High-Tech Metals Limited (ASX:HTM) is an exploration and development mining company focusing on its Canadian cobalt asset in the Kenora Mining District. The company’s Werner Lake project has received no previous modern exploration, creating blue-sky potential as High-Tech leverages new technologies and techniques. Additionally, High-Tech Metals is a well-structured entity from a capital perspective, with a highly experienced team of experts leading the company towards its goals. Toby Hughes was appointed to lead the exploration team and improve the value of the Werner Lake project.
Cobalt is widely used in various applications due to its unique high-temperature and magnetic properties. Historically, cobalt has been used in jet turbines, electroplating and alloyed with nickel to make powerful magnets. Now, cobalt demand is skyrocketing as electric vehicles (EVs) increasingly take a big chunk of the market. EVs are projected to consume 320 kilotons of cobalt by 2030, about 84 percent of the total cobalt demand.
The Werner Lake project is near the Ontario-Manitoba border and is on the Werner Lake Geological Belt, known for hosting cobalt-copper and base metal deposits. The region has undergone continual exploration and production since cobalt was discovered in 1921.
Canada has the sixth largest cobalt reserves globally and both Ontario and Newfoundland and Labrador produce more than 1,000 metric tonnes of cobalt annually. In addition, Canada hosts many of the world’s top mining jurisdictions due to its mining-friendly policies, which will allow High-Tech Metals to streamline exploration and move towards production.
High-Tech’s project was explored in the 1930s and 1940s, then was taken into production in the 1990s. Results from historical exploration and production informed the project’s current JORC-compliant resource estimate of 720,000 pounds (lbs) at 0.52 percent cobalt. While encouraging, the team also believes there is a significant exploration of upside potential by leveraging modern tools and techniques.
High-Tech Metals has taken steps to expand its portfolio, securing an agreement to acquire the Norpax Deposit and an option to purchase the Reynar Lake Project, located in Ontario, Canada. The projects are directly west and adjoin the company’s Werner Lake Project The Norpax Nickel Sulphide Deposit has a historical non-JORC compliant resource of 1.01 million tonnes of 1.2 percent nickel and 0.5 percent copper. The Reynar Lake Project is highly prospective for nickel, copper and cobalt which could potentially provide HTM with additional landholding and increase its cobalt resource and explore for additional nickel sulphide mineralisation.
The company’s cobalt project sits on the Ontario-Manitoba border in the Kenora Mining District, a region known for cobalt, copper and other base metals. The Werner Lake project has some historical exploration and production but has not received any exploration using modern technologies and techniques. High-Tech Metals is currently preparing for its initial geophysics exploration campaign.
Charles Thomas is an executive director and founding partner of GTT Ventures a leading boutique corporate advisory firm based in Australia. Thomas holds a Bachelor of Commerce from UWA majoring in corporate finance. Thomas has worked in the financial service industry for more than 17 years and has extensive experience in capital markets as well as the structuring of corporate transactions. Thomas has significant experience sitting on numerous ASX boards spanning the mining, resources and technology space. Thomas is currently non-executive director of Chase Mining Corporation (ASX:CML), non-executive chairman of Viking Mines Ltd (ASX.VKA) and executive chairman of Marquee Resources Limited (ASX:MQR).
Sonu Cheema is a director at Cicero Group Pty Ltd and has over 12 years of experience working with public and private companies in Australia and abroad. Roles and responsibilities include financial control, preparation of statutory financial reporting, investor relations, initial public offers (IPO), reverse takeovers (RTO), management of capital raising activities, project management and audit management. Cheema currently serves as a non-executive director and company secretary for Avira Resources (ASX:AVW) and Austin Metals (ASX:AYT).
Quinton Meyers has over six years of experience working in the equities markets in the capacity of a stockbroker, company secretary and accountant for multiple ASX-listed companies gaining exposure to the resource, oil and gas and technology sectors. During this time, Meyers has worked on multiple initial public offers, reverse takeovers, equity capital markets transactions, while developing his knowledge of the ASX Listing Rules and Corporations Act.
Meyers holds a Bachelor of Commerce in accounting and finance from Curtin University, a Graduate Diploma in financial planning and is a member of the Chartered Accountants Australian & New Zealand.
Toby Hughes is a professional geologist having worked in mineral exploration for more than 40 years, with experience in orogenic and epithermal systems, volcanogenic massive sulphides, and Cu-Ni-Co. He has worked for several years on and around the Werner Lake deposit, with additional experience in cobalt exploration within the Bear Magmatic Province, NT, Cobalt, ON and China. As a consultant, he has held senior positions with junior and senior mining companies across Canada, Argentina, China, Columbia, Ghana, Guyana, Mongolia, Peru, Venezuela, and the USA exploring for precious, base metal, industrial minerals and diamonds. Hughes is a graduate of The University of Dundee, Scotland (Honours B.Sc. Geology) and a registered professional geoscientist in Ontario.
HIGHLIGHTS
The Ketele LCT Project is underlain by metamorphic rocks of the Southern Ethiopian Shield and large, regional faults known to focus the intrusion of pegmatites elsewhere. Historical reports suggest the presence of pegmatites in the area which will be the focus of the first phase of exploration work currently underway.
Sonu Cheema, Executive Director, commented:
"HTM continues to progress its critical battery minerals focus through the award of the Ketele LCT Project, in one of Africa’s mineral rich countries, Ethiopia. We are excited to be working with the federal government & local communities and look forward to assisting them in developing their critical minerals opportunities.
The Company has commenced a programme of works to realise the exploration potential of the newly granted license through geological mapping, geochemical surveys and rock chip sampling. We look forward to providing further exploration updates as these activities progress.”
Figure 1 – Ketele LCT Project Location.
Figure 2 – Ketele LCT Project area and underlying geology.
Next Steps
The initial year of exploration at Ketele, which has already started, includes:
HTM is committed to responsible exploration practices and takes measures to minimize the impact of its exploration activities on the environment and local communities.
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This article includes content from High-Tech Metals, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
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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 and nine months ended September 30, 2023. All amounts are in Canadian currency unless otherwise noted.
"We are pleased with the progress of our Moa expansion project. The project remains on track and we expect reliable ore flows to the Moa plant with the completion of phase one early next year. Once the full expansion is complete, we expect to achieve higher production levels from 2025 onwards, benefitting us over a mine life that exceeds 20 years," said Leon Binedell, President and CEO of Sherritt International.
Mr. Binedell continued, "While we were successful advancing our expansion project, the third quarter was one marked by challenges. Market conditions softened, particularly for nickel, and we faced a number of concurrent production challenges related to adverse weather, supply chain logistics and unplanned maintenance. Our team responded effectively to reduce the impacts to our operations and largely resolved the maintenance outages by the end of the quarter. Despite the near-term headwinds in EV adoption and slower than expected supply chain development, we remain encouraged on our long-term outlook with the energy transition set to drive significant demand for the critical minerals we produce which aligns well with the timing of our expansion."
SELECTED Q3 2023 DEVELOPMENTS
(1) | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. |
Q3 2023 FINANCIAL HIGHLIGHTS
For the three months ended | For the nine months ended | ||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||
$ millions, except per share amount | September 30 | September 30 | Change | September 30 | September 30 | Change | |||||||||||||||
Revenue | $ | 36.4 | $ | 30.2 | 21 | % | $ | 188.5 | $ | 130.2 | 45 | % | |||||||||
Combined revenue (1) | 132.4 | 190.1 | (30 | %) | 523.0 | 613.8 | (15 | %) | |||||||||||||
(Loss) earnings from operations and joint venture | (23.8 | ) | 21.3 | (212 | %) | - | 118.8 | (100 | %) | ||||||||||||
Net (loss) earnings from continuing operations | (24.8 | ) | (26.9 | ) | 8 | % | (10.9 | ) | 71.0 | (115 | %) | ||||||||||
Net (loss) earnings for the period | (24.8 | ) | (26.3 | ) | 6 | % | (11.2 | ) | 70.5 | (116 | %) | ||||||||||
Adjusted EBITDA (1) | (9.1 | ) | 37.4 | (124 | %) | 46.5 | 197.9 | (77 | %) | ||||||||||||
Adjusted net (loss) earnings from continuing operations | (19.3 | ) | 13.9 | (239 | %) | (6.7 | ) | 95.0 | (107 | %) | |||||||||||
Net (loss) earnings from continuing operations ($ per share) | (0.06 | ) | (0.07 | ) | 14 | % | (0.03 | ) | 0.18 | (117 | %) | ||||||||||
Cash provided by continuing operations for operating activities | 4.4 | 18.8 | (77 | %) | 46.3 | 50.0 | (7 | %) | |||||||||||||
Combined free cash flow (1) | (11.7 | ) | 0.1 | nm (2) | 23.2 | 21.9 | 6 | % | |||||||||||||
Average exchange rate (CAD/US$) | 1.341 | 1.306 | 3 | % | 1.346 | 1.283 | 5 | % | |||||||||||||
(1) | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. | |
(2) | nm = not meaningful |
2023 | 2022 | ||||||||
$ millions, as at | September 30 | December 31 | Change | ||||||
Cash and cash equivalents | |||||||||
Canada | $ | 22.7 | $ | 20.3 | 12 | % | |||
Cuba (1) | 96.9 | 101.7 | (5 | %) | |||||
Other | 0.8 | 1.9 | (58 | %) | |||||
120.4 | 123.9 | (3 | %) | ||||||
Loans and borrowings | 316.5 | 350.9 | (10 | %) | |||||
The Corporation's share of cash and cash equivalents in the Moa Joint Venture, not included in the above balances: | $ | 16.1 | $ | 21.8 | (26 | %) | |||
(1) | As at September 30, 2023, $92.5 million of the Corporation's cash and cash equivalents was held by Energas (December 31, 2022 - $96.7 million). |
Cash and cash equivalents as at September 30, 2023 were $120.4 million, compared to $176.0 million as at June 30, 2023. During Q3 2023, Sherritt received $23.7 million in cash from the sale of cobalt to third parties and used $40.0 million to pay down its revolving credit facility, $15.0 million as a short-term advance to the Moa JV under their credit facility, $12.2 million for operating activities at Fort Site including the impact of receipts from fertilizer pre-sales, $6.9 million for property, plant and equipment, and $3.4 million for the interest payment on the 10.75% unsecured PIK option notes (PIK Notes).
As at September 30, 2023, total available liquidity in Canada, which is composed of cash and cash equivalents in Canada and available credit facilities of $81.5 million was $104.2 million compared to $124.8 million at June 30, 2023.
Subsequent to the quarter end, Sherritt received an additional $1.5 million in cash from the sale of cobalt to third parties and paid $9.4 million in interest on its second lien notes. At the interest payment date, the Corporation was not required to make a mandatory redemption of second lien notes as it did not meet the minimum liquidity threshold as defined in the indenture agreement.
