2024
FINANCIAL RESULTS
Sherritt International Corporation
Sherritt International Corporation
1
Sherritt International Corporation
2024 Annual Report
Table of Contents
Message from Sherritt’s Chief Executive Officer
2
Fourth Quarter and Full Year 2024 Results and Selected Developments
4
Management’s Discussion and Analysis
7
Consolidated Financial Statements
74
Fighting Against Forced Labour and Child Labour in Supply Chains –
2024 Annual Report to the Minister of Public Safety
129
2
Sherritt International Corporation
Message from Sherritt’s Chief Executive Officer
Sherritt performed well in 2024 and demonstrated exceptional agility in a year marked by significant external complexities.
Despite unprecedented challenges, we not only maintained our operational integrity but achieved results that underscore the
resilience of our business.
In Canada, we successfully navigated through rail and port labour disputes which disrupted transportation logistics across
numerous industries. Challenges in Cuba presented additional obstacles with nationwide power grid failures and natural
disasters. Beyond these extraordinary events, nickel and cobalt markets faced continued pressure from increased output in
Indonesia and in the Democratic Republic of the Congo creating oversupply.
Yet, Sherritt emerged stronger. Our long-term strategy, adaptive capabilities, and robust risk mitigation approaches enabled us
to prosper amid these challenging circumstances. Our achievements this year are a testament to the skill, dedication, and
strategic foresight of our global team.
Strategic Management of Global Challenges
In 2024, Sherritt successfully executed a number of strategic management initiatives. Early in the year, our leadership team
implemented a comprehensive organizational restructuring and cost reduction program, projected to generate approximately
$17 million in annualized savings. In our Metals division, we proactively navigated market challenges by modifying our
maintenance schedule to build a feed reserve at our refinery, effectively mitigating potential logistic disruptions while maintaining
production and cost targets. Our Power division, through our ownership in Energas, played an instrumental role during the power
outages in Cuba to restore the national grid.
We continued to enhance our safety performance framework, underscoring our unwavering commitment to operational
excellence and workforce protection. Our comprehensive risk management protocols proved critical, successfully preventing
any health and safety or environmental incidents during the natural disasters that hit Cuba.
Strong Performance Across Core Business Segments
Our Metals division achieved a significant year-over-year increase in nickel production and nickel sales volumes. Through
focused cost management initiatives, we improved our net direct cash cost by 18%, compared to the previous year, even with
much lower cobalt by-product credits. In addition, the contribution from our fertilizer business more than doubled on the strength
of higher production and sales volumes.
We achieved a major milestone with the completion of phase one of our Moa Joint Venture expansion project, the Slurry
Preparation Plant. With phase one complete, we significantly advanced phase two while prudently managing capital spending.
When phase two of the expansion is ramped up, we will have significantly enhanced production capacity of mixed sulphides,
ultimately filling the refinery to nameplate capacity and maximizing profitability by displacing lower margin third-party feeds. We
are now in the final stages of phase two, with the Processing Plant scheduled for commissioning and ramp up this year.
Our Power division reached a six-year high in electricity production, driven by operational improvements and increased gas
supply from new wells. The maintenance work completed in 2024 brought an additional turbine online and enhanced equipment
availability, enabling us to process the increased gas supply. As a direct result of our multi-year strategy to optimize returns on
our Power investment, the division has begun generating meaningful dividends in Canada with $13 million received in 2024. We
anticipate this dividend to double in 2025, projecting dividends in the range of $25 million to $30 million.
Financial Resilience in Challenging Markets
Despite our operational achievements, we continue to navigate a challenging market for nickel and cobalt prices. The average
reference prices of nickel and cobalt fell further in 2024 with both, declining 22% and reaching multi-year lows. While the long-
term fundamentals for nickel and cobalt prices remain positive, we have adapted to the near-term pressures, with the
implemented cost reduction initiatives.
Even with the ongoing pressure on nickel and cobalt prices, we successfully secured $30 million in distributions under the Cobalt
Swap, which resumed in the fourth quarter.
Sherritt International Corporation
3
In response to current market dynamics, we have prioritized capital allocation, which includes prudently deferring certain non-
critical maintenance activities. While these measured adjustments support our near-term financial resilience, we recognize the
potential long-term implications and are implementing comprehensive risk mitigation strategies. Regardless of market conditions,
we always uphold a safety-first philosophy and are dedicated to our operational integrity.
Looking Ahead
The achievements of 2024 would not have been possible without the dedication and expertise of our talented teams and the
resilience and support from our partners in Cuba. We remain focused on enhancing safety, maximizing operational efficiency,
maintaining disciplined cost management, building balance sheet strength and upholding our commitment to responsibly
sourced minerals and sustainable operations. Maximizing cashflows from our Power and Fertilizer businesses during the trough
in both nickel and cobalt markets is a priority, while we continue to advance our longer-term strategic priorities and growth
initiatives at a moderated pace as we remain unwaveringly driven to creating sustainable value for all our stakeholders in the
years ahead.
I thank you for your continued trust and support in Sherritt.
Sincerely,
Leon Binedell
4
Sherritt International Corporation
FOURTH QUARTER AND FULL YEAR 2024 RESULTS AND SELECTED DEVELOPMENTS(1)
Finished nickel and cobalt production at the Moa Joint Venture (“Moa JV”) in Q4 2024 was 3,853 tonnes and
465 tonnes, respectively, (Sherritt’s share(1)). For the full year 2024 finished nickel and cobalt production was
30,331 tonnes and 3,206 tonnes, respectively, (100% basis) both within their respective annual guidance ranges.
Finished nickel sales totaled 4,326 tonnes in Q4 2024 and 15,678 tonnes for the full year both exceeding production.
Sales in Q4 2024 were the highest in two years. Year-over-year finished nickel sales increased by 22% reflecting
Sherritt’s focused effort to expand market opportunities. Finished cobalt sales were 465 tonnes in Q4 2024 and
1,638 tonnes for the full year.
Net direct cash cost (“NDCC”)(2) was US$5.44/lb in Q4 2024. Full year 2024 NDCC(2) of US$5.94/lb was within its
guidance range and was a pronounced improvement over 2023 being 18% lower year-over-year despite a 41%
reduction in cobalt by-product credits due to lower average-realized prices(2). This improvement was driven by notably
lower mining, processing, and refining costs per pound of nickel sold (“MPR/lb”).
Electricity production was 171 GWh in Q4 2024 and 816 GWh for the full year, respectively. In Q4 2024, Sherritt’s
Power division played a meaningful role in restoring the Cuban national grid following nationwide power outages.
Despite the power outages, electricity production in 2024 reached a six-year high as a result of Sherritt’s multiyear
efforts to optimize its Power division by bringing new gas wells into production, improving equipment availability and
increasing utilization rates.
Electricity unit operating cost(2) was $30.64/MWh in Q4 2024. Full year was $34.29/MWh, slightly above the upper
end of the annual guidance range of $34.00/MWh, due to the power outages and frequency control measures in Cuba,
as well as the weaker Canadian dollar on U.S. dollar-denominated costs for the full year 2024.
Organizational restructuring and cost reduction initiatives in 2024 are expected to yield annualized savings of
approximately $17.0 million.
Net loss from continuing operations was $22.5 million, or $(0.06) per share in Q4 2024 and $73.1 million, or
$(0.18) per share for the full year.
Adjusted net loss from continuing operations(2) was $10.2 million or $(0.03) per share in Q4 2024 and $56.3 million
or $(0.14) per share for the full year, and primarily excludes $8.4 million non-cash impairment of intangible assets in
Oil and Gas recognized in Q4 and $6.9 million and $8.2 million non-cash loss on rehabilitation provisions, respectively,
as a result of updates to valuation assumptions for rehabilitation and closure costs on legacy Oil and Gas assets in
Spain.
Adjusted EBITDA(2) was $15.4 million in Q4 2024 and $32.4 million for the full year.
Cobalt Swap distributions totaled $29.8 million in Q4 2024, including $23.7 million in cash and 223 tonnes of finished
cobalt valued at $6.1 million (including both Sherritt’s share and the General Nickel Company S.A. (“GNC”) redirected
share).
Power division dividends in Canada were $7.0 million in Q4 2024, totaling $13.0 million for the year.
Available liquidity in Canada as of December 31, 2024 was $62.4 million.
Construction on phase two of the Moa JV expansion project progressed with piping installation and internal brick
lining of vessels during the quarter, along with some pre-commissioning activities. With lower nickel and cobalt prices,
Sherritt continues to exercise capital preservation measures and has scheduled certain expenditures for Q1 2025 when
construction is expected to be completed and following which, the ramp-up is expected to commence.
