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ANALYST AND INVESTOR DAY – Sherritt International

Sherritt International · Mar 25, 2015 · 73 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. ANALYST AND INVESTOR DAY – Sherritt International – slide 1
    THE NAME IN NICKEL Analyst & Investor Day l March 25, 2015 SHERRITT INVESTOR DAY l PAGE 1
  2. ANALYST AND INVESTOR DAY – Sherritt International – slide 2
    Agenda Analyst & Investor Day l March 25, 2015 David Pathe Dean Chambers Elvin Saruk Martin Vydra Tim Dobson Sean McCaughan President and Executive Vice President Senior Vice President Senior Vice President Senior Vice President…
  3. ANALYST AND INVESTOR DAY – Sherritt International – slide 3
    OVERVIEW & STRATEGY David Pathe, President & CEO SHERRITT INVESTOR DAY l PAGE 4
  4. ANALYST AND INVESTOR DAY – Sherritt International – slide 4
    Investment Proposition LOW COST PRODUCTION GROWTH PRODUCER IN NICKEL EXPERIENCED BOARD FOCUS ON NICKEL AND LONG LIFE AND MANAGEMENT ENERGY YIELDING ASSETS TEAM SOLID RESULTS SHERRITT INVESTOR DAY l PAGE 5
  5. ANALYST AND INVESTOR DAY – Sherritt International – slide 5
    Building on Our 2014 Accomplishments Focusing On Core Continuing To Extending The Strengthening Reducing Nickel Business Ramp Up At Life Of Cuban The Balance Costs Ambatovy Energy Business Sheet Completed sale Achieves guidance…
  6. ANALYST AND INVESTOR DAY – Sherritt International – slide 6
    Executing on Our 2015 Strategic Priorities Focusing On Core Continuing To Extending The Life Maintaining Nickel Business Ramp Up At Of Cuban Energy Strong Balance Ambatovy Business Sheet And Liquidity Sustaining Targeting a…
  7. ANALYST AND INVESTOR DAY – Sherritt International – slide 7
    Nickel Production Growth Finished Nickel Production (tonnes) - Sherritts Attributable Share 19,800 14,821 10,059 2,278 17,132 16,771 16,455 16,750 (1) 2012 2013 2014 2015E Moa Ambatovy 50% 40% Production expected…
  8. ANALYST AND INVESTOR DAY – Sherritt International – slide 8
    Shifting Our Business Focus Historical Contribution: Medium Term Outlook Contribution: Adjusted EBITDA by Division (%)(1) Adjusted EBITDA (%)(1) 6% 5% 9% 30% 60% 81% 66% 34% 65% 25% 19% (0.6%) 2012 2013 2014 Metals…
  9. ANALYST AND INVESTOR DAY – Sherritt International – slide 9
    Production Growth Leading to Strong Cash Flow Analysts Mean Cash Flow Per Share Estimates 2015E-2017E 0.99 1.01 0.48 0.25 2014 (1) 2015E 2016E 2017E Source: Factset Broker Estimates March 20, 2015 SHERRITT INVESTOR…
  10. ANALYST AND INVESTOR DAY – Sherritt International – slide 10
    Ambatovy is on the Cusp of Cash Flow Long-life nickel asset that is on the cusp of cash flow World class accomplishment for Sherritt Illustrative Mining Life Cycle 10 Year Nickel Price Performance 30 Cash Flow 25 20 15 10…
  11. ANALYST AND INVESTOR DAY – Sherritt International – slide 11
    Next Step in Investment Plan Capital expenditures in 2015 targeted at Oil & Gas division and Moa JV Moa capital based on life 2015 Capital Guidance extensions and optimization project Attractive opportunities in Oil & Gas business…
  12. ANALYST AND INVESTOR DAY – Sherritt International – slide 12
    Strong Leverage of NAV to Nickel Price Sensitivity Sensitivity 50% 8.66 7.25 5.87 (1) Analyst Consensus +0.50/lb +1.00/lb Analyst Consensus Nickel Price Assumptions: 2015E: US8.00/lb. l 2016E: US9.00/lb. l 2017E:…
  13. ANALYST AND INVESTOR DAY – Sherritt International – slide 13
    The Political Landscape Cuba Discussions continue regarding the re-establishment of diplomatic relations Embargo/Helms-Burton legislation New foreign investment law in Cuba Madagascar Diplomatic relations with international…
  14. ANALYST AND INVESTOR DAY – Sherritt International – slide 14
    The Political Landscape Relevance of U.S. legislation to Sherritt U.S. Embargo Helms-Burton Act Impacts ability to conduct Travel impact business in U.S., raise financing Legacy US ownership in U.S., source U.S. products…