REVIEW OF OPERATIONS
Metals
For the three months ended | For the nine months ended | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
$ millions (Sherritt's share), except as otherwise noted | September 30 | September 30 | Change | September 30 | September 30 | Change | ||||||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||||||
Revenue (1)(2) | $ | 115.7 | $ | 176.0 | (34 | %) | $ | 477.8 | $ | 571.6 | (16 | %) | ||||||||||
Cost of Sales (1) | 128.1 | 151.0 | (15 | %) | 454.8 | 398.3 | 14 | % | ||||||||||||||
(Loss) earnings from operations | (14.9 | ) | 22.5 | (166 | %) | 19.9 | 167.4 | (88 | %) | |||||||||||||
Adjusted EBITDA (2) | (0.8 | ) | 34.8 | (102 | %) | 62.3 | 206.7 | (70 | %) | |||||||||||||
CASH FLOW | ||||||||||||||||||||||
Cash provided by continuing operations for operating activities | $ | 10.7 | $ | 29.3 | (63 | %) | $ | 112.5 | $ | 90.0 | 25 | % | ||||||||||
Free cash flow (2) | (3.0 | ) | 11.9 | (125 | %) | 73.1 | 49.7 | 47 | % | |||||||||||||
PRODUCTION VOLUMES (tonnes) | ||||||||||||||||||||||
Mixed Sulphides | 4,037 | 4,216 | (4 | %) | 11,570 | 12,248 | (6 | %) | ||||||||||||||
Finished Nickel | 3,841 | 4,443 | (14 | %) | 10,592 | 12,022 | (12 | %) | ||||||||||||||
Finished Cobalt | 410 | 419 | (2 | %) | 1,108 | 1,261 | (12 | %) | ||||||||||||||
Fertilizer | 48,400 | 62,841 | (23 | %) | 158,615 | 187,893 | (16 | %) | ||||||||||||||
NICKEL RECOVERY (3) (%) | 88 | % | 87 | % | 1 | % | 87 | % | 88 | % | (1 | %) | ||||||||||
SALES VOLUMES (tonnes) | ||||||||||||||||||||||
Finished Nickel | 2,845 | 4,487 | (37 | %) | 9,377 | 11,393 | (18 | %) | ||||||||||||||
Finished Cobalt | 526 | 347 | 52 | % | 2,321 | 993 | 134 | % | ||||||||||||||
Fertilizer | 21,389 | 27,373 | (22 | %) | 114,652 | 108,763 | 5 | % | ||||||||||||||
AVERAGE-REFERENCE PRICE (USD) | ||||||||||||||||||||||
Nickel (US$ per pound) | $ | 9.23 | $ | 10.01 | (8 | %) | $ | 10.38 | $ | 11.66 | (11 | %) | ||||||||||
Cobalt (US$ per pound) (4) | 16.58 | 26.26 | (37 | %) | 16.50 | 33.35 | (51 | %) | ||||||||||||||
AVERAGE-REALIZED PRICE (2) (CAD) | ||||||||||||||||||||||
Nickel ($ per pound) | $ | 12.54 | $ | 12.94 | (3 | %) | $ | 14.29 | $ | 14.69 | (3 | %) | ||||||||||
Cobalt ($ per pound) | 17.64 | 28.21 | (37 | %) | 17.51 | 37.59 | (53 | %) | ||||||||||||||
Fertilizer ($ per tonne) | 389.43 | 531.10 | (27 | %) | 612.73 | 823.91 | (26 | %) | ||||||||||||||
UNIT OPERATING COST (2) (US$ per pound) | ||||||||||||||||||||||
Nickel - net direct cash cost | $ | 7.24 | $ | 6.76 | 7 | % | $ | 6.97 | $ | 4.39 | 59 | % | ||||||||||
SPENDING ON CAPITAL (2) ( CAD) | ||||||||||||||||||||||
Sustaining | $ | 12.8 | $ | 16.2 | (21 | %) | $ | 32.3 | $ | 44.4 | (27 | %) | ||||||||||
Growth | 2.9 | 1.9 | 53 | % | 9.1 | 3.0 | 203 | % | ||||||||||||||
$ | 15.7 | $ | 18.1 | (13 | %) | $ | 41.4 | $ | 47.4 | (13 | %) | |||||||||||
(1) | The Financial Highlights, and cash flow amounts for Metals combine the operations 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) | 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. | |
(4) | Average standard-grade cobalt price published per Argus. |
Revenue for the three months ended September 30, 2023 was $115.7 million compared to $176.0 million in same period of the prior year.
Finished nickel revenue for the three months ended September 30, 2023 was $78.6 million compared to $128.0 million in the prior year period as result of lower sales volumes and lower average-realized prices (1) . While average nickel reference prices were 8% lower, the average-realized prices were only 3% lower. Average-realized prices are impacted by the timing of deliveries, the timing of settlement against contract terms and the value of the Canadian dollar against the U.S. dollar. Average-realized prices for the three months ended September 30, 2023 were positively impacted by a stronger U.S. dollar relative to the Canadian dollar compared to the prior year period.
Finished nickel sales volumes for the three months ended September 30, 2023 were lower than the prior year period and finished production volumes in the current quarter primarily due to lower demand for nickel from steel mills after summer shutdowns. Higher MHP and matte intermediate availability also led to lower metal purchasing in Asia, with delivery of new China cathodes to the London Metal Exchange (LME) highlighting the lower nickel metal demand in the region. Decreases in nickel prices have delayed some sales to consumers anticipating the bottom of the current nickel price cycle to be realized in the near-term. Sales volumes for the three months ended September 30, 2023 were also lower compared to the same prior year period where Sherritt successfully reduced the inventory build-up from Q2 2022 in part through higher netback sales to other markets and new customers.
Finished cobalt revenue, including cobalt sold by Sherritt under the Cobalt Swap and Sherritt's 50% share of cobalt sold by the Moa JV, for the three months ended September 30, 2023 was $20.4 million compared to $21.5 million in the prior year period. While cobalt sales volumes of 526 tonnes were 52% higher, revenue was impacted by 37% lower average-realized prices. As of September 30, 2023 Sherritt had sold approximately 97% of the cobalt received under the Cobalt Swap and expects to sell the remaining cobalt and receive all remaining cash by end of year.
Based on Sherritt's 50% share, cobalt sales volumes were 401 tonnes compared to 347 tonnes in Q3 2022 primarily due to a general improvement in demand as consumers took advantage of buying at the perceived bottom of the price cycle and took the opportunity to restock inventories. In addition, Sherritt increased its customer base in the current year.
Fertilizer revenue for the three months ended September 30, 2023 was $8.3 million compared to $15.0 million in the prior year period. Sales volumes for the three months ended September 30, 2023 were 22% lower on lower fertilizer production due to maintenance and 27% lower average-realized prices compared to the prior year period.
Mixed sulphides production at the Moa JV for the three months ended September 30, 2023 was 4,037 tonnes, down 4% from the same period in the prior year primarily due to required maintenance on the ore thickener and lower ore grades. Logistical delays in the delivery of purchased sulphuric acid required during planned sulphuric acid plant maintenance resulted in ore processing reductions at the end of the third quarter and into the early part of the fourth quarter.
Finished nickel production for the three months ended September 30, 2023 totaled 3,841 tonnes, 14% lower than the prior year period primarily as a result of lower mixed sulphides feed availability at the refinery. The first shipment of additional third-party feed initially expected to be received in the third quarter was temporarily delayed as result of Hurricane Lee. Approximately 650 tonnes (100% basis) of the additional feed is expected to be received and processed in the fourth quarter.
Finished cobalt production for the three months ended September 30, 2023 of 410 tonnes was 2% lower compared to the prior year period for the same reasons as the lower nickel production.
Fertilizer production for the three months ended September 30, 2023 was 23% lower, compared to the prior year period in line with metals production and the impact of reduced ammonia plant availability resulting from unplanned maintenance during the year and planned maintenance in the current year quarter.
Mining, processing and refining (MPR) costs per pound of nickel sold for the three months ended September 30, 2023, which includes Sherritt's share of cost of the Cobalt Swap and Moa JV cobalt sold in the current year period, was up 3% compared to the prior year period. The higher MPR costs were primarily attributable to the impact of lower nickel production and sales volumes, higher maintenance costs, and the cost associated with the significantly higher cobalt sales volumes in the current year period. MPR costs in the three-month period ended September 30, 2023 were positively impacted by lower input commodity prices, including a 65% decrease in sulphur prices, a 29% decrease each of diesel and natural gas prices, and a 19% decrease in fuel oil prices.
NDCC (1) per pound of nickel sold for the three months ended September 30, 2023 increased to US$7.24/lb from US$6.76/lb in the prior year period primarily due to the impact of lower nickel sales volumes and lower fertilizer by-product credits, partly offset by higher cobalt by-product credits (2) .
Sustaining spending on capital (1) for the three months ended September 30, 2023 was $12.8 million compared to $16.2 million in the prior year period, primarily due to timing of planned spending at both the Moa JV and Fort Site.
Growth spending on capital for the three months ended September 30, 2023 was $2.9 million, most of which was related to spending on the slurry preparation plant as part of the Moa JV expansion program.
(1) | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. | |
(2) | Cobalt by-product credits include Sherritt's share of cobalt revenue per pound of nickel sold only. |
Moa JV expansion program update
The Moa JV expansion program was specifically designed to minimize the risks of capital overruns and project delays which were anticipated following the COVID-19 pandemic. The low capital intensity of our expansion program, at approximately US$13,200 per additional annual tonne of contained nickel, minimizes risks to our liquidity during volatile market conditions as currently experienced with the slower than anticipated EV supply chain demand.
The Moa JV continued to advance the expansion program at the mine site in Q3 2023. Progress included:
Slurry Preparation Plant (SPP):
The SPP construction remains on budget and expected to commence operations in early-2024.
Processing Plant:
The processing plant expansion remains on budget and on schedule for an expected end of year 2024 completion with commissioning and ramp up in 2025.
Power
For the three months ended | For the nine months ended | |||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||
$ millions (33 ⅓% basis), except as otherwise noted | September 30 | September 30 | Change | September 30 | September 30 | Change | ||||||||||||
FINANCIAL HIGHLIGHTS | ||||||||||||||||||
Revenue | $ | 11.9 | $ | 9.0 | 32 | % | $ | 33.1 | $ | 26.6 | 24 | % | ||||||
Cost of sales | 5.7 | 6.8 | (16 | %) | 15.6 | 19.3 | (19 | %) | ||||||||||
Earnings from operations | 5.6 | 1.4 | 300 | % | 14.8 | 4.2 | 252 | % | ||||||||||
Adjusted EBITDA (1) | 6.2 | 5.5 | 13 | % | 16.6 | 16.2 | 2 | % | ||||||||||
CASH FLOW | ||||||||||||||||||
Cash provided by continuing operations for operating activities | $ | 2.8 | $ | 9.1 | (69 | %) | $ | 9.5 | $ | 23.9 | (60 | %) | ||||||
Free cash flow (1) | 2.2 | 6.1 | (64 | %) | 7.6 | 20.4 | (63 | %) | ||||||||||
PRODUCTION AND SALES | ||||||||||||||||||
Electricity (GWh (2) ) | 190 | 139 | 37 | % | 520 | 409 | 27 | % | ||||||||||
AVERAGE-REALIZED PRICE (1) | ||||||||||||||||||
Electricity ($/MWh (2) ) | $ | 56.30 | $ | 57.02 | (1 | %) | $ | 57.23 | $ | 55.67 | 3 | % | ||||||
UNIT OPERATING COSTS (1) | ||||||||||||||||||
Electricity ($/MWh) | 27.06 | 20.04 | 35 | % | 27.07 | 18.60 | 46 | % | ||||||||||
SPENDING ON CAPITAL (1) | ||||||||||||||||||
Sustaining | $ | 0.6 | $ | 3.0 | (80 | %) | $ | 1.9 | $ | 3.5 | (46 | %) | ||||||
(1) | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. | |
(2) | Gigawatt hours (GWh), Megawatt hours (MWh). |
Revenue for the three months ended September 30, 2023 was $11.9 million, up 32% compared to the prior year period primarily due to higher production.