(1)
References to operating and financial metrics in this press release, unless otherwise indicated, are to “Sherritt’s share” which is consistent with the Corporation’s
definition of reportable segments for financial statement purposes. Sherritt’s share of “Metals” includes the Corporation’s 50% interest in the Moa JV, its 100% interest
in the utility and fertilizer operations in Fort Saskatchewan (“Fort Site”) and its 100% interests in subsidiaries established to buy, market and sell certain of the Moa
JV’s nickel and cobalt production and the Corporation’s cobalt inventory received under the Cobalt Swap agreement (“Metals Marketing”). Sherritt’s share of Power
includes the Corporation’s 33⅓% interest in Energas S.A. (“Energas”). References to Corporate and Other and Oil and Gas includes the Corporation’s 100% interest
in these businesses. Corporate and Other refers to the Corporate head office and technology support. References to Fort Site directly is to the Corporation’s 100%
interest in the utility and fertilizer operations.
(2)
Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
(3)
For additional information on the Cobalt Swap, see Note 12 – Advances, loans receivable and other financial assets of the consolidated financial statements for the
year ended December 31, 2024.
Sherritt International Corporation
5
2025 ANNUAL GUIDANCE
Metals:
Finished nickel and cobalt production are expected to be between 31,000 to 33,000 tonnes (100% basis) and 3,300 to
3,600 tonnes (100% basis), respectively. This increase is attributed to enhanced availability of mixed sulphides from
the Moa mine site to the refinery, following the completion, ramp up and debottlenecking of the phase two expansion.
Production is expected to be weighted towards the latter part of the year. To maximize refinery operation efficiencies
before and during the ramp-up period, third-party feed will be procured and processed as necessary, subject to market
conditions.
NDCC(1) is expected to be between US$5.75 to US$6.25 per pound of nickel sold based on a forecast negative impact
from future commodity prices which are expected to result in year-over-year lower cobalt by-product credits and higher
input costs as well as planned Fort Site ammonia and Moa JV acid plant maintenance offsetting the benefits of higher
expected production and sales and cost optimization initiatives implemented in 2024.
Sustaining spending on capital(1), excluding spending on the new tailings facility, is expected to be $35.0 million (Moa
JV 50% basis, Fort Site 100% basis).
Sustaining spending on capital(1) of $40.0 million (50% basis) is related to advancing Moa JV’s tailings management
project as outlined in its 2023 National Instrument 43-101 Technical Report. The new tailings facility will be engineered
and built to international standards and will provide a tailings solution for the Moa mine over the entirety of its current
mine life of approximately 25 years. The estimated spending in 2025 includes early works spending that was deferred
from 2024. Subsequent to year end, the Moa JV secured a US$60.0 million (100% basis) equivalent loan in Cuban
pesos from a Cuban financial institution with a 5-year maturity that will primarily be utilized to support capital spending
on tailings management.
Growth spending on capital(1) is expected to be $5.0 million (Moa JV 50% basis) due to planned deferral of spending
from 2024 which is to be used for the completion of phase two of the Moa JV expansion as noted above.
Power:
Electricity production is expected to be between 800 to 850 GWh (33⅓% basis) on higher gas and equipment availability
and improved utilization rates despite lower production from Varadero due to planned grid frequency control.
Electricity unit operating cost(1) is expected to be between $23.00 to $24.50 per MWh on lower maintenance and higher
electricity production.
Spending on capital(1) is expected to be $2.0 million (33⅓% basis) reflecting lower maintenance spending.
(1)
Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
6
Sherritt International Corporation
Q4 2024 FINANCIAL HIGHLIGHTS
For the three months ended
For the year ended
2024
2023
2024
2023
$ millions, except per share amount
December 31
December 31
Change
December 31
December 31
Change
Revenue
$
45.7
$
34.8
31%
$
158.8
$
223.3
(29%)
Combined revenue(1)
160.3
140.5
14%
577.6
652.9
(12%)
Loss from operations and joint venture
(16.9)
(43.4)
61%
(43.5)
(43.4)
-
Net loss from continuing operations
(22.5)
(53.4)
58%
(73.1)
(64.3)
(14%)
Net loss for the period
(22.9)
(53.4)
57%
(72.8)
(64.6)
(13%)
Adjusted EBITDA(1)
15.4
(7.0)
320%
32.4
46.2
(30%)
Adjusted loss from continuing operations(1)
(10.2)
(27.9)
63%
(56.3)
(28.1)
(100%)
Net loss from continuing operations ($ per share)
(0.06)
(0.13)
54%
(0.18)
(0.16)
(13%)
Adjusted loss from continuing operations ($ per share)(1)
(0.03)
(0.07)
57%
(0.14)
(0.07)
(100%)
Cash used by continuing operations for operating activities
(21.5)
(18.1)
(19%)
(25.9)
28.2
(192%)
Combined free cash flow(1)
(20.2)
(39.1)
48%
(19.2)
(15.9)
(21%)
Average exchange rate (CAD/US$)
1.398
1.362
3%
1.370
1.350
1%
(1)
Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section of this press release.
2024
2023
$ millions, as at
December 31
December 31
Change
Cash and cash equivalents
Canada
$
32.0 $
21.5
49%
Cuba(1)
113.1
96.3
17%
Other
0.6
1.3
(54%)
145.7
119.1
22%
Loans and borrowings
372.5
355.6
5%
The Corporation's share of cash and cash equivalents in the Moa Joint Venture,
not included in the above balances:
$
5.7 $
5.9
(4%)
(1)
As at December 31, 2024, $111.4 million of the Corporation’s cash and cash equivalents was held by Energas (December 31, 2023 - $93.9 million).
Sherritt International Corporation
7
MANAGEMENT'S DISCUSSION
AND ANALYSIS
For the year ended December 31, 2024
This Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand Sherritt
International Corporation’s operations, financial performance and the present and future business environment. This
MD&A, which has been prepared as of February 5, 2025, should be read in conjunction with Sherritt’s audited
consolidated financial statements for the year ended December 31, 2024. Additional information related to the
Corporation, including the Corporation’s Annual Information Form, is available on SEDAR+ at www.sedarplus.ca or
on the Corporation’s website at www.sherritt.com.
References to “Sherritt” or the “Corporation” refer to Sherritt International Corporation and its share of subsidiaries
and joint arrangements, unless the context indicates otherwise. All amounts are in Canadian dollars, unless otherwise
indicated. References to “US$” are to United States (“U.S.”) dollars and to “€” are to euro.
Securities regulators allow companies to disclose forward-looking information to help investors understand a
company’s future prospects. This MD&A contains statements about Sherritt’s future financial condition, results of
operations and business. See the end of this report for more information on forward-looking statements.
Overview of the business
8
The business we manage
Highlights
10
12
Financial results
14
Consolidated financial position
17
Significant factors influencing operations
Review of operations
19
20
Metals
20
Power
26
Corporate and Other
28
Environmental, social and governance (“ESG”)
29
Outlook
30
Liquidity
32
Sources and uses of cash
34
Reconciliation of Adjusted EBITDA to change in cash and
cash equivalents
Capital resources
Capital risk management
Contractual obligations and commitments
Second Lien Notes
PIK Notes
Credit Facility
Guarantees
Capital structure
36
36
36
37
37
38
38
39
39
Common shares
39
Managing risk
40
Critical accounting estimates and judgments
50
Accounting pronouncements
52
Summary of quarterly results
54
Three-year trend analysis
55
Off-balance sheet arrangements
55
Transactions with related parties
56
Controls and procedures
57
Supplementary information
57
Sensitivity analysis
57
Investment in Moa Joint Venture
58
Non-GAAP and other financial measures
60
Forward-looking statements
72
Management’s discussion and analysis
8
Sherritt International Corporation
Overview of the business
Sherritt is a world leader in using hydrometallurgical processes to mine and refine nickel and cobalt – metals deemed critical for
the energy transition. Sherritt’s Moa JV has an estimated mine life of approximately 25 years and is advancing an expansion
program focused on increasing annual mixed sulphide precipitate (“MSP”) production by 20% of contained nickel and cobalt.
The Corporation’s Power division, through its ownership in Energas, is the largest independent energy producer in Cuba with
installed electrical generating capacity of 506 MW, representing approximately 10% of the national electrical generating capacity
in Cuba. The Energas facilities are comprised of two combined cycle plants that produce low-cost electricity from one of the
lowest carbon emitting sources of power in Cuba. Sherritt’s common shares are listed on the Toronto Stock Exchange under
the symbol “S”.
