SHERRITT INTERNATIONAL CORPORATION 1
First Quarter Results l April 29, 2015
THE NAME IN NICKEL
SHERRITT INTERNATIONAL CORPORATION 2
Cautionary Statement on Forward-Looking Information This document 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”, “projected”, “continue” or other similar words or phrases. Specifically, forward-looking statements in this document include, but are not limited to, certain expectations for achieving financial completion at Ambatovy; securing additional Production Sharing Contracts in Cuba; capital costs and expenditures; global nickel market supply and demand forecasts; Cuban tax rates in the power business; and corporate objectives, goals and plans for 2015. Forward-looking statements are not based on historic facts, but rather on current expectations, assumptions and projections about future events. 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 those 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 document 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. Key factors that may result in material differences between actual results and developments and those contemplated by this document include global economic and market conditions, and business, economic and political conditions in Canada, Cuba, Madagascar, and the principal markets for the Corporation’s products. Other such factors include, but are not limited to, uncertainties in the ramp-up and operation of large mining, processing and refining projects; risks related to the availability of capital to undertake capital initiatives; changes in capital cost estimates in respect of the Corporation’s capital initiatives; risks associated with the Corporation’s joint-venture partners; risk of future non-compliance with financial covenants; potential interruptions in transportation; political, economic and other risks of foreign operations; the Corporation’s reliance on key personnel and skilled workers; the possibility of equipment and other unexpected failures; the potential for shortages of equipment and supplies; risks associated with mining, processing and refining activities; uncertainties in oil and gas exploration; risks related to foreign exchange controls on Cuban government enterprises to transact in foreign currency; risks associated with the United States embargo on Cuba and the Helms-Burton legislation; risks related to the Cuban government’s and Malagasy government’s ability to make certain payments to the Corporation; risks related to exploration and development programs; risks associated with access to reserves and resources; risks related to the Corporation’s reliance on partners and significant customers; risks related to the Corporation’s corporate structure; foreign exchange and pricing risks; uncertainties in commodity pricing; credit risks; competition in product markets; the Corporation’s ability to access markets; risks in obtaining insurance; uncertainties in labour relations; 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; risks associated with future acquisitions; uncertainty in the ability of the Corporation to obtain government permits; risks associated with government regulations and environmental, health and safety matters; uncertainties in growth management; interest rate risk; risks related to political or social unrest or change and those in respect of indigenous and community relations; risks associated with rights and title claims; and the Corporation’s ability to meet other factors listed from time to time in the Corporation’s continuous disclosure documents. 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. 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 document and in the Corporation’s other documents filed with the Canadian securities authorities including, but not limited to, the Corporation’s Annual Information Form for the year ended December 31, 2014 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 document 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.
Non-GAAP Measures Management uses Combined Results, Adjusted EBITDA, average-realized price, unit operating cost, adjusted earnings, combined adjusted operating cash flow per share and combined free cash flow, 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 evaluate the results of its underlying business. These measures 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. For additional information, including a reconciliation of each non-GAAP measures to the most directly comparable GAAP measure, see the Non-GAAP measures section in our Management’s Discussion and Analysis (MD&A) for the three months ended March 31, 2015 available on our website at www.sherritt.com.