Electricity production for the three months ended September 30, 2023 was 190 GWh compared to 139 GWh in the prior year period. The increase in electricity production is a result of increased equipment availability and additional gas from two gas wells that went into production in Q2 2023. The gas is provided to Energas free of charge by Union Cubapetroleo for use in power generation. Opportunities to further increase gas supply for additional power production in 2024 continue to be investigated.
Unit operating costs (1) for the three months ended September 30, 2023 were $27.06/MWh compared to $20.04/MWh for the prior year period primarily driven by the timing of planned maintenance activities, partly offset by higher sales volumes.
The Power business unit had $0.6 million spending on capital (1) in Q3 2023 primarily driven by maintenance activities.
(1) | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. |
Technologies
During the three months ended September 30, 2023, Technologies:
OUTLOOK
2023 production volumes, unit operating costs and spending on capital guidance
Guidance | Year-to-date | Updated | ||||
for 2023 - | actuals - | 2023 guidance - | ||||
Production volumes, unit operating costs and spending on capital | Total | Total | Total | |||
Production volumes | ||||||
Moa Joint Venture (tonnes, 100% basis) | ||||||
Nickel, finished | 30,000 – 32,000 | 21,184 | 29,000 – 30,000 | |||
Cobalt, finished | 3,100 – 3,400 | 2,216 | 2,900 – 3,100 | |||
Electricity (GWh, 33⅓% basis) | 650 – 700 | 520 | No change | |||
Unit operating costs (1) | ||||||
Metals – NDCC (US$ per pound) | $6.75 – $7.25 | $6.97 | No change | |||
Electricity (unit operating cost, $ per MWh) | $27.25 – $28.75 | $27.07 | No change | |||
Spending on capital (1) ($ millions) | ||||||
Sustaining | ||||||
Metals: Moa Joint Venture (50% basis), Fort Site (100% basis) | $70.0 | $32.3 | $50.0 | |||
Power (33⅓% basis) | $4.4 | $1.9 | No change | |||
Growth | ||||||
Metals: Moa Joint Venture (50% basis) | $20.0 | $9.1 | $15.0 | |||
Spending on capital (2) | $94.4 | $43.3 | $69.4 |
(1) | Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release. | |
(2) | Excludes spending on capital of the Metals Marketing, Oil and Gas, Technologies and Corporate segments. |
Metals
Supply chain logistics challenges resulted in delays receiving equipment replacement parts, sulphuric acid, and additional third-party feed, which impacted production in Q3 2023. Based on nickel and cobalt production for the nine months ended September 30, 2023, of 21,184 tonnes and of 2,216 tonnes (100% basis), respectively, Sherritt has updated its 2023 production guidance to 29,000 – 30,000 tonnes of nickel and 2,900 – 3,100 tonnes of cobalt. NDCC guidance for 2023 of US$6.75/lb – US$7.25/lb remains unchanged.
For sustaining spending on capital, Sherritt has reduced its 2023 guidance from $70.0 million to $50.0 million based on its spending for the nine months ended September 30, 2023. Sherritt continues to manage its capital spending in a prudent manner and has the ability to decrease spending or defer certain capital items due to market conditions.
For growth spending on capital, Sherritt has reduced its 2023 guidance from $20.0 million to $15.0 million based on its spending for the nine months ended September 30, 2023 of $9.1 million. This reduction in spending is related to the timing of spending for non-critical path items whereby the project timing and overall budget remains unchanged.
Power
2023 guidance ranges for electricity production, unit operating cost and spending on capital remain unchanged.
CONFERENCE CALL AND WEBCAST
Sherritt will hold its conference call and webcast November 2, 2023 at 10:00 a.m. Eastern Time to review its Q3 2023 results. Dial-in and webcast details are as follows:
North American callers, please dial: | 1 (888) 886-7786 Passcode: 79249342 | |||
International callers, please dial: | 1 (416) 764-8658 Passcode: 79249342 | |||
Live webcast: |
Please dial in 15 minutes before the start of the call to secure a line. Alternatively, listeners can access the conference call and presentation via the webcast available on Sherritt's website.
An archive of the webcast and replay of the conference call will also be available on the website.
FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION AND ANALYSIS
Sherritt's condensed consolidated financial statements and MD&A for the three and nine months ended September 30, 2023 are available at www.sherritt.com and should be read in conjunction with this news release. Financial and operating data can also viewed in the investor relations section of Sherritt's website on SEDAR at www.sedarplus.ca .
NON-GAAP AND OTHER FINANCIAL MEASURES
Management uses the following non-GAAP and other financial measures in this press release and other documents: combined revenue, adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), average-realized price, unit operating cost/net direct cash cost (NDCC), adjusted net earnings/loss from continuing operations, adjusted earnings/loss from continuing operations per share, spending on capital and combined free cash flow.
Management uses these measures to monitor the financial performance of the Corporation and its operating divisions and believes these measures enable investors and analysts to compare the Corporation's financial performance with its competitors and/or evaluate the results of its underlying business. These measures are intended to provide additional information, not to replace International Financial Reporting Standards (IFRS) measures, and do not have a standard definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. As these measures do not have a standardized meaning, they may not be comparable to similar measures provided by other companies.
The non-GAAP and other financial measures are reconciled to their most directly comparable IFRS measures in the Appendix below. This press release should be read in conjunction with Sherritt's consolidated financial statements for the three and nine months ended September 30, 2023.
ABOUT SHERRITT INTERNATIONAL CORPORATION
Sherritt is a world leader in using hydrometallurgical processes to mine and refine nickel and cobalt – metals deemed critical for the energy transition. Sherritt's Moa Joint Venture has a current estimated mine life of 26 years and has embarked on an expansion program focused on increasing annual mixed sulphide precipitate production by 20% or 6,500 tonnes of contained nickel and cobalt (100% basis). The Corporation's Power division, through its ownership in Energas S.A., is the largest independent energy producer in Cuba with installed electrical generating capacity of 506 MW, representing approximately 10% of the national electrical generating capacity in Cuba. The Energas facilities are comprised of two combined cycle plants that produce low-cost electricity from one of the lowest carbon emitting sources of power in Cuba. Additionally, its Technologies Group creates innovative, proprietary solutions for natural resource-based industries around the world to improve environmental performance and increase economic value. 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 can generally be identified by the use of statements that include such words as "believe", "expect", "anticipate", "intend", "plan", "forecast", "likely", "may", "will", "could", "should", "suspect", "outlook", "potential", "projected", "continue" or other similar words or phrases. Specifically, forward-looking statements in this document include, but are not limited to, statements regarding strategies, plans and estimated production amounts resulting from expansion of mining operations at the Moa Joint Venture; growing and increasing nickel and cobalt production; the Moa Joint Venture expansion program update as it relates to the Slurry Preparation Plant and the Processing Plant; commercializing Technologies projects and growing shareholder value; statements set out in the "Outlook" section of this press release; certain expectations regarding production volumes and increases, inventory levels, operating costs and capital spending and intensity; sales volumes; revenue, costs and earnings; the availability of additional gas supplies to be used for power generation; the effect of maintenance challenges at the Moa mine; the anticipated repayment of all outstanding receivables through dividends, including in the form of finished cobalt or cash, the timing and amount of cobalt dividend distributions; sales of finished cobalt and associated receipts; the impact of the U.S. sanctions on Cuba; anticipated economic conditions in Cuba; sufficiency of working capital management and capital project funding; strengthening the Corporation's capital structure and amounts of certain other commitments.
Forward-looking statements are not based on historical facts, but rather on current expectations, assumptions and projections about future events, including commodity and product prices and demand; the level of liquidity and access to funding; share price volatility; production results; realized prices for production; earnings and revenues; global demand for electric vehicles and the anticipated corresponding demand for cobalt and nickel; the commercialization of certain proprietary technologies and services; advancements in environmental and greenhouse gas (GHG) reduction technology; GHG emissions reduction goals and the anticipated timing of achieving such goals, if at all; statistics and metrics relating to Environmental, Social and Governance (ESG) matters which are based on assumptions or developing standards; environmental rehabilitation provisions; environmental risks and liabilities; compliance with applicable environmental laws and regulations; risks related to the U.S. government policy toward Cuba; and certain corporate objectives, goals and plans for 2023. By their nature, forward-looking statements require the Corporation to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that the assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections.
The Corporation cautions readers of this press release not to place undue reliance on any forward-looking statement 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. These risks, uncertainties and other factors include, but are not limited to, security market fluctuations and price volatility; level of liquidity and the related ability of the Moa Joint Venture to pay dividends; access to capital; access to financing; the risk to Sherritt's entitlements to future distributions (including pursuant to the Cobalt Swap) from the Moa Joint Venture, the impact of infectious diseases (including the COVID-19 pandemic), the impact of global conflicts; changes in the global price for nickel, cobalt, oil, gas, fertilizers or certain other commodities; risks related to Sherritt's operations in Cuba; risks related to the U.S. government policy toward Cuba, including the U.S. embargo on Cuba and the Helms-Burton legislation; political, economic and other risks of foreign operations; uncertainty in the ability of the Corporation to enforce legal rights in foreign jurisdictions; uncertainty regarding the interpretation and/or application of the applicable laws in foreign jurisdictions; compliance with applicable environment, health and safety legislation and other associated matters; risks associated with governmental regulations regarding climate change and greenhouse gas emissions; risks relating to community relations; maintaining social license to grow and operate; risks related to environmental liabilities including liability for reclamation costs, tailings facility failures and toxic gas releases; uncertainty about the pace of technological advancements required in relation to achieving ESG targets; risks to information technologies systems and cybersecurity; identification and management of growth opportunities; the ability to replace depleted mineral reserves; risk of future non-compliance with debt restrictions and covenants; risks associated with the Corporation's joint venture partners; variability in production at Sherritt's operations in Cuba; risks associated with mining, processing and refining activities; potential interruptions in transportation; uncertainty of gas supply for electrical generation; reliance on key personnel and skilled workers; growth opportunity risks; the possibility of equipment and other failures; uncertainty of resources and reserve estimates; the potential for shortages of equipment and supplies, including diesel; supplies quality issues; risks related to the Corporation's corporate structure; risks associated with the operation of large projects generally; risks related to the accuracy of capital and operating cost estimates; foreign exchange and pricing risks; credit risks; shortage of equipment and supplies; competition in product markets; future market access; interest rate changes; risks in obtaining insurance; uncertainties in labour relations; legal contingencies; risks related to the Corporation's accounting policies; uncertainty in the ability of the Corporation to obtain government permits; failure to comply with, or changes to, applicable government regulations; bribery and corruption risks, including failure to comply with the Corruption of Foreign Public Officials Act or applicable local anti-corruption law; the ability to accomplish corporate objectives, goals and plans for 2023; and the ability to meet other factors listed from time to time in the Corporation's continuous disclosure documents.