METALS
Moa Joint Venture
Sherritt is an industry leader in the mining, hydrometallurgical processing and refining of nickel and cobalt from lateritic ore
bodies. Sherritt has a 50/50 partnership with General Nickel Company S.A. (“GNC”) of Cuba (the “Moa Joint Venture” or the
“Moa JV”).
The Moa JV is a vertically integrated joint venture that mines, processes and refines nickel and cobalt for sale worldwide (except
in the United States). The joint venture has an open pit lateritic ore mine and processing facility in Moa, Cuba where ore is
processed into mixed sulphide precipitate containing nickel and cobalt. The MSP is transported to its refining facilities in Fort
Saskatchewan, Alberta, Canada. The resulting nickel and cobalt products are sold to various markets, primarily in Europe and
Asia. The Moa JV filed an updated National Instrument 43-101 Technical Report on March 31, 2023.
The refinery facilities in Fort Saskatchewan have an annual combined production capacity of approximately 38,200 tonnes
(100% basis) of nickel and cobalt.
The Moa JV has a current estimated mine life of 25 years and has embarked on an expansion program focused on increasing
annual MSP production by 20% of current production of contained nickel and cobalt. This program capitalizes on the growing
demand for high purity nickel and cobalt being driven by the accelerated adoption of electric vehicles and builds on the 30-year
successful track record of the Moa Joint Venture.
Sherritt International
Metals
Power
Corporate and
Other
(Head office and
technical support)
Oil and Gas
Sherritt International Corporation
9
Fort Site
Sherritt has a wholly-owned fertilizer business in Fort Saskatchewan (Fort Site) that provides inputs (ammonia, sulphuric acid
and utilities) for the Moa Joint Venture’s metals refinery, produces agriculture fertilizer for sale in Western Canada and provides
fertilizer storage and administrative facilities.
Metals Marketing
The Corporation’s Metals Marketing division includes its 100% interest in subsidiaries established to buy, market and sell certain
of Moa JV’s nickel and cobalt production and the Corporation’s cobalt inventory received under the Cobalt Swap(1) agreement.
Strategic development
The Corporation is advancing its near-term strategic focus to expand its mixed hydroxide precipitate (“MHP”) midstream
processing refinery for the electric vehicle supply chain in North America.
POWER
Sherritt’s power generating assets are located in Cuba at Varadero, Boca de Jaruco and Puerto Escondido. These assets are
held by Sherritt through its one-third interest in Energas S.A. (“Energas”), which is a Cuban joint venture established to process
raw natural gas and generate electricity for sale to the Cuban national electrical grid. Cuban government agencies Unión
Eléctrica (“UNE”) and Unión Cubapetróleo (“CUPET”) hold the remaining two-thirds interest in Energas. In 2022, Cuba’s
Executive Committee of the Council of Ministers approved the twenty-year extension of the Energas Joint Venture contract with
the Cuban government to March 2043.
Raw natural gas is supplied free of charge to Energas by CUPET. The processing of raw natural gas produces clean natural
gas, used to generate electricity, as well as by-products such as condensate and liquefied petroleum gas. All of Energas’
electrical generation is purchased by UNE under long-term fixed-price contracts while the by-products are purchased by other
agencies of the Cuban government. Sherritt provided the financing for the construction of the Energas facilities and was being
repaid from the cash flows generated by the facilities. Sherritt and its Cuban partners entered the Cobalt Swap agreements in
2022 whereby GNC assumed the liabilities of Energas to repay the construction financing by way of cash and cobalt dividends
generated by the Moa JV commencing in 2023. The Cobalt Swap effectively advanced the repayment of and transferred the
construction financing into a new financial instrument to be repaid over a five-year term from 2023 through 2027.
The Energas facilities are comprised of two combined cycle plants at Varadero and Boca de Jaruco that produce low-cost
electricity from one of the lowest carbon emitting sources of power in Cuba using steam generated from the waste heat captured
from the gas turbines. Energas’ installed electrical generating capacity is 506 MW, representing approximately 10% of the
national electrical generating capacity in Cuba in 2024.
OIL AND GAS
Oil and Gas is not currently producing or exploring for oil and gas in Cuba but maintains an interest in two production-sharing
contracts (“PSCs”), each in the exploration phase; however, substantive expenditures on further exploration in these blocks are
neither budgeted nor planned in the short term. Its financial results relate to ancillary drilling services, provided to a customer
and agencies of the Cuban government, and environmental rehabilitation costs for legacy assets in Spain, which are non-core
operating activities of the Corporation. The wells drilled for agencies of the Cuban government provide gas to Energas for power
generation.
CORPORATE AND OTHER
Corporate and Other represents the Corporate head office, which provides overall management of the Corporation’s joint
operations and subsidiaries and general corporate activities related to public companies, including business development,
management of cash, publicly-traded debt and government relations, external technical services to third parties and growth and
market development activities including early-stage test work and engineering.
(1)
For additional information on the Cobalt Swap, see Note 12 – Advances, loans receivable and other financial assets of the consolidated financial statements for the
year ended December 31, 2024.
Management’s discussion and analysis
10 Sherritt International Corporation
The business we manage
ACCOUNTING PRESENTATION
Sherritt manages its metals, power and oil and gas operations through different legal structures including 100%-owned
subsidiaries, joint arrangements and production-sharing contracts. With the exception of the Moa Joint Venture, which Sherritt
operates jointly with its partner, Sherritt is the operator of these assets. The relationship for accounting purposes that Sherritt
has with these operations and the economic interest recognized in the Corporation’s financial statements are as follows:
Relationship for
Basis of
accounting purposes
Interest
accounting
Metals - Moa Joint Venture ("Moa JV")
Joint venture
50%
Equity method
Metals - Metals Marketing
Subsidiaries
100%
Consolidation
Power
Joint operation
33⅓%
Share of assets, liabilities
revenues and expenses
Oil and Gas
Subsidiaries
100%
Consolidation
For financial statement purposes, the Fort Site operations (“Fort Site”) and Corporate and Other are a part of Sherritt International
Corporation, the parent company, and are not separate legal entities.
The Moa JV is accounted for using the equity method of accounting, which recognizes the Corporation’s share of earnings (loss)
of Moa Joint Venture, net of tax, and its net assets as the Corporation’s investment in Moa Joint Venture, net of tax. The Financial
results and Review of operations sections in this MD&A present amounts by reportable segment, based on the Corporation’s
economic interest.
As a result of the organization-wide restructuring in January 2024, the former Technologies reportable segment and Corporate
reportable segment were combined into a single Corporate and Other reportable segment, which includes the Corporation’s
management of its joint operations and subsidiaries and general corporate activities related to public companies, including
business and market development, growth and external technical services activities, as well as management of cash, publicly-
traded debt and government relations. Segmented information for the prior year was restated for comparative purposes to reflect
the new Corporate and Other reportable segment. In the current year period, expenses incurred to support and enhance Metals’
operations and business and market development, formerly reported within Technologies, are recognized within the Metals
reportable segment.
The Corporation’s reportable segments are as follows:
Metals: Includes the Corporation’s:
Moa JV:
50% interest in the Moa JV;
Fort Site:
100% interest in the utility and fertilizer operations in Fort Saskatchewan;
Metals Marketing:
100% interests in subsidiaries established to buy, market and sell certain Moa JV’s nickel and cobalt
production and the Corporation’s cobalt inventory received under the Cobalt Swap agreement.
Power: Includes the Corporation’s 33⅓% interest in Energas S.A. (Energas).
Oil and Gas: Includes the Corporation’s 100% interest in its Oil and Gas business.
Corporate and Other: Head office, joint venture management, business development, cash and debt management, government
relations, external technical services to third parties and growth and market development activities.
Operating and financial results presented in this MD&A for reportable segments can be reconciled to note 5 of the consolidated
financial statements for the year ended December 31, 2024.
Sherritt International Corporation
11
NON-GAAP AND OTHER FINANCIAL MEASURES
Management uses the following non-GAAP and other financial measures in this MD&A and other documents: combined revenue,
adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), average-realized price, unit
operating cost/net direct cash cost (“NDCC”), adjusted net earnings/loss from continuing operations, adjusted net earnings/loss
from continuing operations per share, combined spending on capital, combined cash provided (used) by continuing operations
for operating activities and combined free cash flow.
Management uses these measures 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/or evaluate the results of its underlying business. These measures are intended to provide additional information, not to
replace IFRS® Accounting Standards measures, and do not have a standard definition under IFRS Accounting Standards and
should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS
Accounting Standards. As these measures do not have a standardized meaning, they may not be comparable to similar
measures provided by other companies. Further information on the composition and usefulness of each non-GAAP and other
financial measure, including reconciliation to their most directly comparable IFRS Accounting Standards measures, is included
in the Non-GAAP and other financial measures section starting on page 60.