SHERRITT INTERNATIONAL CORPORATION 3
Quarterly results David Pathe, President & CEO
SHERRITT INTERNATIONAL CORPORATION 4
Executing on Our 2015 Strategic Priorities
Focusing On Our Core Nickel Business
Continuing To Ramp Up Ambatovy
Extending The Life Of Our Cuban Energy Business
Building Balance Sheet Strength
Sustaining production and lowering costs at Moa JV Advancing the acid plant project at Moa JV
Targeting a production rate of 90% of nameplate capacity over a 90-day period within the first half of 2015 Targeting financial completion by September 30, 2015
Securing two additional exploration PSCs Commencing drilling on extended Puerto Escondido/Yumuri PSC
Maintaining a strong balance sheet and liquidity
Reducing Costs
Optimizing operating and administrative costs
SHERRITT INTERNATIONAL CORPORATION 5 (1) Compared to the three months ending March 31, 2015. (2) Refers to a Non-GAAP measure. For additional information see the MD&A for March 31, 2015 at www.sherritt.com
Q1 2015 Highlights
Operational Results(1)
• Record nickel production of 9,013 tonnes increased by 26% • Nickel cash costs at Moa JV decreased to US$4.36/lb • Nickel cash costs at Ambatovy JV decreased to U.S.$5.74/lb • Ambatovy JV nickel mine achieved production milestone of “90 for 90”
Financial Results(2)
• Adjusted EBITDA decreased by 19% to $44 million • Combined adjusted operating cash flow increased 58% to $56 million
or $0.19/share • Ambatovy JV achieved $13 million in operating cash flow
SHERRITT INTERNATIONAL CORPORATION 6
Moa JV Highlights
Moa JV Nickel Production (50% basis, tonnes) Net Direct Cash Costs (U.S.$/lb)
PRODUCTION INCREASED BY 20% -- LOWER CASH COSTS
• Finished nickel production increased by 20% to 4,357 tonnes • Cash costs decreased to U.S.$4.36/lb • Cash flow from operations increased to $30 million • Adjusted EBITDA more than doubled to $18.3 million • Nickel recovery of 88%
+20% (18%)
$5.30 $4.36
Q1 2014 Q1 2015
3,639 4,357
Q1 2014 Q1 2015
SHERRITT INTERNATIONAL CORPORATION 7
• Construction commenced in Q1 2015 • Sulphur and sulphuric acid represent 1/3 of our NDCC • Cost savings from eliminating the need to import sulphuric acid and from reduced
fuel oil consumption for steam production
Construction Underway at Acid Plant
SHERRITT INTERNATIONAL CORPORATION 8
Ambatovy JV Outperforms Expectations • Finished nickel production increased 33% • Net direct cash costs decreased 16% • Operating cash flow increased to $13 million from a loss of $21 million in the
previous year, adjusted EBITDA increased to $4.3 million from a loss of $4.4 million • Nickel recovery at 85%
Cash Costs Continue to Improve with Higher Quarterly Production
(1) The net direct cash costs calculation in Q1 2014 includes two of the three months in the quarter due to the start of commercial production effective Feb 1st of 2014. The production number is for the three months of the quarter.
$6.83 $7.19 $7.26
$7.04
$5.74
$4.00
$4.50
$5.00
$5.50
$6.00
$6.50
$7.00
$7.50
0500
1,0001,5002,0002,5003,0003,5004,0004,5005,000
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
Production (Tonnes) NDCC (US$/lb)
(1)
SHERRITT INTERNATIONAL CORPORATION 9
Physical Facilities
Certificate
Mining Certificate
Production Certificate
Port Capacity
Certificate
Pipeline Capacity
Certificate
Environmental Certificate
Marketing Certificate
Efficiency Certificate
Legal and Other Conditions Certificate
Financial Certificate
FINANCIAL COMPLETION
Ambatovy Progressing Towards Financial Completion
• Requirement for financial completion by September 30, 2015
• Ten certificates to be delivered • Upon achieving financial completion