The Corporation, together with its Moa Joint Venture is pursuing a range of growth and expansion opportunities, including without limitation, process technology solutions, development projects, commercial implementation opportunities, life of mine extension opportunities and the conversion of mineral resources to reserves. In addition to the risks noted above, factors that could, alone or in combination, prevent the Corporation from successfully achieving these opportunities may include, without limitation: identifying suitable commercialization and other partners; successfully advancing discussions and successfully concluding applicable agreements with external parties and/or partners; successfully attracting required financing; successfully developing and proving technology required for the potential opportunity; successfully overcoming technical and technological challenges; successful environmental assessment and stakeholder engagement; successfully obtaining intellectual property protection; successfully completing test work and engineering studies, prefeasibility and feasibility studies, piloting, scaling from small scale to large scale production, , procurement, construction, commissioning, ramp-up to commercial scale production and completion; and securing regulatory and government approvals. There can be no assurance that any opportunity will be successful, commercially viable, completed on time or on budget, or will generate any meaningful revenues, savings or earnings, as the case may be, for the Corporation. In addition, the Corporation will incur costs in pursuing any particular opportunity, which may be significant. Readers are cautioned that the foregoing list of factors is not exhaustive and should be considered in conjunction with the risk factors described in the Corporation's other documents filed with the Canadian securities authorities, including without limitation the "Managing Risk" section of the Management's Discussion and Analysis for the three and nine months ended September 30, 2023 and the Annual Information Form of the Corporation dated March 31, 2023 for the period ending December 31, 2022, which is available on SEDAR at www.sedarplus.ca .
The Corporation may, from time to time, make oral forward-looking statements. The Corporation advises that the above paragraph and the risk factors described in this press release and in the Corporation's other documents filed with the Canadian securities authorities should be read for a description of certain factors that could cause the actual results of the Corporation to differ materially from those in the oral forward-looking statements. The forward-looking information and statements contained in this press release are made as of the date hereof and the Corporation undertakes no obligation to update publicly or revise any oral or written forward-looking information or statements, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement.
APPENDIX – NON-GAAP AND OTHER FINANCIAL MEASURES
Management uses the measures below to monitor the financial performance of the Corporation and its operating divisions and believes these measures enable investors and analysts to compare the Corporation's financial performance with its competitors and/or evaluate the results of its underlying business. These measures are intended to provide additional information, not to replace IFRS measures, and do not have a standard definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. As these measures do not have a standardized meaning, they may not be comparable to similar measures provided by other companies.
The non-GAAP and other financial measures are reconciled to the most directly comparable IFRS measure as presented in the condensed consolidated financial statements for the three and nine months ended September 30, 2023.
Combined revenue
The Corporation uses combined revenue as a measure to help management assess the Corporation's financial performance across its operations. Combined revenue includes the Corporation's consolidated revenue and revenue of the Moa JV within the Metals reportable segment on a 50% basis, which is accounted for using the equity method for accounting purposes.
Management uses this measure to reflect the Corporation's economic interest in its operations prior to the application of equity accounting to help allocate financial resources and provide investors with information that it believes is useful in understanding the scope of Sherritt's business, based on its economic interest, irrespective of the accounting treatment.
The table below reconciles combined revenue to revenue per the financial statements:
For the three months ended | For the nine months ended | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
$ millions | September 30 | September 30 | Change | September 30 | September 30 | Change | ||||||||||||||||
Revenue by reportable segment | ||||||||||||||||||||||
Metals (1) | $ | 115.7 | $ | 176.0 | (34 | %) | $ | 477.8 | $ | 571.6 | (16 | %) | ||||||||||
Power | 11.9 | 9.0 | 32 | % | 33.1 | 26.6 | 24 | % | ||||||||||||||
Technologies | 0.3 | 0.2 | 50 | % | 1.0 | 1.3 | (23 | %) | ||||||||||||||
Oil and Gas | 4.4 | 4.7 | (6 | %) | 10.6 | 13.7 | (23 | %) | ||||||||||||||
Corporate | 0.1 | 0.2 | (50 | %) | 0.5 | 0.6 | (17 | %) | ||||||||||||||
Combined revenue | $ | 132.4 | $ | 190.1 | (30 | %) | $ | 523.0 | $ | 613.8 | (15 | %) | ||||||||||
Adjustment for Moa Joint Venture | (96.0 | ) | (159.9 | ) | (334.5 | ) | (483.6 | ) | ||||||||||||||
Financial statement revenue | $ | 36.4 | $ | 30.2 | 21 | % | $ | 188.5 | $ | 130.2 | 45 | % | ||||||||||
(1) | Revenue of Metals for the three months ended September 30, 2023 is composed of revenue recognized by the Moa JV of $96.0 million (50% basis), which is equity-accounted and included in share of earnings of Moa JV, net of tax, coupled with revenue recognized by Fort Site of $7.2 million and Metals Marketing of $12.5 million, both of which are included in consolidated revenue (for the three months ended September 30, 2022 - $159.9 million, $14.0 million and $2.1 million, respectively). Revenue of Metals for the nine months ended September 30, 2023 is composed of revenue recognized by the Moa JV of $334.5 million (50% basis), coupled with revenue recognized by Fort Site of $57.2 million and Metals Marketing of $86.1 million (for the nine months ended September 30, 2022 - $483.6 million, $81.6 million and $6.4 million, respectively). |
Adjusted EBITDA
The Corporation defines Adjusted EBITDA as earnings (loss) from operations and joint venture, which excludes net finance expense and loss from discontinued operations, net of tax, as reported in the financial statements for the period, adjusted for: depletion, depreciation and amortization; impairment losses on non-current non-financial assets and investments; and gains or losses on disposal of property, plant and equipment of the Corporation and the Moa JV. The exclusion of impairment losses eliminates the non-cash impact of the losses.
Management uses Adjusted EBITDA internally to evaluate the cash generation potential of Sherritt's operating divisions on a combined and segment basis as an indicator of ability to fund working capital needs, meet covenant obligations, service debt and fund capital expenditures, as well as provide a level of comparability to similar entities. Management believes that Adjusted EBITDA provides useful information to investors in evaluating the Corporation's operating results in the same manner as management and the Board of Directors.
The tables below reconcile earnings from operations and joint venture per the financial statements to Adjusted EBITDA:
$ millions, for the three months ended September 30 | 2023 | ||||||||||||||||||||||||||
Metals (1) | Power | Techno- | Oil and | Corporate | Adjustment | Total | |||||||||||||||||||||
(Loss) earnings from operations and joint venture | |||||||||||||||||||||||||||
per financial statements | $ | (14.9 | ) | $ | 5.6 | $ | (3.7 | ) | $ | (7.0 | ) | $ | (4.2 | ) | $ | 0.4 | $ | (23.8 | ) | ||||||||
Add: | |||||||||||||||||||||||||||
Depletion, depreciation and amortization | 2.2 | 0.6 | - | 0.1 | 0.3 | - | 3.2 | ||||||||||||||||||||
Adjustments for share of earnings of Moa Joint Venture: | |||||||||||||||||||||||||||
Depletion, depreciation and amortization | 10.4 | - | - | - | - | - | 10.4 | ||||||||||||||||||||
Impairment of property, plant and equipment | 1.5 | - | - | - | - | - | 1.5 | ||||||||||||||||||||
Net finance income | - | - | - | - | - | (2.8 | ) | (2.8 | ) | ||||||||||||||||||
Income tax expense | - | - | - | - | - | 2.4 | 2.4 | ||||||||||||||||||||
Adjusted EBITDA | $ | (0.8 | ) | $ | 6.2 | $ | (3.7 | ) | $ | (6.9 | ) | $ | (3.9 | ) | $ | - | $ | (9.1 | ) | ||||||||
$ millions, for the three months ended September 30 | 2022 | ||||||||||||||||||||||||
Metals (1) | Power | Techno- | Oil and | Corporate | Adjustment | Total | |||||||||||||||||||
Earnings (loss) from operations and joint venture | |||||||||||||||||||||||||
per financial statements | $ | 22.5 | $ | 1.4 | $ | (3.5 | ) | $ | 1.5 | $ | (1.1 | ) | $ | 0.5 | $ | 21.3 | |||||||||
Add: | |||||||||||||||||||||||||
Depletion, depreciation and amortization | 2.1 | 4.1 | - | 0.1 | 0.1 | - | 6.4 | ||||||||||||||||||
Adjustments for share of earnings of Moa Joint Venture: | |||||||||||||||||||||||||
Depletion, depreciation and amortization | 10.2 | - | - | - | - | - | 10.2 | ||||||||||||||||||
Net finance expense | - | - | - | - | - | 1.8 | 1.8 | ||||||||||||||||||
Income tax recovery | - | - | - | - | - | (2.3 | ) | (2.3 | ) | ||||||||||||||||
Adjusted EBITDA | $ | 34.8 | $ | 5.5 | $ | (3.5 | ) | $ | 1.6 | $ | (1.0 | ) | $ | - | $ | 37.4 | |||||||||
$ millions, for the nine months ended September 30 | 2023 | |||||||||||||||||||||||||
Metals (1) | Power | Techno- | Oil and | Corporate | Adjustment | Total | ||||||||||||||||||||
Earnings (loss) from operations and joint venture | ||||||||||||||||||||||||||
per financial statements | $ | 19.9 | $ | 14.8 | $ | (11.9 | ) | $ | (6.9 | ) | $ | (14.6 | ) | $ | (1.3 | ) | $ | - | ||||||||
Add: | ||||||||||||||||||||||||||
Depletion, depreciation and amortization | 7.8 | 1.8 | 0.1 | 0.2 | 0.7 | - | 10.6 | |||||||||||||||||||
Adjustments for share of earnings of Moa Joint Venture: | ||||||||||||||||||||||||||
Depletion, depreciation and amortization | 33.1 | - | - | - | - | - | 33.1 | |||||||||||||||||||
Impairment of property, plant and equipment | 1.5 | - | - | - | - | - | 1.5 | |||||||||||||||||||
Net finance income | - | - | - | - | - | (2.4 | ) | (2.4 | ) | |||||||||||||||||
Income tax expense | - | - | - | - | - | 3.7 | 3.7 | |||||||||||||||||||
Adjusted EBITDA | $ | 62.3 | $ | 16.6 | $ | (11.8 | ) | $ | (6.7 | ) | $ | (13.9 | ) | $ | - | $ | 46.5 | |||||||||
$ millions, for the nine months ended September 30 | 2022 | |||||||||||||||||||||||||
Metals (1) | Power | Techno- | Oil and | Corporate | Adjustment | Total | ||||||||||||||||||||
Earnings (loss) from operations and joint venture | ||||||||||||||||||||||||||
per financial statements | $ | 167.4 | $ | 4.2 | $ | (10.4 | ) | $ | 0.8 | $ | (15.8 | ) | $ | (27.4 | ) | $ | 118.8 | |||||||||
Add (deduct): | ||||||||||||||||||||||||||
Depletion, depreciation and amortization | 7.5 | 12.0 | 0.1 | 0.8 | 0.8 | - | 21.2 | |||||||||||||||||||
Gain on disposal of property, plant and equipment | - | - | - | (1.3 | ) | - | - | (1.3 | ) | |||||||||||||||||
Adjustments for share of earnings of Moa Joint Venture: | ||||||||||||||||||||||||||
Depletion, depreciation and amortization | 31.8 | - | - | - | - | - | 31.8 | |||||||||||||||||||
Net finance expense | - | - | - | - | - | 6.7 | 6.7 | |||||||||||||||||||
Income tax expense | - | - | - | - | - | 20.7 | 20.7 | |||||||||||||||||||
Adjusted EBITDA | $ | 206.7 | $ | 16.2 | $ | (10.3 | ) | $ | 0.3 | $ | (15.0 | ) | $ | - | $ | 197.9 | ||||||||||
(1) | Adjusted EBITDA of Metals for the three months ended September 30, 2023 is composed of Adjusted EBITDA at Moa JV of $6.4 million (50% basis), Adjusted EBITDA at Fort Site of $(7.7) million and Adjusted EBITDA at Metals Marketing of $0.5 million (for the three months ended September 30, 2022 - $31.5 million, $3.8 million and $(0.5) million, respectively). | |
(2) | Adjusted EBITDA of Metals for the nine months ended September 30, 2023 is composed of Adjusted EBITDA at Moa JV of $72.2 million (50% basis), Adjusted EBITDA at Fort Site of $0.3 million and Adjusted EBITDA at Metals Marketing of $(10.2) million (for the nine months ended September 30, 2022 - $176.4 million, $32.0 million and $(1.7) million, respectively). |
Average-realized price
Average-realized price is generally calculated by dividing revenue by sales volume for the given product in a given division. The average-realized price for power excludes by-product revenue, as this revenue is not earned directly for power generation. Transactions by a Moa JV marketing company, included in other revenue, are excluded.