  15. ANALYST AND INVESTOR DAY – Sherritt International – slide 15
    Sustainability: Managing Risks, Building Value Sherritt identifies environmental, social and governance risks/opportunities and implements measures to enhance our social license, build reputation and drive business value. We have been…
  16. ANALYST AND INVESTOR DAY – Sherritt International – slide 16
    FINANCE UPDATE Dean Chambers, Executive Vice President & CFO SHERRITT INVESTOR DAY l PAGE 17
  17. ANALYST AND INVESTOR DAY – Sherritt International – slide 17
    Maintaining Financial Strength SHERRITT INVESTOR DAY l PAGE 18
  18. ANALYST AND INVESTOR DAY – Sherritt International – slide 18
    Maintaining Financial Strength Reduced leverage in 2014 As at December 31, 2014 ( millions) Total Recourse Senior unsecured notes (2018, 2020, 2022) 732 732 Ambatovy partner loans 111 111 Ambatovy additional partner loans 1,014 -…
  19. ANALYST AND INVESTOR DAY – Sherritt International – slide 19
    Ambatovy Distributable Cash Flow Revenue Generated by Ambatovy (100%) subtract Payment of Operating Expenses (100%) subtract 1. Interest LIBOR + 255 bps (post financial Payment of Debt Service (2 parts) (100%) completion) 2.…
  20. ANALYST AND INVESTOR DAY – Sherritt International – slide 20
    Rigorous Liquidity Management Desirable level of liquidity driven by: Cash and Cash Equivalents ( millions) maturity profile of long-term debt estimate of cash flow from 476 operations based on conservative commodity price…
  21. ANALYST AND INVESTOR DAY – Sherritt International – slide 21
    Ambatovy Progressing Towards Financial Completion Requirement for financial completion by September 30, 2015 Production Environmental Ten certificates to be delivered Certificate Certificate Pipeline Upon achieving financial…
  22. ANALYST AND INVESTOR DAY – Sherritt International – slide 22
    Ambatovy Expected to be Cash Flow Positive Prior to Debt Service Funding to Ambatovy driven by debt reduction On pace to become funding neutral at end of 2015 Funding estimates in the range of 50-100 million to Ambatovy from Sherritt…
  23. ANALYST AND INVESTOR DAY – Sherritt International – slide 23
    IFRS to Proportionate Ownership Reconciliation Adjusted Results to IFRS 2014 Actual ( millions) Adjusted IFRS adjustments IFRS Results(1) and other(2) Results Revenue Moa JV and Fort Site 457.4 (385.6) 71.8 Ambatovy JV 291.8 (291.8) -…
  24. ANALYST AND INVESTOR DAY – Sherritt International – slide 24
    Navigating the Statement of Cash Flow Operating Cash Flow Operating cash flow generated (used) by CASH consolidated business units only, being Oil & Gas, Power, Fort Site and Corporate PROVIDED BY Cash generated (used) by Moa and…
  25. ANALYST AND INVESTOR DAY – Sherritt International – slide 25
    Navigating the Statement of Cash flow Other Items Power cash flow Power conditional sales agreement to Energas provides annual principal and interest cash flow in addition to EBITDA Interest received of 27 million (0.09/share) in 2014…
  26. ANALYST AND INVESTOR DAY – Sherritt International – slide 26
    Tax Overview Oil & Gas, Power and Moa are cash taxable Not cash taxable in Corporate and Segment/ December 31, 2014 Ambatovy due to previous losses Operation Tax Expense/(Recovery) Tax expense on financial ( millions) statements is…
  27. ANALYST AND INVESTOR DAY – Sherritt International – slide 27
    New Foreign Investment Law in Cuba to Reduce Taxes Sherritts Cuban tax rates are decreasing 2014 cash taxes would have been lower by 15 Million (0.05/share) if in place all of 2014 Statutory Tax Segment/Operation Jurisdiction…
  28. ANALYST AND INVESTOR DAY – Sherritt International – slide 28
    Analysts Consensus NAV NAV ranges from 3.44 - 9.18 per share Valuations for Ambatovy account for one of the largest variances, followed by Moa Current share price 2.29 NAV Per Share 9.18 8.06 7.64 6.00 5.87 5.33 4.55 4.68…
