Photo by Shane McLendon

21st February 2022

The Canadian nickel and cobalt miner, Sherritt International, has said that despite the impact of the global pandemic, continuing US sanctions, and rising input costs, it has been able to meet it 2021 production and cost targets and will as planned proceed with the expansion of its operations in Cuba  

Announcing its 2021-year-end results, Leon Binedell, the President and CEO of Sherritt, said that underpinning the progress made in 2021 were improved nickel and cobalt market fundamentals driven by the rapid adoption of electric vehicles.  

Observing that the company expects market conditions to be bullish in the near term, he said that as Sherritt Technologies commercialise projects, Sherritt International intends extending the life of its joint venture mining operations at Moa in Eastern Cuba beyond 2040 and increasing its combined nickel and cobalt production capacity. Sherritt has a 50% stake in the mining joint venture with Cuba’s Compania General de Niquel. 

The company said in a news release that its share of finished nickel and cobalt production at Moa in 2021 was 4,266 tons and 476 tons respectively. Overall, Moa produced 15,592 tons of finished nickel last year, a figure on a par with that produced in 2020, and 1,763 tons of finished cobalt, a 5% improvement on cobalt output in 2020. The company anticipates that in 2022 total finished nickel production will be 32,000 and 34,000 tons and between 3,400 and 3,700 tons of finished cobalt. 

Sherritt reported that although there had been ‘variability’ in the timing of cash and cash equivalents from its mining and energy operations in Cuba, payments were continuing to be received. Binedell said that the company’s weaker year-end cash position was because of lower energy payments from its Cuban partner Energas on account of their reduced access to foreign currency and a decision by the company to defer distributions expected from the Moa joint venture in the fourth quarter.  

In its news release Sherritt said that it had since received C$8.1mn (US$6.29mn) as its share of Moa JV distributions, anticipates an additional distribution in the first quarter of the year, and said it expects greater than C$35mn (US$27.5mn) from the JV in the 2022 financial year. 

The company previously indicated that while it anticipates improved economic conditions in Cuba in 2022, it continued to anticipate variability in the timing and the amount of energy payments in the near term and was working with its Cuban partners to ensure timely receipt of energy payments.  

Unit operating costs of C$23.06/MWh (US$18.10) for Sherritt’s power business in the 2021 financial year were lower than anticipated largely owing to the impacts of a stronger Canadian dollar and the unification of Cuba’s dual currencies. The company forecast the unit cost for its energy operations in Cuba in 2022 at between C$26.50/MWh (US$20.8) and C$28/MWh (US$22). 

Sherritt said that it will now proceed with its expansion strategy in conjunction with its Cuban partners to capitalise on the growing demand for high purity nickel and cobalt required for electric vehicles  

The company confirmed that to support the growth strategy it announced last November it will extend the life of the mine and increase finished nickel and cobalt production by somewhere between 15% and 20% of what it achieved in 2021. In part, this will involve expenditure on a new slurry preparation plant. The US$27mn investment is expected to be completed in 2024, reducing ore haulage and decreasing the intensity of the mine’s carbon emissions. Once on stream, the new plant is expected to see an increase in production of mixed sulphides by about 1,700 tons a year.  

In addition, the company intends completing a previously suspended expansion of a processing plant at Moa and the upgrading of some utilities to facilitate increased sulphide production there. It will also seek to extend the life of the mine through the conversion of mineral resources into reserves based on an economic cut-off grade. 

Sherritt said that its intention is to become a leading green metals producer, with Sherritt Technologies enabling transformational growth and balance sheet strength by maximising the value of its Cuban energy businesses. 

Separately on a call, Binedell told analysts that Sherritt continued its discussions with its Cuban partners “to expedite the payment of overdue receivables, increase availability of natural gas needed for power production activities, and extend the power generation agreement with Energas, which is currently slated to expire in March of 2023”. 

To that end, he said, Sherritt had completed a feasibility study detailing the economic benefits of extending the power agreement. The study was approved by the shareholders of Energas and is expected, he noted, to be submitted this month to the Cuban authorities for final review, with approval expected before the year’s end. 

Sherritt has a one‑third interest in Energas SA through a joint venture that sees it receive raw natural gas and generate electricity for sale into the Cuban national electrical grid. Unión Eléctrica (UNE) and Unión Cubapetróleo (CUPET) hold the remaining two‑thirds interest in Energas.

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