing operations (1) | | | | | (22.8 | ) | | | (24.6 | ) | | 7 | % | | Net loss from continuing operations ($ per share) (basic and diluted) | | | | | (0.10 | ) | | | (0.10 | ) | | - | | | Adjusted loss from continuing operations ($ per share) (1) | | | | | (0.06 | ) | | | (0.06 | ) | | - | | | | | | | | | | | | | | | | | | Cash provided by continuing operations for operating activities | | | | | 1.0 | | | | 13.0 | | | (92 | %) | | Combined free cash flow (1) | | | | | (6.6 | ) | | | 15.8 | | | (142 | %) | | Average exchange rate (CAD/US$) | | | | | 1.435 | | | | 1.349 | | | N/A | |
| | | | | | | 2025 | | | 2024 | | | | | | | | $ millions, as at | | | | March 31 | | | December 31 | | | Change | | | | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | | | | | | | | | | | | | | | Canada | | | | | | $ | 25.4 | | | $ | 32.0 | | | (21 | %) | | Cuba (2) | | | | | | | 109.6 | | | | 113.1 | | | (3 | %) | | Other | | | | | | | 0.6 | | | | 0.6 | | | - | | | | | | | | | | 135.6 | | | | 145.7 | | | (7 | %) | | | | | | | | | | | | | | | | | | | Loans and borrowings | | | | | | | 376.6 | | | | 372.5 | | | 1 | % | | | | | | | | | | | | | | | | | | | The Corporation's share of cash and cash equivalents in the Moa Joint Venture, not included in the above balances: | | $ | 11.8 | | | $ | 5.7 | | | 108 | % | | | | |
| (1) | | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. | | (2) | | As at March 31, 2025, $107.2 million of the Corporation’s cash and cash equivalents was held by Energas (December 31, 2024 - $111.4 million). |
Cash and cash equivalents were $135.6 million as at March 31, 2025 compared to $145.7 million as at December 31, 2024.
As at March 31, 2025, total available liquidity in Canada was $55.7 million, composed of cash and cash equivalents in Canada of $25.4 million and available credit facilities of $30.3 million compared to $62.4 million as at December 31, 2024. During the quarter, Sherritt received $6.1 million of proceeds from sales of cobalt under the Cobalt Swap agreement and $4.3 million of dividends from Energas. These receipts were offset by $5.9 million on contractually obligated environmental rehabilitation costs related to legacy Oil and Gas assets in Spain and $3.1 million of spending on property, plant and equipment. In addition, these amounts were offset by cash provided by operating activities, primarily reflecting timing of working capital payments, net of Debt and Equity Transaction costs in the quarter.
At current spot nickel prices, and based on 2025 guidance for production volumes, NDCC (1) and spending on capital (1) disclosed in the Outlook section of the Management’s Discussion and Analysis for the three months ended March 31, 2025 (“MD&A”), the Corporation continues to expect that cobalt dividends and cash distributions under the Cobalt Swap agreement will commence in the second half of the year and will not meet the annual minimum amount in 2025.
The Moa JV’s cash and cobalt distributions to the Corporation are determined based on available cash in excess of liquidity requirements. Determinants of the Moa JV’s liquidity include anticipated nickel and cobalt prices and sales volumes, planned spending on capital at the Moa JV including growth capital, capital committed toward the new tailings facility net of financing, working capital needs, expected financing and other expected liquidity requirements. Available cash is also impacted by changes in working capital primarily related to changes in inventory, and timing of receipts and payments, including receipts on nickel and cobalt sales subsequent to shipment.
Based on 2025 guidance estimates for production volumes, unit operating costs (1) and spending on capital (1) disclosed in the Outlook section of the MD&A, Sherritt continues to expect total dividends from Energas in Canada in 2025 to be between $25.0 million and $30.0 million.
For further information on risks related to distributions from the Moa JV and dividends in Canada from Energas, refer to the risks related to Sherritt’s corporate structure in the Corporation’s 2024 Annual Information Form.