  29. ANALYST AND INVESTOR DAY – Sherritt International – slide 29
    NICKEL MARKET Martin Vydra, Senior Vice President, Moa JV SHERRITT INVESTOR DAY l PAGE 30
  30. ANALYST AND INVESTOR DAY – Sherritt International – slide 30
    Nickel Market Supply/Demand 2015E-2019E Despite a 10% increase in nickel World Supply/Demand 2014-2019 averaged prices to US7.65/lb in 2014, market expectations were 2,400 higher 2,300 2,200 Consensus forecasts call for higher…
  31. ANALYST AND INVESTOR DAY – Sherritt International – slide 31
    Premium Pricing for Highest Grade Nickel (Class II nickel) (Class I nickel) PRICING OPERATIONS AMBATOVY MOA Only 14 companies in the world can deliver nickel to the LME. Sherritt is one of them SHERRITT INVESTOR DAY l…
  32. ANALYST AND INVESTOR DAY – Sherritt International – slide 32
    Low Cost Nickel Producer Nickel Cost Curve (U.S. /lb) Nickel Industry, Normal, C1 Cash Cost Source: Wood Mackenzie SHERRITT INVESTOR DAY l PAGE 33
  33. ANALYST AND INVESTOR DAY – Sherritt International – slide 33
    MOA STEADY PROFITABLE PRODUCTION Martin Vydra, Senior Vice President, Moa JV SHERRITT INVESTOR DAY l PAGE 34
  34. ANALYST AND INVESTOR DAY – Sherritt International – slide 34
    Moa Long Life Quality Asset A vertically integrated nickel mining, processing, refining enterprise Sherritt owns 50% & General Nickel Company S.A. (GNC) of Cuba owns 50% Open pit mine producing nickel and cobalt from laterites…
  35. ANALYST AND INVESTOR DAY – Sherritt International – slide 35
    Long-Term Resource Long life ore body consisting of: Proven and Probable reserves 16 years Additional resources received in 2013 require drilling to upgrade to reserve Agreement with Cuba for a total of 25 years of reserves at…
  36. ANALYST AND INVESTOR DAY – Sherritt International – slide 36
    Moa Mining Concessions SHERRITT INVESTOR DAY l PAGE 37
  37. ANALYST AND INVESTOR DAY – Sherritt International – slide 37
    Production Increase in 2015 Recoveries of 87% in 2014 and ore grades 1.30% Ni+Co historically exploited expected to be consistent for the future Moa Nickel Production 2014-2015E (1)(2) Moa Cobalt Production 2014-2015E (1)(2) 1,875…
  38. ANALYST AND INVESTOR DAY – Sherritt International – slide 38
    Progress at Acid Plant Commenced construction in Q1 2015 Re-start construction on existing infrastructure Decrease in operating costs will vary with commodity prices Expect start-up in second half of 2016 SHERRITT INVESTOR DAY…
  39. ANALYST AND INVESTOR DAY – Sherritt International – slide 39
    Pipeline of Opportunities to enhance Moa JV business Operational Potential Medium Efficiencies Term Projects Optimization Projects Fleet dispatch Replace slurry prep system plant Maintenance 5th sulphide planning…
  40. ANALYST AND INVESTOR DAY – Sherritt International – slide 40
    Reinvesting to Sustain Operations for 25 Years 2014-2015E ( millions) Sustaining capital for mobile equipment at Moa and infrastructure at refinery to 20 extend life of operation 60 20 million in growth capital 6 supported by…
  41. ANALYST AND INVESTOR DAY – Sherritt International – slide 41
    Moas Highlights Deep technical expertise with over 60 year operating history Low cash costs of US5 per lb in 2014 - forecasted to continue to 2016 Construction of new acid plant will reduce operating costs Long-term resource with…
  42. ANALYST AND INVESTOR DAY – Sherritt International – slide 42
    AMBATOVY PRODUCING RESULTS Tim Dobson, Senior Vice President, Ambatovy JV SHERRITT INVESTOR DAY l PAGE 43
  43. ANALYST AND INVESTOR DAY – Sherritt International – slide 43
    Growth SHERRITT INVESTOR DAY l PAGE 44
  44. ANALYST AND INVESTOR DAY – Sherritt International – slide 44