Management uses this measure, and believes investors use this measure, to compare the relationship between the revenue per unit and direct costs on a per unit basis in each reporting period for nickel, cobalt, fertilizer and power and provide comparability with other similar external operations.
Average-realized price for fertilizer is the weighted-average realized price of ammonia and various ammonium sulphate products.
Average-realized price for nickel and cobalt are expressed in Canadian dollars per pound sold, while fertilizer is expressed in Canadian dollars per tonne sold and electricity is expressed in Canadian dollars per megawatt hour sold.
The tables below reconcile revenue per the financial statements to average-realized price:
$ millions, except average-realized price and sales volume, for the three months ended September 30 | 2023 | ||||||||||||||||||||||
Metals | |||||||||||||||||||||||
Nickel | Cobalt | Fertilizer | Power | Other (1) | Adjustment | Total | |||||||||||||||||
Revenue per financial statements | $ | 78.6 | $ | 20.4 | $ | 8.3 | $ | 11.9 | $ | 13.2 | $ | (96.0 | ) | $ | 36.4 | ||||||||
Adjustments to revenue: | |||||||||||||||||||||||
By-product revenue | - | - | - | (1.2 | ) | ||||||||||||||||||
Revenue for purposes of average-realized price calculation | 78.6 | 20.4 | 8.3 | 10.7 | |||||||||||||||||||
Sales volume for the period | 6.3 | 1.2 | 21.4 | 190 | |||||||||||||||||||
| Volume units | Millions of | Millions of | Thousands | Gigawatt | |||||||||||||||||||
Average-realized price (2)(3)(4) | $ | 12.54 | $ | 17.64 | $ | 389.43 | $ | 56.30 | |||||||||||||||
$ millions, except average-realized price and sales volume, for the three months ended September 30 | 2022 | ||||||||||||||||||||||
Metals | |||||||||||||||||||||||
Nickel | Cobalt | Fertilizer | Power | Other (1) | Adjustment | Total | |||||||||||||||||
Revenue per financial statements | $ | 128.0 | $ | 21.5 | $ | 15.0 | $ | 9.0 | $ | 16.6 | $ | (159.9 | ) | $ | 30.2 | ||||||||
Adjustments to revenue: | |||||||||||||||||||||||
By-product revenue | - | - | - | (1.1 | ) | ||||||||||||||||||
Revenue for purposes of average-realized price calculation | 128.0 | 21.5 | 15.0 | 7.9 | |||||||||||||||||||
Sales volume for the period | 9.9 | 0.8 | 27.4 | 139 | |||||||||||||||||||
| Volume units | Millions of | Millions of | Thousands | Gigawatt | |||||||||||||||||||
Average-realized price (2)(3)(4) | $ | 12.94 | $ | 28.21 | $ | 531.10 | $ | 57.02 | |||||||||||||||
$ millions, except average-realized price and sales volume, for the nine months ended September 30 | 2023 | ||||||||||||||||||||||
Metals | |||||||||||||||||||||||
Nickel | Cobalt | Fertilizer | Power | Other (1) | Adjustment | Total | |||||||||||||||||
Revenue per financial statements | $ | 295.5 | $ | 89.6 | $ | 70.2 | $ | 33.1 | $ | 34.6 | $ | (334.5 | ) | $ | 188.5 | ||||||||
Adjustments to revenue: | |||||||||||||||||||||||
By-product revenue | - | - | - | (3.3 | ) | ||||||||||||||||||
Revenue for purposes of average-realized price calculation | 295.5 | 89.6 | 70.2 | 29.8 | |||||||||||||||||||
Sales volume for the period | 20.7 | 5.2 | 114.7 | 520 | |||||||||||||||||||
| Volume units | Millions of | Millions of | Thousands | Gigawatt | |||||||||||||||||||
Average-realized price (2)(3)(4) | $ | 14.29 | $ | 17.51 | $ | 612.73 | $ | 57.23 | |||||||||||||||
$ millions, except average-realized price and sales volume, for the nine months ended September 30 | 2022 | ||||||||||||||||||||||
Metals | |||||||||||||||||||||||
Nickel | Cobalt | Fertilizer | Power | Other (1) | Adjustment | Total | |||||||||||||||||
Revenue per financial statements | $ | 369.0 | $ | 82.2 | $ | 84.2 | $ | 26.6 | $ | 51.8 | $ | (483.6 | ) | $ | 130.2 | ||||||||
Adjustments to revenue: | |||||||||||||||||||||||
By-product revenue | - | - | - | (3.9 | ) | ||||||||||||||||||
Revenue for purposes of average-realized price calculation | 369.0 | 82.2 | 84.2 | 22.7 | |||||||||||||||||||
Sales volume for the period | 25.1 | 2.2 | 108.8 | 409 | |||||||||||||||||||
| Volume units | Millions of | Millions of | Thousands | Gigawatt | |||||||||||||||||||
Average-realized price (2)(3)(4) | $ | 14.69 | $ | 37.59 | $ | 823.91 | $ | 55.67 | |||||||||||||||
(1) | Other revenue includes revenue from the Oil and Gas, Technologies and Corporate reportable segments. | |
(2) | Average-realized price may not calculate exactly based on amounts presented due to foreign exchange and rounding. | |
(3) | Power, average-realized price per MWh. | |
(4) | Fertilizer, average-realized price per tonne. |
Unit operating cost/NDCC
With the exception of Metals, which uses NDCC, unit operating cost is generally calculated by dividing cost of sales as reported in the financial statements, less depreciation, depletion and amortization in cost of sales, the impact of impairment losses, gains and losses on disposal of property, plant, and equipment and exploration and evaluation assets and certain other non-production related costs, by the number of units sold.
Metals' NDCC is calculated by dividing cost of sales, as reported in the financial statements, adjusted for the following: depreciation, depletion, amortization and impairment losses in cost of sales; cobalt by-product, fertilizer and other revenue; cobalt gain/loss; and other costs primarily related to the impact of opening and closing inventory values, by the number of finished nickel pounds sold in the period, expressed in U.S. dollars.
Unit operating costs for nickel and electricity are key measures that management and investors uses to monitor performance. NDCC of nickel is a widely-used performance measure for nickel producers. Management uses unit operating costs/NDCC to assess how well the Corporation's producing mine and power facilities are performing and to assess overall production efficiency and effectiveness internally across periods and compared to its competitors.
Unit operating cost (NDCC) for nickel is expressed in U.S. dollars per pound sold, while electricity is expressed in Canadian dollars per megawatt hour sold.