Management’s discussion and analysis
12 Sherritt International Corporation
Highlights
FOURTH QUARTER AND FULL YEAR 2024 RESULTS AND SELECTED DEVELOPMENTS(1)
Finished nickel and cobalt production at the Moa Joint Venture (“Moa JV”) in Q4 2024 was 3,853 tonnes and
465 tonnes, respectively, (Sherritt’s share(1)). For the full year 2024 finished nickel and cobalt production was
30,331 tonnes and 3,206 tonnes, respectively, (100% basis) both within their respective annual guidance ranges.
Finished nickel sales totaled 4,326 tonnes in Q4 2024 and 15,678 tonnes for the full year both exceeding production.
Sales in Q4 2024 were the highest in two years. Year-over-year finished nickel sales increased by 22% reflecting
Sherritt’s focused effort to expand market opportunities. Finished cobalt sales were 465 tonnes in Q4 2024 and
1,638 tonnes for the full year.
Net direct cash cost (“NDCC”)(2) was US$5.44/lb in Q4 2024. Full year 2024 NDCC(2) of US$5.94/lb was within its
guidance range and was a pronounced improvement over 2023 being 18% lower year-over-year despite a 41%
reduction in cobalt by-product credits due to lower average-realized prices(2). This improvement was driven by notably
lower mining, processing, and refining costs per pound of nickel sold (“MPR/lb”).
Electricity production was 171 GWh in Q4 2024 and 816 GWh for the full year, respectively. In Q4 2024, Sherritt’s
Power division played a meaningful role in restoring the Cuban national grid following nationwide power outages.
Despite the power outages, electricity production in 2024 reached a six-year high as a result of Sherritt’s multiyear
efforts to optimize its Power division by bringing new gas wells into production, improving equipment availability and
increasing utilization rates.
Electricity unit operating cost(2) was $30.64/MWh in Q4 2024. Full year was $34.29/MWh, slightly above the upper
end of the annual guidance range of $34.00/MWh, due to the power outages and frequency control measures in Cuba,
as well as the weaker Canadian dollar on U.S. dollar-denominated costs for the full year 2024.
Organizational restructuring and cost reduction initiatives in 2024 are expected to yield annualized savings of
approximately $17.0 million.
Net loss from continuing operations was $22.5 million, or $(0.06) per share in Q4 2024 and $73.1 million, or
$(0.18) per share for the full year.
Adjusted net loss from continuing operations(2) was $10.2 million or $(0.03) per share in Q4 2024 and $56.3 million
or $(0.14) per share for the full year, and primarily excludes $8.4 million non-cash impairment of intangible assets in
Oil and Gas recognized in Q4 and $6.9 million and $8.2 million non-cash loss on rehabilitation provisions, respectively,
as a result of updates to valuation assumptions for rehabilitation and closure costs on legacy Oil and Gas assets in
Spain.
Adjusted EBITDA(2) was $15.4 million in Q4 2024 and $32.4 million for the full year.
Cobalt Swap distributions totaled $29.8 million in Q4 2024, including $23.7 million in cash and 223 tonnes of finished
cobalt valued at $6.1 million (including both Sherritt’s share and the General Nickel Company S.A. (“GNC”) redirected
share).
Power division dividends in Canada were $7.0 million in Q4 2024, totaling $13.0 million for the year.
Available liquidity in Canada as of December 31, 2024 was $62.4 million.
Construction on phase two of the Moa JV expansion project progressed with piping installation and internal brick
lining of vessels during the quarter, along with some pre-commissioning activities. With lower nickel and cobalt prices,
Sherritt continues to exercise capital preservation measures and has scheduled certain expenditures for Q1 2025 when
construction is expected to be completed and following which, the ramp-up is expected to commence.
(1)
References to operating and financial metrics in this MD&A, unless otherwise indicated, are to “Sherritt’s share” which the Corporation’s definition of reportable
segments for financial statement purposes. Sherritt’s share of “Metals” includes the Corporation’s 50% interest in the Moa JV, its 100% interest in the utility and
fertilizer operations in Fort Saskatchewan (“Fort Site”) and its 100% interests in subsidiaries (“Metals Marketing”) established to buy, market and sell certain of Moa
JV’s nickel and cobalt production and the Corporation’s cobalt inventory received under the Cobalt Swap agreement. Sherritt’s Share of Power includes the
Corporation’s 33⅓% interest in Energas S.A. (“Energas”). References to Corporate and Other and Oil and Gas includes the Corporation’s 100% interest in these
businesses. Corporate and Other refers to the Corporate head office and growth and market development support. References to Fort Site directly is to the
Corporation’s 100% interest in the utility and fertilizer operations.
(2)
Non-GAAP and other financial measures. For additional information, see the Non-GAAP and other financial measures section.
(3)
For additional information on the Cobalt Swap, see Note 12 – Advances, loans receivable and other financial assets of the consolidated financial statements for the
year ended December 31, 2024.
Sherritt International Corporation
13
2025 ANNUAL GUIDANCE
Metals:
Finished nickel and cobalt production are expected to be between 31,000 to 33,000 tonnes (100% basis) and 3,300 to
3,600 tonnes (100% basis), respectively. This increase is attributed to enhanced availability of mixed sulphides from
the Moa mine site to the refinery, following the completion, ramp up and debottlenecking of the phase two expansion.
Production is expected to be weighted towards the latter part of the year. To maximize refinery operation efficiencies
before and during the ramp-up period, third-party feed will be procured and processed as necessary, subject to market
conditions.
NDCC(1) is expected to be between US$5.75 to US$6.25 per pound of nickel sold based on a forecast negative impact
from future commodity prices which are expected to result in year-over-year lower cobalt by-product credits and higher
input costs as well as planned Fort Site ammonia and Moa JV acid plant maintenance offsetting the benefits of higher
expected production and sales and cost optimization initiatives implemented in 2024.
Sustaining spending on capital(1), excluding spending on the new tailings facility, is expected to be $35.0 million (Moa
JV 50% basis, Fort Site 100% basis).
Sustaining spending on capital(1) of $40.0 million (50% basis) is related to advancing Moa JV’s tailings management
project as outlined in its 2023 National Instrument 43-101 Technical Report. The new tailings facility will be engineered
and built to international standards and will provide a tailings solution for the Moa mine over the entirety of its current
mine life of approximately 25 years. The estimated spending in 2025 includes early works spending that was deferred
from 2024. Subsequent to year end, the Moa JV secured a US$60.0 million (100% basis) equivalent loan in Cuban
pesos from a Cuban financial institution with a 5-year maturity that will primarily be utilized to support capital spending
on tailings management.
Growth spending on capital(1) is expected to be $5.0 million (Moa JV 50% basis) due to planned deferral of spending
from 2024 which is to be used for the completion of phase two of the Moa JV expansion as noted above.
Power:
Electricity production is expected to be between 800 to 850 GWh (33⅓% basis) on higher gas and equipment availability
and improved utilization rates despite lower production from Varadero due to planned grid frequency control.
Electricity unit operating cost(1) is expected to be between $23.00 to $24.50 per MWh on lower maintenance and higher
electricity production.
Spending on capital(1) is expected to be $2.0 million (33⅓% basis) reflecting lower maintenance spending.
(1)
Non-GAAP financial measures. For additional information see the Non-GAAP and other financial measures section.