    Ambatovy Transitioning to Steady State Operations Sherritt is the operator with a 40% interest The worlds largest finished nickel laterite project Nameplate capacity of 60,000 t/yr LME-grade nickel Long life asset with a mine life…
  45. ANALYST AND INVESTOR DAY – Sherritt International – slide 45
    Significant Assets In a New Mining Frontier Port Tailings Pond Port of Toamasina Plant Site Supported by a 30 year mine life Ore Slurry Proven and Probable Pipeline reserves of 186 Mine Site million tonnes at 0.85% nickel…
  46. ANALYST AND INVESTOR DAY – Sherritt International – slide 46
    The Ambatovy Plant World Class Operations SHERRITT INVESTOR DAY l PAGE 47
  47. ANALYST AND INVESTOR DAY – Sherritt International – slide 47
    Sherritts Proven Laterite Expertise Demonstrated Over Decades HPAL 20+ years Moa experience Proven autoclave technology Multiple train operations Refinery 60 years Fort Saskatchewan experience 100% LME grade metal products…
  48. ANALYST AND INVESTOR DAY – Sherritt International – slide 48
    Production Levels Rising 36 Month Ramp-Up Nearing Completion Quarterly Finished Nickel Production (tonnes, 40% basis) 5,000 4,500+ 4,500 3,964 4,000 3,743 3,513 3,602 3,500 3,000 2,854 2,690 2,500 2,332 2,183 2,000 1,500 1,000…
  49. ANALYST AND INVESTOR DAY – Sherritt International – slide 49
    Key Milestones A Track Record of Success January 2014 Commercial production: 70% nameplate capacity for 30 days December 2014 Full year metal production: 61% nameplate capacity January 2015 Autoclave throughput: 102% of nameplate…
  50. ANALYST AND INVESTOR DAY – Sherritt International – slide 50
    Nickel Production Forecast Targeting 100% Nameplate Production Rate Nickel Production Forecast 2014-2015E (1)(2) 2015 Achieved 90% nameplate production rate 19,800 Transition from ramp up to operations will bring 14,821 increased…
  51. ANALYST AND INVESTOR DAY – Sherritt International – slide 51
    Net Direct Cash Costs Expectations Increasing Production Volume Unlocks Value Targeted C1 Costs (US/lb) 12 10 8 6 - 8 6 4 - 6 4 3 - 5 2 0 70% 90% 100% Production as a % of nameplate capacity Low cash costs of 4 - 6 at…
  52. ANALYST AND INVESTOR DAY – Sherritt International – slide 52
    Capital Expenditures Plant Transitioning to Sustaining Capital Phase Capital Expenditures ( millions, 40% basis) 40 Reliability and debottlenecking 38 capital will decrease over next 2 3 years Mine development and tailings…
  53. ANALYST AND INVESTOR DAY – Sherritt International – slide 53
    A Bright Future for Ambatovy New, Long Life Assets Increasing production provides strong leverage to rising nickel prices expected in the second half of 2015 90 for 90 production test completed Transitioning from ramp up to…
  54. ANALYST AND INVESTOR DAY – Sherritt International – slide 54
    OIL & GAS AND POWER BUILDING LONG-TERM PRODUCTION Elvin Saruk, Senior Vice President, Oil & Gas and Power SHERRITT INVESTOR DAY l PAGE 55
  55. ANALYST AND INVESTOR DAY – Sherritt International – slide 55
    Profitable SHERRITT INVESTOR DAY l PAGE 56
  56. ANALYST AND INVESTOR DAY – Sherritt International – slide 56
    Profitable Production Largest independent oil producer in Cuba Production of 20,000 gross working- interest (GWI) bopd from 56 wells Low unit operating costs in 2014 of 8.56 per GWI bbl Strong operating margin and contribution to…
  57. ANALYST AND INVESTOR DAY – Sherritt International – slide 57
    Expansion Drilling in Two New Blocks Received extension of Puerto Escondido/Yumuri PSC to 2028 plus two new PSCs covering 1,228 square kms with 25 year term Completed five out of seven commitment wells on extension lands…
  58. ANALYST AND INVESTOR DAY – Sherritt International – slide 58
    Revenue Based on Fuel Oil No. 6 Performance Revenue is based on Fuel Oil No. 6 price Price relationship of Fuel Oil No. 6 to WTI is currently at approximately 90% 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 0 0…
  59. ANALYST AND INVESTOR DAY – Sherritt International – slide 59