• Financing is non-recourse to all partners
• One-time funding of reserve account equivalent to 6 months principal + interest
• Interest changes from Libor + ~140 bps to Libor + ~255 bps
• Put/call option for SNC-Lavalin’s 5% equity and loans can be triggered
After IE sign off After IE sign off
After IE sign off
SHERRITT INTERNATIONAL CORPORATION 10
1,500
1,600
1,700
1,800
1,900
2,000
2,100
2,200
2,300
2,400
2014 2015 2016 2017 2018 2019
World Demand World SupplySource: CRU
World Supply/Demand 2014-2019 • Prices remain under pressure
from softer demand; LME inventories rose 5%
• NPI supply challenges from China starting to appear, and supply deficit expectations remain, but timing is unpredictable
Nickel Market Supply/Demand 2015E-2019E
$1 CHANGE IN NICKEL PRICE = $100 MILLION IN ADDITIONAL CASH FLOW PER YEAR
SHERRITT INTERNATIONAL CORPORATION 11
• Oil prices declined 50% year over year • First evidence of oil prices rebounding
Global Oil Prices Continue to Impact Revenue
0
20
40
60
80
100
120
Mar
-14
Apr
-14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Sep
-14
Oct
-14
Nov
-14
Dec
-14
Jan-
15
Feb-
15
Mar
-15
Apr
-15
WTI Fuel Oil No 6
SHERRITT INTERNATIONAL CORPORATION 12
Oil and Gas Operating Highlights
REVENUE DOWN 45% YOY FOLLOWING A 50% DECLINE IN AVERAGE REFERENCE PRICES AND A 41% DECLINE IN WEIGHTED AVG REALIZED PRICES
(2%) +23% 20,200
19,719
Q1 2014 Q1 2015
Production – Gross Working-Interest
$6.70 $8.26
Q1 2014 Q1 2015
Unit Operating Costs – Cuba ($ per boe)
• Adjusted EBITDA of $21.5 million down 64% • Cash provided by operations of $6.6 million down 59% • Gross production down 2%, primarily due to lower than expected production from two
of the six wells drilled in the extension
SHERRITT INTERNATIONAL CORPORATION 13
• Two new wells drilled in the quarter, with one producing and one being tested
• Since start of drilling in the extension, six out of seven commitment wells completed
Expansion Drilling in Two New Blocks
SHERRITT INTERNATIONAL CORPORATION 14
Power Cash Flow Continues to Improve
• Electricity generation increased 12% • Unit operating costs decreased 10% • Average realized price increased 14% • Cash flow from operations increased to $24 million • Boca de Jaruco plant is producing solid results
187
210
Q1 2014 Q1 2015
$17.43
$15.64
Q1 2014 Q1 2015
Electricity Generation (GWh) Unit Operating Costs ($/MWh)
+10%
(12%)
SHERRITT INTERNATIONAL CORPORATION 15
FINANCE UPDATE Dean Chambers, Executive Vice President & CFO
SHERRITT INTERNATIONAL CORPORATION 16
Combined Results • Combined Results are a non-GAAP measure that has been presented to report
Sherritt's proportionate interest in all of its businesses including the Moa and Ambatovy Joint Ventures.
(1) Cash flow from operations associate and joint venture adjusted for non-cash changes in working capital (2) Accounting regulations prevent Sherritt from labeling this non-GAAP measure as "Combined EBITDA" and therefore
it is required to call it "Adjusted EBITDA“ (3) Cash flow from operations, associate, and joint venture adjusted for spending on property, plant and equipment, exploration
and evaluation, and intangible expenditures
Combined Results Per Financial Statements
Combined revenue Revenue
Combined cost of sales Cost of sales
Combined administration expenses Administration expenses
Combined net financing expense Net financing expense
Combined income taxes Income taxes
Combined adjusted operating cash flow (1)
Cash flow from operations
Adjusted EBITDA(2)
Adjusted EBITDA
Combined free cash flow(3)
Free cash flow
Adjustments to include proportionate share of Moa