Management’s discussion and analysis
14 Sherritt International Corporation
Financial results
For the three months ended
For the year ended
2024
2023
2024
2023
$ millions, except as otherwise noted
December 31
December 31
Change
December 31
December 31
Change
FINANCIAL HIGHLIGHTS
Revenue
$
45.7
$
34.8
31%
$
158.8
$
223.3
(29%)
Combined revenue(1)
160.3
140.5
14%
577.6
652.9
(12%)
Loss from operations and joint venture
(16.9)
(43.4)
61%
(43.5)
(43.4)
-
Net loss from continuing operations
(22.5)
(53.4)
58%
(73.1)
(64.3)
(14%)
Loss from discontinued operations, net of tax
(0.4)
-
-
0.3
(0.3)
200%
Net loss for the period
(22.9)
(53.4)
57%
(72.8)
(64.6)
(13%)
Adjusted net loss from continuing operations(1)
(10.2)
(27.9)
63%
(56.3)
(28.1)
(100%)
Adjusted EBITDA(1)
15.4
(7.0)
320%
32.4
46.2
(30%)
Net loss from continuing operations ($ per share)
(basic and diluted)
$
(0.06)
$
(0.13)
54%
$
(0.18)
$
(0.16)
(13%)
Net loss ($ per share)
-
(basic and diluted)
(0.06)
(0.13)
54%
(0.18)
(0.16)
(13%)
Adjusted loss from continuing operations(1)
($ per share)
(0.03)
(0.07)
57%
(0.14)
(0.07)
(100%)
CASH
Cash and cash equivalents (as at December 31)
$
145.7
$
119.1
22%
$
145.7
$
119.1
22%
Cash (used) provided by continuing operations for
operating activities
(21.5)
(18.1)
(19%)
(25.9)
28.2
(192%)
Combined free cash flow(1)
(20.2)
(39.1)
48%
(19.2)
(15.9)
(21%)
Distributions received from Moa Joint Venture
Cash distributions - Cobalt Swap
11.9
-
-
11.9
32.0
(63%)
Cash distributions - GNC receivable receipts
11.9
-
-
11.9
32.0
(63%)
Proceeds from Cobalt Swap - Sherritt share
-
1.3
(100%)
0.6
40.2
(99%)
Proceeds from Cobalt Swap - GNC redirected share
-
1.3
(100%)
0.6
40.2
(99%)
OPERATIONAL DATA
COMBINED SPENDING ON CAPITAL(1)
11.7
$
22.5
(48%)
$
42.7
$
66.5
(36%)
PRODUCTION VOLUMES
Mixed sulphides (50% basis, tonnes)
3,552
3,514
1%
15,847
15,084
5%
Finished nickel (50% basis, tonnes)
3,853
3,744
3%
15,166
14,336
6%
Finished cobalt (50% basis, tonnes)
465
330
41%
1,603
1,438
11%
Fertilizer (tonnes)
67,648
61,092
11%
250,272
219,707
14%
Electricity (gigawatt hours) (33⅓% basis)
171
225
(24%)
816
745
10%
SALES VOLUMES
Finished nickel (50% basis, tonnes)
4,326
3,511
23%
15,678
12,888
22%
Finished cobalt (50% basis, tonnes)
465
399
17%
1,638
2,720
(40%)
Fertilizer (tonnes)
63,299
55,509
14%
179,135
170,161
5%
Electricity (gigawatt hours) (33⅓% basis)
171
225
(24%)
816
745
10%
AVERAGE EXCHANGE RATE (CAD/US$)
1.398
1.362
3%
1.370
1.350
1%
AVERAGE-REALIZED PRICES (CAD)(1)
Nickel ($ per pound)
$
9.98
$
10.87
(8%)
$
10.30
$
13.36
(23%)
Cobalt ($ per pound)
12.30
17.23
(29%)
13.30
17.47
(24%)
Fertilizer ($ per tonne)
502.93
414.80
21%
503.19
548.16
(8%)
Electricity ($ per megawatt hour)
53.19
57.96
(8%)
52.01
57.45
(9%)
UNIT OPERATING COSTS(1)
Nickel (NDCC) (US$ per pound)
$
5.44
$
7.87
(31%)
$
5.94
$
7.22
(18%)
Electricity ($ per megawatt hour)
30.64
29.16
5%
34.29
27.70
24%
(1)
Non-GAAP and other financial measures. For additional information, see the Non-GAAP and other financial measures section.
Sherritt International Corporation
15
The change in net loss from continuing operations is detailed below:
(1)
MPR costs and cobalt by-product credits include the cost and cobalt revenue, respectively, on cobalt sold from Sherritt’s 50% share of cobalt received under the
Cobalt Swap.
(2)
Other primarily relates to changes in Moa Joint Venture royalties, net costs and revenue on sold cobalt from GNC under the Cobalt Swap agreement and other by-
products, foreign exchange, depletion, and depreciation, amortization and administrative expenses and net revenue and costs of Oil and Gas, except rehabilitation
and closure expense on assets in Spain and E&E impairments which are disclosed separately.
Consolidated revenue, which excludes revenue from the Moa JV as it is accounted for under the equity method, for Q4 2024
was $45.7 million compared to $34.8 million in Q4 2023. Revenue in Q4 2024 was higher as revenue from fertilizers at Fort Site
increased 38% as a result of higher fertilizer average-realized prices(1) and sales volumes compared to Q4 2023. Fort Site
fertilizer revenue for Q4 2024 was $23.8 million compared to $14.4 million in Q4 2023. Cobalt Swap revenue for Q4 2024 was
$1.5 million compared to $2.0 million in Q4 2023.
Consolidated revenue for full year 2024 was $158.8 million compared to $223.3 million. Revenue was lower primarily due to the
timing of receipts and sales of cobalt by Sherritt under the Cobalt Swap agreement(2). Cobalt Swap revenue for full year 2024
was $2.4 million compared to $80.1 million in 2023. Fort Site fertilizer revenue for full year 2024 was $62.6 million compared to
$64.1 million in 2023 as lower average-realized prices(1) more than offset higher sales volumes in 2024.
Combined revenue(1) which includes the Corporation’s consolidated revenue and its 50% share of revenue of the Moa JV was
$160.3 million in Q4 2024 compared to $140.5 million in Q4 2023 primarily as a result of higher consolidated revenue as
discussed above and 13% higher nickel revenue of $95.3 million at the Moa JV as higher sales volumes offset lower average-
realized prices(1).
Combined revenue for full year 2024 was $577.6 million compared to $652.9 million in 2023. While cobalt revenue under the
Cobalt Swap was lower in 2024, cobalt revenue of the Moa JV was $45.6 million compared to $24.7 million in 2023. Nickel
revenue of $355.9 million was 6% lower as lower average-realized prices(1) more than offset higher sales volumes compared to
2023.
Management’s discussion and analysis
16 Sherritt International Corporation
In Q4 2024, average-realized prices(1) for nickel and cobalt were 8% and 29% lower, respectively, and 21% higher for fertilizers
than in Q4 2023, respectively. For full year 2024, average-realized prices(1) for nickel, cobalt and fertilizers were 23%, 24% and
8% lower than in full year 2023, respectively.
While the timing of receipts and sales of cobalt under the Cobalt Swap results in variances in cobalt sales volumes, revenue and
cost of sales for Sherritt, it does not have a material impact on earnings from operations, average-realized prices(1), cobalt by-
product credit, or NDCC(1). For more information regarding the Cobalt Swap, refer to the Cobalt Swap sales section in the Metals
Review of operations section.
The loss from continuing operations in Q4 2024 of $22.5 million compared to a loss from continuing operations of $53.4 million
in Q4 2023. Higher contribution from fertilizer sales, lower MPR/lb of nickel sold, and higher nickel sales volumes more than
offset the impact of lower average-realized prices(1) for nickel and cobalt. Fertilizer contribution was higher on higher revenue
and lower maintenance costs in Q4 2024 compared to Q4 2023. MPR/lb were 14% lower primarily as a result of lower
maintenance costs, increased operating efficiencies on better feed availability, and 44% lower natural gas and 22% lower diesel
average prices. The average price for sulphur was 3% higher in Q4 2024. Earnings from operations in Power in Q4 2024 was
lower than in Q4 2023 as a result of the impact of the nationwide power outage in Cuba which offset higher production and sales
related to higher gas and equipment availability. The positive net change in net loss from continuing operations in Oil and Gas
from Q4 2023 to Q4 2024 was primarily driven by an increase in rehabilitation and closure costs as a result of updated cost
estimates provided by the operator of Sherritt’s legacy Oil and Gas assets in Spain in Q4 2023, partly offset by a non-cash
impairment of intangible assets in Q4 2024.
The loss from continuing operations for full year 2024 of $73.1 million compared to $64.3 million in 2023 as the impact of lower
average-realized prices(1) for nickel and cobalt more than offset the benefits of lower MPR/lb and higher contribution from
fertilizers. MPR/lb were 15% lower primarily as a result of lower sulphur, natural gas and diesel input prices, lower maintenance
costs, lower purchases of sulphuric acid and increased operating efficiencies on better feed availability. For the full year 2024,
average prices for sulphur, natural gas and diesel were 22%, 45% and 13% lower, respectively, compared to those in full year
2023. Fertilizer contribution was higher in full year 2024 as a result of significantly lower maintenance costs on relatively
unchanged revenue compared to 2023. Earnings from operations in Power in full year 2024 was lower than in full year 2023 due
to higher planned maintenance. The positive net change in net loss from continuing operations in Oil and Gas from 2023 to 2024
was primarily driven by the increase in rehabilitation and closure costs at Sherritt’s legacy Oil and Gas assets in Spain in Q4
2023, partly offset by a non-cash impairment of intangible assets in Q4 2024.