    Revenue Model For each PSC, after commercial production, Sherritt is allocated cost recovery oil as reimbursement for approved capital and operating costs, including costs in the cost recovery pool Volume of cost recovery oil =…
  60. ANALYST AND INVESTOR DAY – Sherritt International – slide 60
    Attractive Netback Business Model Low Cash Costs Attributed To: Successful ( Vertical Experienced operating 2015E 10/bbl integration Team model Sherritts netback is 5% higher when compared to other heavy oil producers Sherritt…
  61. ANALYST AND INVESTOR DAY – Sherritt International – slide 61
    Long-Term Production Strategy Multi-year production strategy to reach 20,000 bbls over the long-term Existing Varadero PSC ends in November 2017 and PE/YU ends in March 2018 Immediate focus in on the PE/YU extension lands Production…
  62. ANALYST AND INVESTOR DAY – Sherritt International – slide 62
    Investing in Long-Term Production Capital Expenditures 2014-2015E Increased oil production 107 increasing drilling activity Second drill rig in 65 operation Extensive land position to develop new wells Low cost production 2014…
  63. ANALYST AND INVESTOR DAY – Sherritt International – slide 63
    2015 Highlights The Year of Execution Priorities for 2015 Plan is to drill 10 wells in 2015 dependent on success Receive approval for two new PSCs Prepare to drill on Block 10 in early 2016 Challenges Low oil prices SHERRITT…
  64. ANALYST AND INVESTOR DAY – Sherritt International – slide 64
    Reliability SHERRITT INVESTOR DAY l PAGE 65
  65. ANALYST AND INVESTOR DAY – Sherritt International – slide 65
    Largest Independent Power Producer in Cuba Sherritt Power operates in Cuba through its 331/3% interest in Energas S.A. Natural gas is processed from oil fields and generates electricity and liquids The 150 MW Boca de Jaruco Combined…
  66. ANALYST AND INVESTOR DAY – Sherritt International – slide 66
    Seeking Opportunities to Increase Utilization Stable power generation of 850 Electricity (GWh) GWh Business focused on optimal 847 850 utilization of gas Current unused generation capacity of 145 MW Opportunity to increase power…
  67. ANALYST AND INVESTOR DAY – Sherritt International – slide 67
    Predictable Cash Flow Model Total Capital Expenditures ( millions) Cash flow is received from adjusted EBITDA and net finance 4.4 income 4.0 Contributed adjusted EBITDA of 25 million in 2014 Capital is anticipated to remain…
  68. ANALYST AND INVESTOR DAY – Sherritt International – slide 68
    Power Highlights Reliable contributor to adjusted EBITDA Seeking fuel opportunities to achieve increased power generation by utilizing installed capacity SHERRITT INVESTOR DAY l PAGE 69
  69. ANALYST AND INVESTOR DAY – Sherritt International – slide 69
    Conclusion SHERRITT INVESTOR DAY l PAGE 70
  70. ANALYST AND INVESTOR DAY – Sherritt International – slide 70
    Delivering Results Focused on delivering against stated priorities Clear strategy, Strategic priorities to simplified business result in stronger business Prudent Decision Making Strategic Disciplined growth deployment based on…
  71. ANALYST AND INVESTOR DAY – Sherritt International – slide 71
    Investment Summary Top 10 largest nickel producer in the world Rising production in base metals with forecasted nickel price increases Strong cash flow growth Catalysts - financial completion at Ambatovy SHERRITT INVESTOR…
  72. ANALYST AND INVESTOR DAY – Sherritt International – slide 72
    Questions SHERRITT INVESTOR DAY l PAGE 73
  73. ANALYST AND INVESTOR DAY – Sherritt International – slide 73
    Sherritt International Corporation 1133 Yonge Street, Toronto, Ontario, Canada M4T 2Y7 Media & Investor Relations Sean McCaughan Telephone: 416.935.2451 Toll-Free: 1.800.704.6698 Email: investorsherritt.com Website: www.sherritt.com…

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