24th October 2022
The Canadian miner and refiner of nickel and cobalt, Sherritt International Corporation, has signed agreements with its Cuban partners settling C$362mn (US$265mn) in outstanding debt over five years. It has also agreed the terms on which it undertakes future mining and other operations in Cuba.
Under the agreement, beginning 1 January 2023, its Moa joint venture will prioritise payment of dividends in the form of finished cobalt to each partner, up to an annual maximum volume of cobalt, with any additional dividends in a given year to be distributed in cash.
The company said that all of its Cuban partner’s share of such cobalt dividends, and potentially additional cash dividends, will be redirected to Sherritt as payment to settle the receivables until an annual dollar limit, including the collection of any prior year shortfalls, has been reached.
Under the terms of the cobalt swap, Compania General de Niquel SA (GNC), Sherritt’s Moa joint venture partner, has agreed to assume certain liabilities of amounts owed to Sherritt by CUPET and Energas SA to fully repay outstanding amounts over a five-year period.
In a statement, Leon Binedell, the President and CEO of Sherritt said that the agreement was a testament to the strong working relationship the company had with its Cuban partners.
Observing that it believes that the agreement “ brings an end to the historical repayment uncertainty,” he said that “Combined with Sherritt’s portion of the dividends, this is expected to provide significant cash flow to deliver on our strategic priorities to reduce debt and aggressively expand our business.”
Bindell went on to note that the strong fundamentals for both the nickel and cobalt markets was driven primarily by the strength of the electric vehicle battery market. This, he said, made it “an opportune time for completing these agreements and ensuring that each of the partners benefit from it.” He described the agreement as “innovative.”
In a lengthy statement the company said that on 1 January 2023, the outstanding receivable amounts owing to Sherritt from Energas and CUPET, estimated to total C$361.9mn (US$265.3mn), will be assumed by GNC, who in turn will enter into payment agreements of an equivalent amount, denominated in local Cuban currency with Energas and CUPET. The amount includes the Energas conditional sales agreement receivable of C$332.4 (US$343.7mn) and trade accounts receivable from CUPET of C$29.5mn (US$21.6mn).
As a result of the exchange, Sherritt will no longer have the responsibility for collection on the amounts solely from Energas and CUPET. Energas and CUPET will remain liable for payment of the Energas/CUPET liabilities, as applicable, only to the extent not satisfied by GNC. On distribution of any redirected amounts from GNC in cobalt or cash to Sherritt, GNC will receive an equivalent payment from Energas or CUPET denominated in Cuban pesos.
Sheritt said that on 12 October 2022, Cuba’s Executive Council approved the twenty-year extension of the Energas power generation contract with the Cuban government to March 2043, which was set to expire in March 2023. The Energas facilities have an electrical generating capacity of 506 MW from two combined cycle plants at Varadero and Boca de Jaruco.
Sherritt is engaged in a multi-pronged growth strategy in Cuba focused on expanding nickel and cobalt production by up to 20% from 2021 and intends extending the life of its mine at Moa beyond 2040. It is also the largest independent energy producer in Cuba.
Photo by Encal Media
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