Sherritt continues to realize savings in line with its estimated $17.2 million in annual savings from the workforce reductions
announced in the first half of 2024 and organizational structure changes during the second half of 2024.
Amounts related to the GNC receivable and Energas payable pursuant to the Cobalt Swap are non-cash revaluation adjustments
based on updates to valuation assumptions, primarily revisions to forecast timing of receipts of cobalt and cash distributions and
forecast cobalt prices.
(1)
Non-GAAP and other financial measure. For additional information, see the Non-GAAP and other financial measures section.
(2)
For additional information on the Cobalt Swap, see Note 12 – Advances, loans receivable and other financial assets of the consolidated financial statements for the
year ended December 31, 2024.
Sherritt International Corporation
17
CONSOLIDATED FINANCIAL POSITION
The following table summarizes the significant items as derived from the consolidated statements of financial position:
$ millions, except as otherwise noted, as at December 31
2024
2023
Change
Current assets
$
384.8
$
399.0
(4%)
Current liabilities
293.0
287.3
2%
Working capital(1)
91.8
111.7
(18%)
Current ratio(2)
1.31:1
1.39:1
(5%)
Cash and cash equivalents
$
145.7
$
119.1
22%
Investment in Moa JV
665.4
646.7
3%
Non-current advances, loans receivable and other financial assets
171.6
170.2
1%
Property, plant and equipment
152.1
159.2
(4%)
Total assets
1,382.8
1,390.6
(1%)
Loans and borrowings
372.5
355.6
5%
Provisions
109.5
128.0
(14%)
Total liabilities
785.4
777.0
1%
Deficit
(2,972.4)
(2,899.6)
(3%)
Shareholders' equity
597.4
613.6
(3%)
(1)
Working capital is calculated as the Corporation’s current assets less current liabilities.
(2)
The current ratio is calculated as the Corporation’s current assets divided by its current liabilities.
Cash and cash equivalents were $145.7 million as at December 31, 2024 compared to $148.6 million as at September 30, 2024.
As at December 31, 2024, total available liquidity in Canada, which is composed of cash and cash equivalents in Canada of
$32.0 million and available credit facilities of $30.4 million was $62.4 million compared to $71.4 million as at September 30, 2024.
During the quarter, Sherritt received $23.7 million of Cobalt Swap cash distributions, $7.0 million of dividends from Energas and
$4.7 million on the settlement of in-the-money nickel put options. These receipts were offset by cash used for operating activities
primarily reflecting timing of working capital receipts and payments, $9.4 million for interest on the Corporation’s 8.5% secured
second lien notes (“Second Lien Notes”), and $3.6 million on contractually obligated rehabilitation and closure costs related to
legacy Oil and Gas assets in Spain.
On a full year basis, total available liquidity in Canada was in line with the $63.0 million as at December 31, 2023. During 2024,
Sherritt received $23.7 million of cash Cobalt Swap distributions and $13.0 million of dividends from Energas, $36.2 million of
proceeds from operating activities at Fort Site on higher operating earnings and timing of working capital receipts and payments,
$30.0 million as full repayment of short-term working capital advances made to the Moa JV in 2023 and $5.9 million net proceeds
from nickel put options. These receipts were offset by cash used for operating activities primarily on timing of working capital
receipts and to support planned maintenance activities at Power, $18.8 million for interest on the Second Lien Notes, $6.6 million
for property, plant and equipment and $27.2 million on contractually obligated rehabilitation and closure costs related to legacy
Oil and Gas assets in Spain.
At current spot nickel prices, the Corporation expects that cobalt dividends and cash distributions under the Cobalt Swap
agreement will commence in the second half of the year and will not meet the annual minimum amount in 2025. The Moa JV’s
cash and cobalt distributions to the Corporation are determined based on available cash in excess of liquidity requirements.
Determinants of liquidity include anticipated nickel and cobalt prices and sales volumes, planned spending on capital at the Moa
JV including growth capital, capital committed toward the new tailings facility net of financing, working capital needs, expected
financing and other expected liquidity requirements. Available cash is also impacted by changes in working capital primarily
related to changes in inventory, and timing of receipts and payments, including receipts on nickel and cobalt sales subsequent
to shipment.
With the completion of maintenance work in 2024 to bring online an additional turbine and to improve equipment availability to
process gas from the recently completed wells and based on 2025 guidance estimates for production volumes, unit operating
costs(1) and spending on capital(1) disclosed in the Outlook section, total dividends in Canada from Energas in 2025 are expected
to be between $25.0 million and $30.0 million.
As at December 31, 2024, the Corporation was in compliance with all its debt covenants.
Management’s discussion and analysis
18 Sherritt International Corporation
At the Second Lien Notes interest payment date in October 2024, the Corporation was not required to make a mandatory
redemption of Second Lien Notes as it did not have Excess Cash Flow as defined in the Second Lien Notes indenture agreement
for the two-quarter period ended June 30, 2024. For the two-quarter period ended December 31, 2024, Excess Cash Flow was
$5.5 million. Subject to the minimum liquidity threshold of $75.0 million pursuant to the Second Lien Notes Indenture at the
interest payment date in April 2025, the Corporation will be required to redeem, at par, total Second Lien Notes equal to 50% of
Excess Cash Flow, or $2.8 million.
Subsequent to the quarter end, consistent with its prudent approach to managing liquidity, Sherritt elected not to pay cash
interest due in January 2025 of $3.6 million and added the payment-in-kind interest to the principal amount owed to noteholders
in its 10.75% unsecured PIK option notes (“PIK notes”).
(1)
Non-GAAP and other financial measures. For additional information see the Non-GAAP and other financial measures section.
Sherritt International Corporation
19
Significant factors influencing operations
As a commodity-based business, Sherritt’s operating results are primarily influenced by the prices of nickel and cobalt and its
fertilizers.
NICKEL
In Q4 2024, the price of nickel on the London Metal Exchange (“LME”) closed at US$6.85/lb decreasing from the Q3 2024
closing price of US$7.71/lb. The average nickel price of US$7.27/lb during the quarter was relatively unchanged compared to
the average nickel price of US$7.37/lb in Q3 2024. For the full year 2024, the price of nickel decreased from US$7.39/lb at the
beginning of the year and the average nickel price was US$7.63/lb.
Increased supply, primarily from Chinese and Indonesian miners, caused the market to end the year with an estimated surplus
of approximately 140 thousand tonnes(1). Supply is expected to continue to increase in excess of demand in the near term on
unabated Chinese and Indonesian production which is expected to keep nickel prices under pressure in the near term; however,
adoption of reduced quotas in Indonesia could potentially provide some price recovery and stabilization.
While global nickel demand growth in 2024 was strong, it was lower than commodity analysts had initially forecast with the
stainless steel sector driving most of the growth. In the near-term, demand is expected to face pressures from bearish economic
growth estimates, especially in China, tariff tensions, and a stronger U.S. dollar.
Longer-term demand is expected to increase in excess of supply leading to a market balance deficit position beyond 2030(2);
however, the timing of this shift in market balance will ultimately be dependent on the level of nickel production, including
Indonesian government-driven supply intervention, the pace of substantial nickel demand growth from electric vehicle (“EV”)
adoption, and the adherence by governments and industries to existing climate policies and targets.
COBALT
In Q4 2024, Argus Chemical Grade cobalt price closed at US$11.50/lb, relatively unchanged from the Q3 2024 closing price of
US$11.63/lb. The average cobalt price decreased to US$11.59 during the quarter from US$12.25/lb in Q3 2024. For the full year
2024, the price of cobalt decreased from US$14.25/lb at the beginning of the year and the average cobalt price was US$12.77/lb.
Recent supply surpluses are primarily driven by unabated production by copper-cobalt producers in the Democratic Republic of
the Congo (“DRC”) and nickel-cobalt producers in Indonesia outstripping demand increases. Supply from these regions
continues to grow, with substantial metal refining capacity expanding in Indonesia and China. Meanwhile, most mined and
refined projects outside the DRC, Indonesia, and China are delayed, further concentrating over 80% of global supply decisions
in these three countries.
Cobalt demand from the portable electronics and transportation sectors grew by 5% and 9% in 2024, respectively. Transportation
related demand was led by China, with modest growth in North America and stagnation in Europe(3). EV-related cobalt demand
growth remains strong long-term, but faces risks in the medium term from weakening climate policy support and regulatory shifts.
FERTILIZER
In Q4 2024, fertilizer prices increased compared quarter-over-quarter, driven by rising input costs for natural gas and sulphur,
alongside spring 2025 demand. Anticipated colder winter conditions in early 2025 may further elevate natural gas usage for
heating, potentially sustaining higher fertilizer prices.