As at March 31, 2025, the Corporation was in compliance with all its debt covenants.
| (1) | | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. |
REVIEW OF OPERATIONS
Metals
| $ millions (Sherritt's share), except as otherwise noted, for the three months ended March 31 | 2025 | | | 2024 | | | Change | | | | | | | | | | | | | | | | | | | | | | | | | | | FINANCIAL HIGHLIGHTS (1) | | | | | | | | | | | | | | | | | Revenue | | | | | | $ | 113.7 | | | $ | 115.1 | | | (1 | %) | | Cost of sales | | | | | | | 119.1 | | | | 131.1 | | | (9 | %) | | Loss from operations | | | | | | | (8.6 | ) | | | (21.0 | ) | | 59 | % | | Adjusted EBITDA (2) | | | | | | | 5.5 | | | | (7.5 | ) | | 173 | % | | | | | | | | | | | | | | | | | | | CASH FLOW (1) | | | | | | | | | | | | | | | | | Cash provided by continuing operations for operating activities (2) | | | | $ | 21.9 | | | $ | 31.2 | | | (30 | %) | | | | Free cash flow (2) | | | | | | | 11.4 | | | | 21.7 | | | (47 | %) | | | | | | | | | | | | | | | | | | | PRODUCTION VOLUMES (tonnes) | | | | | | | | | | | | | | | | | Mixed sulphides ("MSP") (3) | | | | | | | 3,157 | | | | 4,052 | | | (22 | %) | | Finished nickel | | | | | | | 2,947 | | | | 3,597 | | | (18 | %) | | Finished cobalt | | | | | | | 323 | | | | 342 | | | (6 | %) | | Fertilizers | | | | | | | 55,820 | | | | 57,064 | | | (2 | %) | | | | | | | | | | | | | | | | | | | NICKEL RECOVERY (4) (%) | | | | | | 85 | % | | | 85 | % | | - | | | | | | | | | | | | | | | | | | | | | SALES VOLUMES (tonnes) | | | | | | | | | | | | | | | | | Finished nickel | | | | | | | 3,439 | | | | 4,023 | | | (15 | %) | | Finished cobalt | | | | | | | 456 | | | | 362 | | | 26 | % | | Fertilizer | | | | | | | 33,120 | | | | 23,909 | | | 39 | % | | | | | | | | | | | | | | | | | | | AVERAGE-REFERENCE PRICES (5) (US$ per pound) | | | | | | | | | | | | | | | | | Nickel | | | | | | $ | 7.06 | | | $ | 7.52 | | | (6 | %) | | Cobalt | | | | | | | 12.84 | | | | 13.89 | | | (8 | %) | | | | | | | | | | | | | | | | | | | AVERAGE REALIZED PRICE (2) | | | | | | | | | | | | | | | | | Nickel ($ per pound) | | | | | | $ | 9.98 | | | $ | 9.90 | | | 1 | % | | Cobalt ($ per pound) | | | | | | | 13.29 | | | | 14.51 | | | (8 | %) | | Fertilizer ($ per tonne) | | | | | | | 478.84 | | | | 412.05 | | | 16 | % | | | | | | | | | | | | | | | | | | | UNIT OPERATING COSTS (2) (US$ per pound) | | | | | | | | | | | | | | | | | Nickel - net direct cash cost (2) | | | | | | $ | 5.95 | | | $ | 7.24 | | | (18 | %) | | | | | | | | | | | | | | | | | | | SPENDING ON CAPITAL (2) | | | | | | | | | | | | | | | | | Sustaining | | | | | | | | | | | | | | | | | Moa JV (50% basis), Fort Site (100% basis) | | | | | | $ | 8.8 | | | $ | 6.4 | | | 38 | % | | Tailings facility, Moa JV (50% basis) | | | | | | | 4.8 | | | | 1.0 | | | 380 | % | | Growth - Moa JV (50% basis) | | | | | | | 1.7 | | | | 2.0 | | | (15 | %) | | | | | | | | | 15.3 | | | | 9.4 | | | 63 | % |
| (1) | | The amounts included in the Financial Highlights, and cash flow sections for Metals above include the combined results of the Moa JV, Fort Site and Metals Marketing. Breakdowns of revenue, Adjusted EBITDA, and the components of free cash flow (cash provided (used) by continuing operations for operating activities and Property, plant and equipment expenditures) for each of these operations are included in the Combined Revenue, Adjusted EBITDA and Free cash flow reconciliations, respectively, in the Non-GAAP and other financial measures section of this press release. | | (2) | | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. | | (3) | | Mixed sulphides = mixed sulphide precipitate (MSP). | | (4) | | The nickel recovery rate measures the amount of finished nickel that is produced compared to the original nickel content of the ore that was mined. | | (5) | | Reference sources: Nickel – London Metal Exchange (“LME”). Cobalt - Average chemical-grade cobalt price published per Argus. |