Sherritt meets 2020 guidance but shares fall

Sherritt’s mining and processing facility in Moa, Cuba. Credit: Sherritt International Corp.

Sherritt International (TSX: S) on Monday reported its production results for full year 2020, and also provided guidance for expected production, unit costs and capital spending in 2021.

Finished nickel production at the Moa joint venture in Cuba (50% owned) was 31,506 tonnes on a 100% basis, largely in line with guidance of 32,000-33,000 tonnes for the year. Finished cobalt production at the Moa JV was 3,370 tonnes on a 100% basis, consistent with guidance for the year.

Nickel and cobalt production in 2020 were negatively impacted by railway service disruptions in Q1, an extended plant shutdown in Q3 due to additional found work scope and reduced contractor availability due to covid-19, and by unplanned repairs to autoclaves in Q4.

Production totals achieved at the Moa JV in 2020 benefitted from additional health and safety measures implemented in Q1 to prevent the spread of covid-19, Sherritt said.

In 2021, nickel and cobalt production at the Moa JV are forecasted at between 32,000-34,000 tonnes and 3,300-3,600 tonnes, respectively. Anticipated production for 2021 is consistent with initial guidance for 2020 and recent performance at the Moa JV, and reflective of the ongoing commitment to operational excellence and employee health and safety, the company added.

Net direct cash costs (NDCC) at the Moa JV are forecasted at between $4.25-$4.75 per pound of finished nickel sold, marginally above 2020 guidance due to higher forecasted input commodity prices.

Net direct cash costs include byproduct credits and input commodities that are subject to considerable change given the volatility of cobalt, fertilizers, crude oil, natural gas and sulphur prices. Forecasted NDCC for 2021 is also subject to the seasonality of fertilizer sales, which are typically higher in the second and fourth quarters.

NDCC guidance for 2021 is based on a forecast cobalt reference price of $15.58 per pound and a forecast average sulphur price of $145 per tonne including freight and handling.

The Moa operation uses an open-pit mining process to extract lateritic ore, which is processed using high-pressure acid leaching on-site into mixed sulphides containing nickel and cobalt. The mixed sulphides are then transported to Fort Saskatchewan, Alberta, where they are refined into high-quality finished nickel and cobalt as well as a byproduct ammonium sulphate fertilizer.

Sherritt’s share of capital spending at the Moa JV and at the Fort Site is forecasted at $44 million in 2021.

Shares of Sherritt International fell 8.5% by 12:30 p.m. in Toronto. The company’s market capitalization currently stands at C$192.68 million.

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