(1)
CRU, Nickel Market Outlook, December 2024
(2)
Wood Mackenzie, Nickel Market Balance, December 2024
(3)
CRU, Cobalt Market Outlook, November 2024
Management’s discussion and analysis
20 Sherritt International Corporation
Review of operations
METALS
For the three months ended
For the year ended
2024
2023
2024
2023
$ millions (Sherritt's share), except as otherwise noted
December 31
December 31
Change
December 31
December 31
Change
FINANCIAL HIGHLIGHTS(1)
Revenue
$
148.3
$
125.9
18%
$
526.6
$
603.7
(13%)
Cost of sales
146.6
146.6
-
532.3
601.4
(11%)
Loss from operations
(1.0)
(22.0)
95%
(18.5)
(2.1)
(781%)
Adjusted EBITDA(2)
14.6
(8.7)
268%
40.0
53.6
(25%)
CASH FLOW(1)
Cash provided by continuing operations for operating activities(2) $
5.9
$
3.4
74%
$
93.1
$
115.9
(20%)
Free cash flow(2)
(0.3)
(14.2)
98%
59.1
58.9
-
PRODUCTION VOLUME (tonnes)
Mixed Sulphides
3,552
3,514
1%
15,847
15,084
5%
Finished Nickel
3,853
3,744
3%
15,166
14,336
6%
Finished Cobalt
465
330
41%
1,603
1,438
11%
Fertilizer
67,648
61,092
11%
250,272
219,707
14%
NICKEL RECOVERY(3) (%)
84%
89%
(6%)
86%
88%
(2%)
SALES VOLUME (tonnes)
Finished Nickel
4,326
3,511
23%
15,678
12,888
22%
Finished Cobalt
465
399
17%
1,638
2,720
(40%)
Fertilizer
63,299
55,509
14%
179,135
170,161
5%
AVERAGE REFERENCE PRICE(4) (US$ per pound)
Nickel
$
7.27
$
7.82
(7%)
$
7.63
$
9.74
(22%)
Cobalt
11.59
15.69
(26%)
12.77
16.30
(22%)
AVERAGE-REALIZED PRICE(2)
Nickel ($ per pound)
$
9.98
$
10.87
(8%)
$
10.30
$
13.36
(23%)
Cobalt ($ per pound)
12.30
17.23
(29%)
13.30
17.47
(24%)
Fertilizer ($ per tonne)
502.93
414.80
21%
503.19
548.16
(8%)
UNIT OPERATING COST(2) (US$ per pound)
Nickel - net direct cash cost(2)
$
5.44
$
7.87
(31%)
$
5.94
$
7.22
(18%)
SPENDING ON CAPITAL(2)
Sustaining
$
6.0
$
19.0
(68%)
$
28.3
$
51.3
(45%)
Growth
5.3
2.3
130%
11.4
11.4
-
$
11.3
$
21.3
(47%)
$
39.7
$
62.7
(37%)
(1)
The amounts included in the Financial Highlights and Cash Flow sections for Metals above include the combined results of the Moa JV, Fort Site and Metals Marketing.
Breakdowns of revenue, Adjusted EBITDA, and the components of free cash flow (cash provided (used) by continuing operations for operating activities and Property,
plant and equipment expenditures) for each of these operations are included in the Combined revenue, Adjusted EBITDA and Free cash flow reconciliations,
respectively, in the Non-GAAP and other financial measures section of this MD&A.
(2)
Non-GAAP and other financial measures. For additional information, see the Non-GAAP and other financial measures section.
(3)
The nickel recovery rate measures the amount of finished nickel that is produced compared to the nickel content of the ore that was mined.
(4)
Reference source: Nickel - LME. Cobalt - Average chemical-grade cobalt price published by Argus.
Sherritt International Corporation
21
(1)
The annual refinery maintenance shutdown occurred in Q2 2024.
(2)
Non-GAAP and other financial measure. For additional information, see the Non-GAAP and other financial measures section.
Metals revenue, cost of sales and NDCC(1) are composed of the following:
For the three months ended
For the year ended
2024
2023
2024
2023
$ millions, except as otherwise noted
December 31
December 31
Change
December 31
December 31
Change
REVENUE
Nickel
$
95.3
$
84.1
13%
$
355.9
$
379.6
(6%)
Cobalt
12.6
15.2
(17%)
48.0
104.8
(54%)
Fertilizers
31.8
23.1
38%
90.1
93.3
(3%)
Other
8.6
3.5
146%
32.6
26.0
25%
$
148.3
$
125.9
18%
$
526.6
$
603.7
(13%)
COST OF SALES(2)
Mining, processing and refining (MPR)(3)
$
84.8
$
76.4
11%
$
323.6
$
275.0
18%
Third-party feed costs
8.2
11.9
(31%)
20.8
26.1
(20%)
Finished cobalt cost(4)
1.4
1.8
(22%)
2.2
86.1
(97%)
Fertilizers
20.3
26.3
(23%)
62.0
81.9
(24%)
Selling costs
9.1
8.2
11%
31.3
29.0
8%
Other
7.2
8.7
(17%)
34.4
49.1
(30%)
$
131.0
$
133.3
(2%)
$
474.3
$
547.2
(13%)
NET DIRECT CASH COST(1) (US$ per pound of nickel)
Mining, processing and refining costs(5)
$
6.29
$
7.35
(14%)
$
6.83
$
8.08
(15%)
Third-party feed costs
0.63
1.14
(45%)
0.44
0.68
(35%)
Cobalt by-product credits(5)
(0.89)
(1.34)
34%
(0.99)
(1.69)
41%
Net fertilizer by-product credit
(0.85)
0.31
(374%)
(0.59)
(0.30)
(97%)
Net impact of redirected cobalt(6)
(0.01)
(0.01)
-
-
0.09
(100%)
Other(7)
0.27
0.42
(36%)
0.25
0.36
(31%)
$
5.44
$
7.87
(31%)
$
5.94
$
7.22
(18%)
(1)
Non-GAAP and other financial measure. For additional information, see the Non-GAAP and other financial measures section.
(2)
Excludes depletion, depreciation and amortization and excludes impairment of property, plant and equipment.
(3)
Effective January 1, 2023, MPR costs exclude the cost of cobalt volumes sold in accordance with the Cobalt Swap.
(4)
Finished cobalt cost is based on the settlement value of the cobalt sold. The settlement value is based on an in-kind value of cobalt, calculated at the time of distribution
as a cobalt reference price from the month preceding distribution, modified mutually between the Corporation and GNC in consideration of selling costs incurred by
the Corporation.
(5)
MPR and cobalt by-product credits include the cost and cobalt revenue, respectively, on cobalt sold from Sherritt’s 50% share of cobalt received under the Cobalt
Swap.
(6)
Net impact of redirected cobalt includes the finished cobalt cost less cobalt by-product credits per pound of nickel sold on the cobalt sold from GNC’s redirected cobalt
received by Sherritt under the Cobalt Swap.
(7)
Includes marketing costs, discounts/premiums, and other by-product credits.
Management’s discussion and analysis
22 Sherritt International Corporation
The following table summarizes average reference prices for key input commodities for Metals(1):
For the three months ended
For the year ended
2024
2023
2024
2023
December 31
December 31
Change
December 31
December 31
Change
Sulphur (US$ per tonne)
$
187.75
$
181.79
3%
$
179.95
$
230.30
(22%)
Diesel (US$ per litre)
0.90
1.16
(22%)
0.98
1.12
(13%)
Fuel oil (US$ per tonne)
439.37
483.33
(9%)
468.57
466.07
1%
Natural gas cost ($ per gigajoule)
1.63
2.93
(44%)
1.60
2.90
(45%)
(1)
The above input commodity prices are the average prices incurred during the periods reflected in cost of sales or inventory.
The following graphs summarize the change in loss from operations for Metals:
(1)
MPR and cobalt by-product credits include the costs and cobalt revenue, respectively, on cobalt sold from Sherritt’s 50% share of cobalt received under the Cobalt
Swap.
(2)
Other is primarily composed of sulphuric acid revenue and costs, selling costs, royalty costs, administrative costs, net costs and revenue on sold cobalt redirected
from GNC to Sherritt under the Cobalt Swap agreement, inventory impairments, depletion, depreciation and amortization.
Sherritt International Corporation
23
Revenue
Metals revenue for the three months and year ended December 31, 2024 was $148.3 million and $526.6 million compared to
$125.9 million and $603.7 million, respectively, in the same periods in 2023.