and Ambatovy in the combined results
Combined Results Non-GAAP Measures
SHERRITT INTERNATIONAL CORPORATION 17
STRENGTHENING OUR FINANCIAL POSITION Financial Highlights
(1) Refers to a non-GAAP measure. For additional information see the MD&A for March 31, 2015 at www.sherritt.com
$54.9 $44.2
Q1 2014 Q1 2015
Combined Adjusted Operating Cash Flow ($ millions)
Earnings (Loss) from Continuing Operations/Share
$34.7
$56.1
Q1 2014 Q1 2015
In millions $, as at
March 31, 2015
December 31, 2014
% Change
Cash, Cash Equivalents and Short Term Investments $478 $476 --
Ambatovy JV Partner Loans $1,109 $1,014 9%
Recourse Debt 854 843 1%
Total Debt $1,964 $1,860 6%
Q1 2014
Adjusted EBITDA ($ millions)
(1)
($0.24) ($0.20) ($0.19)
($0.24)
Q1 2015 As reported Adjusted As reported Adjusted
SHERRITT INTERNATIONAL CORPORATION 18
New Foreign Investment Law in Cuba to Reduce Taxes
Segment/Operation Oil & Gas Power Moa JV Ambatovy JV Corporate & other
Jurisdiction
Cuba Cuba
Cuba Madagascar
Canada
Statutory Tax Rate
22.5% 15%
22.5% 10%, 25%
25%
• Cuban tax rates have decreased • ~$17 Million if tax savings in place all of 2014 • One-time gain recognized in Q1 of $30 million
30% 30% 45%
ONE TIME TAX GAIN OF $30 MILLION
(1) Subject to confirmation
(1)
SHERRITT INTERNATIONAL CORPORATION 19
Net Loss Reconciliation from Q4 2014 to Q1 2015
Adjusted net loss - Q4 2014 $ (80.0)
Ambatovy higher sales, lower loss 22.7 Lower Oil & Gas EBITDA and lower Moa JV earnings (7.9) Tax recovery in Cuba 30.1 Higher FX and consolidated depreciation, lower borrowing (21.7) Q1 2015 net loss from continuing operations (56.8) Adjusting items (FX, VAT, call option) 15.9 Adjusting for tax recovery (30.1) Adjusted net loss from continuing operations $ (71.0)
SHERRITT INTERNATIONAL CORPORATION 20
Combined Adjusted Operating Cash Flow Reconciliation from Q4 2014 to Q1 2015
Combined adjusted operating cash flow - Q4 2014 $ (35)
Increase in Ambatovy operating cash flow 24 Decrease in Moa and Fort Site operating cash flow (2) Decrease in Oil & Gas operating cash flow (5) Increase in Power operating cash flow (excluding Energas CSA interest) 2 Higher Energas CSA interest received 12 Lower interest paid on debentures 18 Add back premium paid on debentures in Q4 2014 34 Lower other Corporate cash flows 8
Combined adjusted operating cash flow - Q1 2015 $ 56
SHERRITT INTERNATIONAL CORPORATION 21
Reducing Capital Spending
• At the current USD/ CAD exchange rate, originally forecasted expenditures are ~$250 million vs. $231 million at original exchange rates.
• Capital guidance is now $210 million
Division Original Guidance Feb 2015
Current Guidance Q1 2015
Change
Oil & Gas $ 107 $ 96 $ (11)
Ambatovy JV 40 35 (5)
Moa JV / Fort Site 80 75 (5)
Power 4 4 -
Total $ 231 $ 210 $ (21)
SHERRITT INTERNATIONAL CORPORATION 22
Investment Opportunity
Top 10 largest nickel producer in the world
Strong cash flow growth
Catalysts - Increasing nickel production and rising nickel price
Rising production in base metals with forecasted nickel price increases
SHERRITT INTERNATIONAL CORPORATION 23
Appendix - Enhancing Disclosure of Cash Flow
Combined adjusted operating cash flow
• Cash flow from operations, associate and joint venture adjusted for non-cash changes in working capital
Combined free cash flow
• Cash flow from operations, associate, and joint venture adjusted for spending on property plant and equipment, exploration and evaluation, and intangible expenditures
SHERRITT INTERNATIONAL CORPORATION 24
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: [email protected] Website: www.sherritt.com