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Sherritt International Corp Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company expects to navigate the current market pressures successfully and continue to do so in the years ahead.
- The company maintained its available liquidity in Canada, ending the year at approximately the same level it started despite the average reference price for both nickel and cobalt declining by 22%.
- Nickel sales volumes were 23% higher in Q4, and mining, processing, and refining costs per pound of nickel sold were 14% lower in Q4.
- The company acknowledges its team and partners in Cuba for their exceptional performance in both Metals production and Power production and net direct cash costs, all falling within the guidance range for the year.
- Financial performance continues to be impacted by the challenging price environment for nickel and cobalt.
- The company faced a number of external challenges in Cuba during Q4, including an earthquake, two hurricanes, national-wide power outages, and heavy rains that required the company to process lower-grade stockpiles.
- Operating conditions in Cuba have been much more challenging following COVID with a reduction of tourism revenue into the country, and following the initial Trump stance to go hard against Cuba and sort of maximum pressure.
- The company expects lower cobalt by-product credits and higher input costs, mainly from higher sulfur prices.
- NDCC is expected to be relatively consistent with 2024, benefiting from higher production and sales in addition to cost optimization initiatives.
- The company expects to receive a full year of savings following the cost optimizations implemented last year.
- Power production in 2025 will continue to be strong despite the Varadero facility operating in frequency control, which is estimated to have an impact of approximately 150 gigawatt hours in power generation.
- The company expects to see increased levels of production in sales, which is ultimately driving increased availability of cash flow and the ability to pay dividends.
- The company expects to receive significantly larger dividends in Canada as a direct result of its multi-year strategy to optimize its Power division.
Q&A Highlights from Sherritt International Corp Earnings Call Q4 2024
- Analyst asked about the company's continued expansion in Moa despite the challenging operating conditions in Cuba, including immigration and power blackouts.
- The company has been able to navigate the challenging operating conditions in Cuba successfully over the last few years, and they expect to continue to do so in the years ahead. They have taken steps to incentivize and retain talent in Cuba, which should help to mitigate the impact of talent exiting the region. The company is confident that their actions will create a similar operating environment and outcome as they have experienced in the past.
- The company has been able to navigate the challenging operating conditions in Cuba successfully over the last few years, and they expect to continue to do so in the years ahead. They have taken steps to incentivize and retain talent in Cuba, which should help to mitigate the impact of talent exiting the region. The company is confident that their actions will create a similar operating environment and outcome as they have experienced in the past.
- Analyst asked about the potential impact of the Trump administration's actions on the company's operations.
- The company does not currently sell any products to the United States, nor do they have any dealings with the United States. Therefore, any potential sanctions against Canada would have minimal impact on their operations and business. However, they refrain from speculating on the specific actions the Trump administration might take.
- The company does not currently sell any products to the United States, nor do they have any dealings with the United States. Therefore, any potential sanctions against Canada would have minimal impact on their operations and business. However, they refrain from speculating on the specific actions the Trump administration might take.
- Analyst asked about the swap agreement and the possibility of a deferment of the 2025 payments to 2026.
- The company clarified that the Cobalt Swap functions by setting a targeted minimum level per year, and if that minimum threshold is not met, it gets added to the following year. The target for 2025 is higher than the minimum for a single year, and the company does not anticipate that it will be fully fulfilled under current market conditions. However, they expect the Cobalt Swap to be fulfilled in the expected timeframe by the end of 2027, given the significant impact of refractive interest if it's not fully repaid in the expected timeframe. The company's partners are highly incentivized to ensure that the Cobalt Swap is fully satisfied by the end of the term.
- The company clarified that the Cobalt Swap functions by setting a targeted minimum level per year, and if that minimum threshold is not met, it gets added to the following year. The target for 2025 is higher than the minimum for a single year, and the company does not anticipate that it will be fully fulfilled under current market conditions. However, they expect the Cobalt Swap to be fulfilled in the expected timeframe by the end of 2027, given the significant impact of refractive interest if it's not fully repaid in the expected timeframe. The company's partners are highly incentivized to ensure that the Cobalt Swap is fully satisfied by the end of the term.
- Analyst asked about the ramp-up and whether it's fair to assume or model completion by the end of the first half of this year.
- The company clarified that they are only commencing the ramp-up in the first half of this year, so they will start getting volumes from the ramp-up in Q3 and reach full capacity by Q4.
- The company clarified that they are only commencing the ramp-up in the first half of this year, so they will start getting volumes from the ramp-up in Q3 and reach full capacity by Q4.
- Analyst asked about the correlation between unit production costs or operating costs and fuel prices.
- Leon Binedell explained that the fuel supplied to Energas by CUPET is free of charge, so the cost of operating is purely the transformation cost of converting gas, treating the gas, and generating power. There is no cost of fuel or exposure to fuel prices.
- Leon Binedell explained that the fuel supplied to Energas by CUPET is free of charge, so the cost of operating is purely the transformation cost of converting gas, treating the gas, and generating power. There is no cost of fuel or exposure to fuel prices.
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