The tables below reconcile cost of sales per the financial statements to unit operating cost/NDCC:
$ millions, except unit cost and sales volume, for the three months ended September 30 | 2023 | |||||||||||||||||
Metals | Power | Other (1) | Adjustment | Total | ||||||||||||||
Cost of sales per financial statements | $ | 128.1 | $ | 5.7 | $ | 15.1 | $ | (98.9 | ) | $ | 50.0 | |||||||
Less: | ||||||||||||||||||
Depletion, depreciation and amortization in cost of sales | (12.5 | ) | (0.6 | ) | ||||||||||||||
115.6 | 5.1 | |||||||||||||||||
Adjustments to cost of sales: | ||||||||||||||||||
Cobalt by-product, fertilizer and other revenue | (37.1 | ) | - | |||||||||||||||
Cobalt gain | (0.3 | ) | - | |||||||||||||||
Impact of opening/closing inventory and other (2) | (18.2 | ) | - | |||||||||||||||
Cost of sales for purposes of unit cost calculation | 60.0 | 5.1 | ||||||||||||||||
Sales volume for the period | 6.3 | 190 | ||||||||||||||||
| Volume units | Millions of | Gigawatt | ||||||||||||||||
Unit operating cost (3)(4) | $ | 9.56 | $ | 27.06 | ||||||||||||||
Unit operating cost (US$ per pound) (NDCC) (5) | $ | 7.24 | ||||||||||||||||
$ millions, except unit cost and sales volume, for the three months ended September 30 | 2022 | |||||||||||||||||
Metals | Power | Other (1) | Adjustment | Total | ||||||||||||||
Cost of sales per financial statements | $ | 151.0 | $ | 6.8 | $ | 6.4 | $ | (137.2 | ) | $ | 27.0 | |||||||
Less: | ||||||||||||||||||
Depletion, depreciation and amortization in cost of sales | (12.3 | ) | (4.1 | ) | ||||||||||||||
138.7 | 2.7 | |||||||||||||||||
Adjustments to cost of sales: | ||||||||||||||||||
Cobalt by-product, fertilizer and other revenue | (48.0 | ) | - | |||||||||||||||
Impact of opening/closing inventory and other (2) | (3.6 | ) | - | |||||||||||||||
Cost of sales for purposes of unit cost calculation | 87.1 | 2.7 | ||||||||||||||||
Sales volume for the period | 9.9 | 139 | ||||||||||||||||
| Volume units | Millions of | Gigawatt | ||||||||||||||||
Unit operating cost (3)(4) | $ | 8.81 | $ | 20.04 | ||||||||||||||
Unit operating cost (US$ per pound) (NDCC) (5) | $ | 6.76 | ||||||||||||||||
$ millions, except unit cost and sales volume, for the nine months ended September 30 | 2023 | |||||||||||||||||
Metals | Power | Other (1) | Adjustment | Total | ||||||||||||||
Cost of sales per financial statements | $ | 454.8 | $ | 15.6 | $ | 29.2 | $ | (294.2 | ) | $ | 205.4 | |||||||
Less: | ||||||||||||||||||
Depletion, depreciation and amortization in cost of sales | (40.7 | ) | (1.5 | ) | ||||||||||||||
414.1 | 14.1 | |||||||||||||||||
Adjustments to cost of sales: | ||||||||||||||||||
Cobalt by-product, fertilizer and other revenue | (182.3 | ) | - | |||||||||||||||
Cobalt gain | (2.7 | ) | - | |||||||||||||||
Impact of opening/closing inventory and other (2) | (35.3 | ) | - | |||||||||||||||
Cost of sales for purposes of unit cost calculation | 193.8 | 14.1 | ||||||||||||||||
Sales volume for the period | 20.7 | 520 | ||||||||||||||||
| Volume units | Millions of | Gigawatt | ||||||||||||||||
Unit operating cost (3)(4) | $ | 9.37 | $ | 27.07 | ||||||||||||||
Unit operating cost (US$ per pound) (NDCC) (5) | $ | 6.97 | ||||||||||||||||
$ millions, except unit cost and sales volume, for the nine months ended September 30 | 2022 | |||||||||||||||||
Metals | Power | Other (1) | Adjustment | Total | ||||||||||||||
Cost of sales per financial statements | $ | 398.3 | $ | 19.3 | $ | 23.3 | $ | (334.9 | ) | $ | 106.0 | |||||||
Less: | ||||||||||||||||||
Depletion, depreciation and amortization in cost of sales | (39.3 | ) | (12.0 | ) | ||||||||||||||
359.0 | 7.3 | |||||||||||||||||
Adjustments to cost of sales: | ||||||||||||||||||
Cobalt by-product, fertilizer and other revenue | (202.6 | ) | - | |||||||||||||||
Impact of opening/closing inventory and other (2) | (15.2 | ) | - | |||||||||||||||
Cost of sales for purposes of unit cost calculation | 141.2 | 7.3 | ||||||||||||||||
Sales volume for the period | 25.1 | 409 | ||||||||||||||||
| Volume units | Millions of | Gigawatt | ||||||||||||||||
Unit operating cost (3)(4) | $ | 5.62 | $ | 18.60 | ||||||||||||||
Unit operating cost (US$ per pound) (NDCC) (5) | $ | 4.39 | ||||||||||||||||
(1) | Other is composed of the cost of sales of the Oil and Gas and Technologies reportable segments. | |
(2) | Other is primarily composed of royalties and other contributions, sales discounts and other non-cash items. | |
(3) | Unit operating cost/NDCC may not calculate exactly based on amounts presented due to foreign exchange and rounding. | |
(4) | Power, unit operating cost price per MWh. | |
(5) | Unit operating costs in US$ are converted at the average exchange rate for the period. |
Adjusted net earnings/loss from continuing operations and adjusted net earnings/loss from continuing operations per share
The Corporation defines adjusted net earnings/loss from continuing operations as net earnings/loss from continuing operations less items not reflective of operational performance. These adjusting items include, but are not limited to, inventory obsolescence, impairment of assets, gains and losses on the acquisition or disposal of assets, unrealized foreign exchange gains and losses, gains and losses on financial assets and liabilities and other one-time adjustments. While some adjustments are recurring (such as unrealized foreign exchange (gain) loss and revaluations of allowances for expected credit losses (ACL)), management believes that they do not reflect the Corporation's operational performance or future operational performance. Adjusted net earnings/loss from continuing operations per share is defined consistent with the definition above and divided by the Corporation's weighted-average number of common shares outstanding.
Management uses these measures internally and believes that they provide investors with performance measures with which to assess the Corporation's core operations by adjusting for items or transactions that are not reflective of its core operating activities.
The table below reconcile net (loss) earnings from continuing operations and net (loss) earnings from continuing operations per share, both per the financial statements, to adjusted net (loss) earnings from continuing operations and adjusted net (loss) earnings from continuing operations per share, respectively:
2023 | 2022 | |||||||||||||||
For the three months ended September 30 | $ millions | $/share | $ millions | $/share | ||||||||||||
Net loss from continuing operations | $ | (24.8 | ) | $ | (0.06 | ) | $ | (26.9 | ) | $ | (0.07 | ) | ||||
Adjusting items: | ||||||||||||||||
Sherritt - Unrealized foreign exchange gain - continuing operations | (0.9 | ) | - | (4.6 | ) | (0.01 | ) | |||||||||
Metals - Moa JV - Impairment of property, plant and equipment | 1.5 | - | - | - | ||||||||||||
Metals - Moa JV - Inventory write-down/obsolescence | 1.6 | - | 0.1 | - | ||||||||||||
Metals - Fort Site - Inventory write-down/obsolescence | 7.3 | 0.02 | - | - | ||||||||||||
Metals - Metals Marketing - Cobalt gain | 0.3 | - | - | - | ||||||||||||
Oil and Gas and Power - Trade accounts receivable, net ACL revaluation | - | - | (1.1 | ) | - | |||||||||||
Power - Energas conditional sales agreement ACL revaluation (1) | - | - | 48.5 | 0.12 | ||||||||||||
Power - Revaluation of Energas payable | 0.5 | - | - | - | ||||||||||||
Power - Revaluation of GNC receivable | (5.0 | ) | (0.01 | ) | - | - | ||||||||||
Total adjustments, before tax | $ | 5.3 | $ | 0.01 | $ | 42.9 | $ | 0.11 | ||||||||
Tax adjustments | 0.2 | - | (2.1 | ) | (0.01 | ) | ||||||||||
Adjusted net (loss) earnings from continuing operations | $ | (19.3 | ) | $ | (0.05 | ) | $ | 13.9 | $ | 0.03 | ||||||
2023 | 2022 | |||||||||||||||
For the nine months ended September 30 | $ millions | $/share | $ millions | $/share | ||||||||||||
Net (loss) earnings from continuing operations | $ | (10.9 | ) | $ | (0.03 | ) | $ | 71.0 | $ | 0.18 | ||||||
Adjusting items: | ||||||||||||||||
Sherritt - Unrealized foreign exchange loss (gain) - continuing operations | 0.2 | - | (9.5 | ) | (0.02 | ) | ||||||||||
Corporate - Gain on repurchase of notes | (3.5 | ) | (0.01 | ) | (13.8 | ) | (0.03 | ) | ||||||||
Corporate - Transaction finance charges on repurchase of notes | - | - | 1.2 | - | ||||||||||||
Corporate - Unrealized losses on commodity put options | - | - | (0.9 | ) | - | |||||||||||
Corporate - Realized losses on commodity put options | - | - | 0.9 | - | ||||||||||||
Metals - Moa JV - Impairment of property, plant and equipment | 1.5 | - | - | - | ||||||||||||
Metals - Moa JV - Inventory write-down/obsolescence | 3.0 | 0.01 | 0.5 | - | ||||||||||||
Metals - Fort Site - Inventory write-down/obsolescence | 8.1 | 0.02 | - | - | ||||||||||||
Metals - Metals Marketing - Inventory write-down/obsolescence | 1.1 | - | - | - | ||||||||||||
Metals - Metals Marketing - Cobalt gain | 2.7 | 0.01 | - | - | ||||||||||||
Oil and Gas - Gain on disposal of PP&E | - | - | (1.3 | ) | - | |||||||||||
Oil and Gas and Power - Trade accounts receivable, net ACL revaluation | - | - | 0.4 | - | ||||||||||||
Power - Energas conditional sales agreement ACL revaluation (1) | - | - | 49.0 | 0.12 | ||||||||||||
Power - Revaluation of Energas payable | 8.9 | 0.02 | - | - | ||||||||||||
Power - Revaluation of GNC receivable | (18.2 | ) | (0.04 | ) | - | - | ||||||||||
Total adjustments, before tax | $ | 3.8 | $ | 0.01 | $ | 26.5 | $ | 0.07 | ||||||||
Tax adjustments | 0.4 | - | (2.5 | ) | (0.01 | ) | ||||||||||
Adjusted net (loss) earnings from continuing operations | $ | (6.7 | ) | $ | (0.02 | ) | $ | 95.0 | $ | 0.24 | ||||||
(1) | In the comparative period, Power recognized a non-cash loss of $48.5 million and $49.0 million, respectively, during the three and nine months ended September 30, 2022 on the revaluation of the ACL on the Energas CSA as a result of the Cobalt Swap signed by the Corporation subsequent to the comparative period end and, in part, due to the suspension of interest over the five-year period of the agreement. |
Spending on capital
The Corporation defines spending on capital for each segment as property, plant and equipment and intangible asset expenditures on a cash basis adjusted to the accrual basis in order to account for assets that are available for use by the Corporation and the Moa Joint Venture prior to payment and includes adjustments to accruals. The Moa Joint Venture and Fort Site segment's spending on capital includes the Fort Site's expenditures, plus the Corporation's 50% share of the Moa Joint Venture's expenditures, which is accounted for using the equity method for accounting purposes.
Combined spending on capital is the aggregate of each segment's spending on capital or the Corporation's consolidated property, plant and equipment and intangible asset expenditures and the property, plant and equipment and intangible asset expenditures of the Moa Joint Venture on a 50% basis, all adjusted to the accrual basis.
Combined spending on capital is used by management, and management believes this information is used by investors, to analyze the Corporation and the Moa Joint Venture's investments in non-current assets that are held for use in the production of nickel, cobalt, fertilizers, oil and gas and power generation.
The tables below reconcile property, plant and equipment and intangible asset expenditures per the financial statements to combined spending on capital, expressed in Canadian dollars:
$ millions, for the three months ended September 30 | 2023 | ||||||||||||||||||
Metals | Power | Other (1) | Combined | Adjustment | Total | ||||||||||||||
Property, plant and equipment expenditures (2) | $ | 13.7 | $ | 0.6 | $ | 0.2 | $ | 14.5 | $ | (7.6 | ) | $ | 6.9 | ||||||
Intangible asset expenditures (2) | - | - | 0.1 | 0.1 | - | 0.1 | |||||||||||||
13.7 | 0.6 | 0.3 | 14.6 | $ | (7.6 | ) | $ | 7.0 | |||||||||||
Adjustments: | |||||||||||||||||||
Accrual adjustment | 2.0 | - | - | 2.0 | |||||||||||||||
Spending on capital | $ | 15.7 | $ | 0.6 | $ | 0.3 | $ | 16.6 | |||||||||||
$ millions, for the three months ended September 30 | 2022 | ||||||||||||||||||
Metals | Power | Other (1) | Combined | Adjustment | Total | ||||||||||||||
Property, plant and equipment expenditures (2) | $ | 17.4 | $ | 3.0 | $ | 0.1 | $ | 20.5 | $ | (10.1 | ) | $ | 10.4 | ||||||
Intangible asset expenditures (2) | - | - | - | - | - | - | |||||||||||||
17.4 | 3.0 | 0.1 | 20.5 | $ | (10.1 | ) | $ | 10.4 | |||||||||||
Adjustments: | |||||||||||||||||||
Accrual adjustment | 0.7 | - | - | 0.7 | |||||||||||||||
Spending on capital | $ | 18.1 | $ | 3.0 | $ | 0.1 | $ | 21.2 | |||||||||||
$ millions, for the nine months ended September 30 | 2023 | |||||||||||||||||||
Metals | Power | Other (1) | Combined | Adjustment | Total | |||||||||||||||
Property, plant and equipment expenditures (2) | $ | 39.4 | $ | 1.9 | $ | 0.2 | $ | 41.5 | $ | (26.9 | ) | $ | 14.6 | |||||||
Intangible asset expenditures (2) | - | - | 1.2 | 1.2 | - | 1.2 | ||||||||||||||
39.4 | 1.9 | 1.4 | 42.7 | $ | (26.9 | ) | $ | 15.8 | ||||||||||||
Adjustments: | ||||||||||||||||||||
Accrual adjustment | 2.0 | - | (0.7 | ) | 1.3 | |||||||||||||||
Spending on capital | $ | 41.4 | $ | 1.9 | $ | 0.7 | $ | 44.0 | ||||||||||||
$ millions, for the nine months ended September 30 | 2022 | ||||||||||||||||||
Metals | Power | Other (1) | Combined | Adjustment | Total | ||||||||||||||
Property, plant and equipment expenditures (2) | $ | 40.3 | $ | 3.5 | $ | 0.1 | $ | 43.9 | $ | (25.9 | ) | $ | 18.0 | ||||||
Intangible asset expenditures (2) | - | - | 0.6 | 0.6 | - | 0.6 | |||||||||||||
40.3 | 3.5 | 0.7 | 44.5 | $ | (25.9 | ) | $ | 18.6 | |||||||||||
Adjustments: | |||||||||||||||||||
Accrual adjustment | 7.1 | - | - | 7.1 | |||||||||||||||
Spending on capital | $ | 47.4 | $ | 3.5 | $ | 0.7 | $ | 51.6 | |||||||||||
(1) | Includes property, plant and equipment and intangible asset expenditures of the Oil and Gas and Corporate segments. | |
(2) | Total property, plant and equipment expenditures and total intangible asset expenditures as presented in the Corporation's consolidated statements of cash flow. |
Combined free cash flow
The Corporation defines free cash flow for each segment as cash provided (used) by continuing operations for operating activities, less cash expenditures on property, plant and equipment and intangible assets, including exploration and evaluation assets. The Metals segment's free cash flow includes the Fort Site and Metals Marketing's free cash flow, plus the Corporation's 50% share of the Moa JV's free cash flow, which is accounted for using the equity method for accounting purposes. The Corporate segment's cash used by continuing operations for operating activities is adjusted to exclude distributions received from Moa JV.
Combined free cash flow is the aggregate of each segment's free cash flow or the Corporation's consolidated cash provided (used) by continuing operations for operating activities, less consolidated cash expenditures on property, plant and equipment and intangible assets, including exploration and evaluation assets, less distributions received from Moa JV, plus cash provided (used) by continuing operations for operating activities for the Corporation's 50% share of the Moa JV, less cash expenditures on property, plant and equipment and intangible assets for the Corporation's 50% share of the Moa JV. Distributions from the Moa JV excluded from Corporate cash used by continuing operations for operating activities are included in the Adjustment for Moa Joint Venture to arrive at total cash provided (used) by continuing operations for operating activities per the financial statements.
Free cash flow is used by management, and management believes this information is used by investors, to analyze cash flows generated from operations and assess its operations' ability to provide cash or its use of cash, after funding cash capital requirements, to service current and future working capital needs and service debt.
The tables below reconcile cash provided (used) by continuing operations for operating activities per the financial statements to combined free cash flow:
$ millions, for the three months ended September 30 | 2023 | ||||||||||||||||||||||||||||||
Metals (1)(2) | Power | Technol- | Oil and | Corporate | Combined | Adjustment | Total | ||||||||||||||||||||||||
Cash provided (used) by continuing operations for operating activities | $ | 10.7 | $ | 2.8 | $ | (3.9 | ) | $ | 2.6 | $ | (9.3 | ) | $ | 2.9 | $ | 1.5 | $ | 4.4 | |||||||||||||
Less: | |||||||||||||||||||||||||||||||
Property, plant and equipment expenditures | (13.7 | ) | (0.6 | ) | - | (0.2 | ) | - | (14.5 | ) | 7.6 | (6.9 | ) | ||||||||||||||||||
Intangible expenditures | - | - | - | (0.1 | ) | - | (0.1 | ) | - | (0.1 | ) | ||||||||||||||||||||
Free cash flow | $ | (3.0 | ) | $ | 2.2 | $ | (3.9 | ) | $ | 2.3 | $ | (9.3 | ) | $ | (11.7 | ) | $ | 9.1 | $ | (2.6 | ) | ||||||||||
$ millions, for the three months ended September 30 | 2022 | |||||||||||||||||||||||||||||||
Metals (1)(2) | Power | Technol- | Oil and | Corporate | Combined | Adjustment | Total | |||||||||||||||||||||||||
Cash provided (used) by continuing operations for operating activities | $ | 29.3 | $ | 9.1 | $ | (3.6 | ) | $ | 3.4 | $ | (17.6 | ) | $ | 20.6 | $ | (1.8 | ) | $ | 18.8 | |||||||||||||
Less: | ||||||||||||||||||||||||||||||||
Property, plant and equipment expenditures | (17.4 | ) | (3.0 | ) | - | (0.1 | ) | - | (20.5 | ) | 10.1 | (10.4 | ) | |||||||||||||||||||
Intangible expenditures | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Free cash flow | $ | 11.9 | $ | 6.1 | $ | (3.6 | ) | $ | 3.3 | $ | (17.6 | ) | $ | 0.1 | $ | 8.3 | $ | 8.4 | ||||||||||||||
$ millions, for the nine months ended September 30 | 2023 | |||||||||||||||||||||||||||||||
Metals (3)(4) | Power | Technol- | Oil and | Corporate | Combined | Adjustment | Total | |||||||||||||||||||||||||
Cash provided (used) by continuing operations for operating activities | $ | 112.5 | $ | 9.5 | $ | (13.0 | ) | $ | 3.8 | $ | (46.9 | ) | $ | 65.9 | $ | (19.6 | ) | $ | 46.3 | |||||||||||||
Less: | ||||||||||||||||||||||||||||||||
Property, plant and equipment expenditures | (39.4 | ) | (1.9 | ) | - | (0.2 | ) | - | (41.5 | ) | 26.9 | (14.6 | ) | |||||||||||||||||||
Intangible expenditures | - | - | - | (1.2 | ) | - | (1.2 | ) | - | (1.2 | ) | |||||||||||||||||||||
Free cash flow | $ | 73.1 | $ | 7.6 | $ | (13.0 | ) | $ | 2.4 | $ | (46.9 | ) | $ | 23.2 | $ | 7.3 | $ | 30.5 | ||||||||||||||
$ millions, for the nine months ended September 30 | 2022 | |||||||||||||||||||||||||||||||
Metals (3)(4) | Power | Technol- | Oil and | Corporate | Combined | Adjustment | Total | |||||||||||||||||||||||||
Cash provided (used) by continuing operations for operating activities | $ | 90.0 | $ | 23.9 | $ | (10.6 | ) | $ | (2.2 | ) | $ | (34.7 | ) | $ | 66.4 | $ | (16.4 | ) | $ | 50.0 | ||||||||||||
Less: | ||||||||||||||||||||||||||||||||
Property, plant and equipment expenditures | (40.3 | ) | (3.5 | ) | - | (0.1 | ) | - | (43.9 | ) | 25.9 | (18.0 | ) | |||||||||||||||||||
Intangible expenditures | - | - | - | (0.6 | ) | - | (0.6 | ) | - | (0.6 | ) | |||||||||||||||||||||
Free cash flow | $ | 49.7 | $ | 20.4 | $ | (10.6 | ) | $ | (2.9 | ) | $ | (34.7 | ) | $ | 21.9 | $ | 9.5 | $ | 31.4 | |||||||||||||
(1) | Cash (used) provided by continuing operations for operating activities for the Moa JV, Fort Site and Metals Marketing was $(1.8) million, $(12.2) million and $24.7 million, respectively, for the three months ended September 30, 2023 (September 30, 2022 - $2.0 million, $23.5 million and $3.8 million, respectively). | |
(2) | Property, plant and equipment expenditures and intangible expenditures for the Moa JV, Fort Site and Metals Marketing was $7.5 million, $6.2 million and nil, respectively, for the three months ended September 30, 2023 (September 30, 2022 - $10.1 million, $7.3 million and nil, respectively). | |
(3) | Cash provided (used) by continuing operations for operating activities for the Moa JV, Fort Site and Metals Marketing was $51.6 million, $(17.4) million and $78.3 million, respectively, for the nine months ended September 30, 2023 (September 30, 2022 - $60.0 million, $31.4 million and $(1.4) million, respectively). | |
(4) | Property, plant and equipment expenditures and intangible expenditures for the Moa JV, Fort Site and Metals Marketing was $26.8 million, $12.6 million and nil, respectively, for the nine months ended September 30, 2023 (September 30, 2022 - $25.9 million, $14.4 million and nil, respectively). |
View source version on businesswire.com: https://www.businesswire.com/news/home/20231101917931/en/
For further investor information contact:
Tom Halton
Director, Investor Relations and Corporate Affairs
Telephone: (416) 935-2451
Toll-free: 1 (800) 704-6698
E-mail: investor@sherritt.com
Sherritt International Corporation
Bay Adelaide Centre, East Tower
22 Adelaide St. West, Suite 4220
Toronto, ON M5H 4E3
www.sherritt.com
News Provided by Business Wire via QuoteMedia
HIGHLIGHTS
High-grade nickel sulphide (greater than 1% Ni) rock chips sampled at Werner Lake, which has predominately been explored for cobalt and copper previously, also returned high grade samples including 6.22% Cu and >1% Co.
Additionally, more than 12 samples exceeded grades of 1% cobalt or 1% copper (exceeded upper detection limit) including individual sample results of:
The HTM field team collected 209 rock samples over the course of June and July that greatly assisted in delineating the Ni-Cu-Co drill targets.
The Company has significantly increased its exposure to nickel sulphides and copper through the acquisition of Norpax and option of Reynar Lake Projects.
Norpax Deposit:
Reynar Lake Project:
During the quarter, High-Tech announced that significant results were achieved through the Ni- Cu-Co geochemical assessment of 209 rock samples collected during the 2023 field season at Werner Lake (Please refer to ASX Announcement dated 30 August 2023).
The results were extremely encouraging for Werner Lake and confirm the Cu-Co potential of the Project, as well as the discovery of high-grade nickel sulphide at surface. With 209 samples taken as part of the program, more than 12 samples exceeded grades of 1% cobalt or 1% copper (exceeded upper detection limit) including individual sample results of:
Targeted lithologies included intrusive mafic and ultramafic rocks with variable amounts of sulphide (pyrite, pyrrhotite, pentlandite, and chalcopyrite) including some semi-massive concentrations. Samples were analysed for precious metals by fire assay and inductively coupled plasma-atomic emission spectrometry (ICP-AES) finish, base metals by ICP-mass spectrometry (ICP-MS) and for copper over-limit by ICP finish. The analysis was aimed at identifying areas of interest for further geological assessment for (but not limited to) Co-Ni-Cu mineralisation.
Figure 1 – Sample F0015010 – 3.48% Cu and >1% Ni – Semi-massive pyrite-pyrrhotite-pentlandite.
Figure 2 - Sample F0015073 - >1% Ni and 0.8% Cu – Chlorite-altered gabbro with pyrrhotite, pentlandite and chalcopyrite.
Norpax Acquisition and Reynar Lake Option
High-Tech announced on 6 September 2023 that it had entered into an agreement to acquire the Norpax and purchased an option to acquire the Reynar Lake Project (Reynar Lake) (Together, the Projects). The Projects are located in Ontario, Canada and are directly west and adjoin the Company’s existing project at Werner Lake.
The acquisition of the Projects increases HTM’s landholding in the Werner Lake Area and the Company’s exposure to battery metals such as copper, cobalt, and nickel.
Norpax consist of one mining claim covering an area of 1.11km2, which is approximately 1km west of the HTM Werner Lake property and 6km east of the Manitoba-Ontario Boarder and has a historic resource of 1,010,000 tonnes 1.2% Ni and 0.5% Cu2 (Refer to ASX Announcement dated 6 September 2023).*
*The historical estimates are not reported in accordance with the JORC codes. A competent person has not done sufficient work to classify the historical estimates as a mineral resource in accordance with JORC Code. It is uncertain that following further exploration work that the historical estimates will be able to be reported as mineral resources within the JORC Code
The Company intends to continue to review all available date on the Project and design an exploration program that will move towards a JORC 2012 compliant Mineral Resource Estimate (MRE).
Click here for the full ASX Release
This article includes content from High-Tech Metals, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
HIGHLIGHTS
HTM finishes maiden drill program at Werner Lake with 798m of diamond drilling completed. All samples have been sent for assay at the Company’s lab services provider.
This follows the successful lithogeochemical sampling program which returned high-grade nickel sulphide (greater than 1% Ni) assays at Werner Lake. Historically, the property has also been explored for cobalt and copper, with recent sampling returning high grade samples including 6.22% Cu and >1% Co (refer ASX release dated 30 August 2023).
Figure 1 – Diamond Drilling at the Werner Lake Project.
Figure 2 – Diamond drilling zones at the Werner Lake Project.
This follows the significant results achieved through the Ni-Cu-Co lithogeochemical sampling programme totalling 209 samples collected during the 2023 field season at Werner Lake located in northwestern Ontario (refer ASX release dated 30 August 2023). The sampling results are extremely encouraging for Werner Lake and confirm the Cu-Co potential of the Project, as well as the discovery of high-grade nickel sulphide at surface. Of the 209 samples taken as part of the program, twelve samples exceeded grades of more than 1% cobalt or 1% copper and three samples returned results greater than 1% Ni (refer ASX release dated 30 August 2023).
Sonu Cheema, Executive Director, commented:
"Following the successful sampling program which covered an area of approximately 6km2 within our overall project area of approximately 20 km2, HTM has completed its maiden diamond drilling program at the high-grade Werner Lake Ni-Cu-Co project.
“Results from the drill targets have been advanced to ALS laboratory for assessment with results expected in the coming month.”
The Company is actively evaluating numerous new project possibilities near Werner Lake. It is consistently conducting thorough internal assessments of projects that align with the Company's goal of specializing in battery metals. Of special interest are ventures that enhance the Company's involvement in the recently discovered nickel potential of Werner Lake.
Click here for the full ASX Release
This article includes content from High-Tech Metals, licensed for the purpose of publishing on Investing News Australia. This article does not constitute financial product advice. It is your responsibility to perform proper due diligence before acting upon any information provided here. Please refer to our full disclaimer here.
Incremental European LNG Exposure to Drive Significant E.G. Financial Uplift Starting Jan 2024
Marathon Oil Corporation (NYSE: MRO) announced that through its wholly-owned subsidiaries it has entered into a five-year firm LNG sales agreement with Glencore Energy UK Ltd, a subsidiary of Glencore PLC (LSE: GLEN), for a portion of its equity natural gas produced from the Alba Field (Alba Unit, MRO 64% working interest) in Equatorial Guinea (E.G.), effective Jan. 1, 2024 . The pricing structure for the LNG sales agreement is linked to the Dutch Title Transfer Facility (TTF) index, less a fixed transportation fee, providing Marathon Oil with significant incremental exposure to the European LNG market.
Separately, due to the expected arbitrage between LNG and methanol pricing, Marathon Oil announced it expects to optimize its E.G. integrated gas operations in 2024 by redirecting a portion of Alba Unit natural gas from the local methanol facility (MRO 45% working interest) to the LNG facility (MRO 56% working interest).
"I'm excited to announce this new sales agreement linked to the European LNG market, signaling the conclusion of the legacy Henry Hub linked contract," said chairman, president, and CEO Lee Tillman . "The timing of this new sales agreement, EG LNG's track record of reliable operations, and the plant's proximity to Europe resulted in tremendous demand and an extremely competitive process. At recent forward curve pricing, we expect to realize an approximate year-on-year EBITDA increase of over $300 million next year across our E.G. integrated gas business, reflecting our differentiated and increasing exposure to the global LNG market. This success positions us strongly for the next phase of opportunities to advance the E.G. Gas Mega Hub, including up to two infill development wells in the Alba Unit and the potential tie-in of the third-party Aseng gas cap monetization."
Alex Sanna , Head of Oil and Gas Marketing, Glencore PLC, said: "We are delighted to further expand our cooperation with Marathon Oil. This deal reconfirms our commitment to the growth and diversification of our LNG portfolio as we continue to support producers and end users as a reliable and responsible off-taker and supplier."
About Marathon Oil
Marathon Oil (NYSE: MRO) is an independent oil and gas exploration and production (E&P) company focused on four of the most competitive resource plays in the U.S. - Eagle Ford, Texas ; Bakken, North Dakota ; STACK and SCOOP in Oklahoma and Permian in New Mexico and Texas , complemented by a world-class integrated gas business in Equatorial Guinea . The Company's Framework for Success is founded in a strong balance sheet, ESG excellence and the competitive advantages of a high-quality multi-basin portfolio. For more information, please visit www.marathonoil.com .
About Glencore
Glencore is one of the world's largest global diversified natural resource companies and a major producer and marketer of more than 60 commodities that advance everyday life. Through a network of assets, customers and suppliers that spans the globe, we produce, process, recycle, source, market and distribute the commodities that support decarbonisation while meeting the energy needs of today.
With around 140,000 employees and contractors and a strong footprint in over 35 countries in both established and emerging regions for natural resources, our marketing and industrial activities are supported by a global network of more than 40 offices.
Glencore's customers are industrial consumers, such as those in the automotive, steel, power generation, battery manufacturing and oil sectors. We also provide financing, logistics and other services to producers and consumers of commodities.
Forward-looking Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, including without limitation statements regarding: future optimization of E.G. integrated gas operations; expected EBITDA uplift across our E.G. integrated gas business; future exposure to the global LNG market; advancement of the Gas Mega Hub, including future development activity in the Alba Unit and potential future tie-in of the third party Aseng gas cap blowdown, and other statements regarding management's plans and objectives for future operations, are forward-looking statements. Words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "future," "guidance," "intend," "may," "outlook," "plan," "positioned," "project," "seek," "should," "target," "will," "would," or similar words may be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking. While Marathon Oil believes its assumptions concerning future events are reasonable, a number of factors could cause actual results to differ materially from those projected, including, but not limited to: conditions in the oil and gas industry, including supply/demand levels for crude oil and condensate, NGLs and natural gas and the resulting impact on price; changes in expected reserve or production levels; changes in political or economic conditions in the U.S. and Equatorial Guinea , including changes in foreign currency exchange rates, interest rates, inflation rates and global and domestic market conditions; actions taken by the members of the Organization of the Petroleum Exporting Countries (OPEC) and Russia affecting the production and pricing of crude oil and other global and domestic political, economic or diplomatic developments; capital available for exploration and development; risks related to Marathon Oil's hedging activities; voluntary or involuntary curtailments, delays or cancellations of certain drilling activities; well production timing; liabilities or corrective actions resulting from litigation, other proceedings and investigations or alleged violations of law or permits; drilling and operating risks; lack of, or disruption in, access to storage capacity, pipelines or other transportation methods; availability of drilling rigs, materials and labor, including the costs associated therewith; difficulty in obtaining necessary approvals and permits; the availability, cost, terms and timing of issuance or execution of, competition for, and challenges to, mineral licenses and leases and governmental and other permits and rights-of-way, and our ability to retain mineral licenses and leases; non-performance by third parties of contractual or legal obligations, including due to bankruptcy; administrative impediments or unexpected events that may impact dividends or other distributions, or the timing thereof, from our equity method investees; changes in our credit ratings; hazards such as weather conditions, a health pandemic (including COVID-19), acts of war or terrorist acts and the government or military response thereto; the impacts of supply chain disruptions that began during the COVID-19 pandemic and the resulting inflationary environment; security threats, including cybersecurity threats and disruptions to our business and operations from breaches of our information technology systems, or breaches of the information technology systems, facilities and infrastructure of third parties with which we transact business; changes in safety, health, environmental, tax and other regulations, requirements or initiatives, including initiatives addressing the impact of global climate change, air emissions, or water management; our ability to achieve, reach or otherwise meet initiatives, plans, or ambitions with respect to ESG matters; our ability to pay dividends and make share repurchases; our ability to secure increased exposure to the global LNG market; impacts of the Inflation Reduction Act of 2022 and our assumptions relating thereto; the risk that the Ensign assets do not perform consistent with our expectations, including with respect to future production or drilling inventory; other geological, operating and economic considerations; and the risk factors, forward-looking statements and challenges and uncertainties described in Marathon Oil's 2022 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases, available at https://ir.marathonoil.com/ . Except as required by law, Marathon Oil undertakes no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.
Media Relations Contact:
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Investor Relations Contacts:
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SOURCE Marathon Oil Corporation
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