Nickel revenue for the three months and year ended December 31, 2024 was $95.3 million and $355.9 million compared to
$84.1 million and $379.6 million, respectively, in the same periods in 2023. In Q4 2024, the 23% increase in nickel sales volume
offset the 8% lower average-realized price(1). For the year ended December 31, 2024, the 22% increase in nickel sales volume
was more than offset by the 23% decrease in average-realized price(1) in 2024. Sales volumes were higher in line with higher
production in each quarter in 2024, except in Q3 where demand is typically softer and as a result of the Canadian rail lock-out
that temporarily disrupted logistics. In Q4 2024, sales volume was above production due to strong spot sales and the realization
of sales deferred as a result of the Canadian rail lock-out in the third quarter.
Cobalt revenue for the three months and year ended December 31, 2024 was $12.6 million and $48.0 million compared to $15.2
million and $104.8 million, respectively, in the same periods in 2023. Lower revenue in the current year periods was primarily
due to the timing of receipts and sales of cobalt by Sherritt under the Cobalt Swap agreement and lower average-realized
prices(1). The average-realized prices(1) for cobalt were 29% and 24% lower in the current year periods, respectively, compared
to the same periods in 2023. For more information regarding the timing of Cobalt Swap receipts, sales and distributions in 2024,
refer to the Cobalt Swap section below.
Sherritt will continue to leverage its marketing strategy in developing new avenues for sales which, concurrent with implementing
strategic costs reductions, is expected to effectively weather the unabated oversupply strategy from China, Indonesia and the
Democratic Republic of the Congo. Sherritt is actively pursuing spot sales opportunities, new customer development and market
opportunities to counter dependance on supply from these countries.
Fertilizer revenue for the three months and year ended December 31, 2024 was $31.8 million and $90.1 million compared to
$23.1 million and $93.3 million, respectively, in the same periods in 2023. Fertilizer sales volumes were 14% and 5% higher
while average-realized prices(1) were 21% higher and 8% lower for the three months and year ended December 31, 2024,
respectively, compared to the same periods in 2023. Higher fertilizer sales volumes in 2024 reflect better available production
for sale compared to 2023 consistent with higher nickel production and better equipment availability.
Cobalt Swap
In Q4 2024, Sherritt focused efforts to maximize distributions under the Cobalt Swap agreement. In Q3 2024, Sherritt had
indicated the Cobalt Swap distribution in Q4 could be up to a maximum of $50.0 million (including both Sherritt’s share and
GNC’s redirected share) assuming midpoint guidance for annual nickel production and first half 2024 average nickel and cobalt
reference prices of US$8.00/lb and US$13.50/lb continued in the second half of the year. Despite average nickel and cobalt
reference prices in the second half of 2024 being US$7.32/lb and US$11.92/lb, respectively, well below their first half averages,
Sherritt’s focused efforts to prudently manage and maximize its cash flows in the Moa JV led to significant distributions of $23.7
million in cash and 223 tonnes of finished cobalt with an in-kind value of $6.1 million (including both Sherritt’s share and GNC’s
redirected share) for a total of $29.8 million.
In Q4 2024, Sherritt sold 50 tonnes of the 223 tonnes of finished cobalt that it received under the Cobalt Swap agreement
recognizing revenue of $1.5 million. In 2023, Sherritt had received 100% of the annual maximum amount of cobalt (2,082 tonnes)
by the end of the second quarter and had sold virtually all of that cobalt by the end of the year, including 49 tonnes in Q4 2023.
Sales of cobalt from the Cobalt Swap in full year 2024 were 73 tonnes, or $2.4 million, compared to 2,059 tonnes, or $80.1 million,
in 2023.
At current spot nickel prices, the Corporation expects that cobalt dividends and cash distributions under the Cobalt Swap
agreement will commence in the second half of the year and will not meet the annual minimum amount in 2025. The Moa JV’s
cash and cobalt distributions to the Corporation are determined based on available cash in excess of liquidity requirements.
Determinants of liquidity include anticipated nickel and cobalt prices and sales volumes, planned spending on capital at the Moa
JV including growth capital, capital committed toward the new tailings facility net of financing, working capital needs, expected
financing and other expected liquidity requirements. Available cash is also impacted by changes in working capital primarily
related to changes in inventory, and timing of receipts and payments, including receipts on nickel and cobalt sales subsequent
to shipment.
Management’s discussion and analysis
24 Sherritt International Corporation
While the timing of receipts and sales of cobalt under the Cobalt Swap results in variances in cobalt sales volume, revenue and
cost of sales for Sherritt, they do not have a material impact on earnings from operations, average-realized prices(1), cobalt by-
product credits, or NDCC(1). This is because the variance in revenue and costs of Sherritt’s share of cobalt under the Cobalt
Swap is offset by Sherritt’s share of revenue and costs of the Moa JV and the cost of cobalt sold on volumes of cobalt redirected
from GNC is determined based on the in-kind value of cobalt calculated as the cobalt reference price from the month preceding
distribution less a mutually agreed selling cost adjustment.
Production
Mixed sulphides production at the Moa JV for the three months and year ended December 31, 2024 was 3,552 tonnes and
15,847 tonnes, 1% and 5% higher, respectively, compared to the same periods in 2023. Lower maintenance and improved feed
to the processing plant following the completion of the new Slurry Preparation Plant (“SPP”) in the first quarter of 2024 contributed
to higher production throughout the year. During Q4 2024 a number of external factors in Cuba occurred including an earthquake,
hurricanes and nationwide power outages that individually did not materially impact mixed sulphide precipitate (“MSP”)
production but in aggregate and when combined with heavy rains which required the processing of lower grade stockpiles,
resulted in MSP production being lower than it would have been otherwise.
Finished nickel production for the three months and year ended December 31, 2024 was 3,853 tonnes and 15,166 tonnes, 3%
and 6% higher, respectively, compared to the same periods in 2023 primarily as a result of higher mixed sulphides feed
availability at the refinery partly offset by lower third-party feed purchases in 2024.
Finished cobalt production for the three months and year ended December 31, 2024 was 465 tonnes and 1,603 tonnes, 41%
and 11% higher, respectively, compared to the same periods in 2023 for the same reasons as finished nickel. Third-party feed
processed in Q4 2024 had higher cobalt content compared to feed processed in Q4 2023.
Finished nickel and cobalt production for full year 2024, on a 100% basis, was within the annual guidance ranges.
Fertilizer production for the three months and year ended December 31, 2024 was 67,648 tonnes and 250,272 tonnes, 11% and
14% higher, respectively, compared to the same periods in 2023 in line with higher metals production and the implementation
of operational improvements during 2024.
NDCC(1)
NDCC(1) per pound of nickel sold for the three months and year ended December 31, 2024 was US$5.44/lb and US$5.94/lb,
respectively, compared to US$7.87/lb and US$7.22/lb in the same periods in 2023. In each of the current year periods, NDCC(1)
significantly improved as a result of lower MPR/lb and third-party feed costs and higher net fertilizer by-product credits, partly
offset by lower cobalt by-product credits. NDCC(1) was also positively impacted by higher nickel sales volume in each of the
current year periods compared to the same periods in the prior year. NDCC(1) for 2024 was within the annual guidance range.
Overall, finished nickel and cobalt production significantly benefitted from the Corporation’s multiyear production optimization
and expansion programs that have resulted in improved mining production and refining process flows which provided operational
stability and improved operational efficiencies and have been instrumental in driving NDCC(1) down in this volatile commodities
market.
MPR/lb was 14% and 15% lower in Q4 and full year 2024, respectively, compared to the same periods in 2023. In Q4 2024, the
average price for natural gas and diesel were 44% and 22% lower, respectively, while sulphur was 3% higher, compared those
in Q4 2023. For the full year 2024, average prices for sulphur, natural gas and diesel were 22%, 45% and 13% lower,
respectively, compared to those in 2023. Full year MPR was also positively impacted by lower maintenance costs, operational
improvements and lower purchases of sulphuric acid.
Third-party feed costs were 45% and 35% lower in Q4 and full year 2024 compared to in the same periods in 2023 on lower
feed availability.
Net fertilizer by-product credits were significantly higher in Q4 2024 compared to Q4 2023 as a result of higher sales volumes
and average-realized prices(1) as well as lower maintenance costs. For the full year 2024, net fertilizer by-product credits were
higher, however, lower fertilizer maintenance costs were partly offset by lower average-realized prices(1) in full year 2024
compared to 2023.
Cobalt by-product credits(2) were 34% and 41% lower in Q4 and full year 2024, respectively, primarily as a result of lower
average-realized prices(1).
Sherritt International Corporation
25
Spending on capital(1)
During the fourth quarter, in response to market conditions, Sherritt took a prudent approach and reduced its spending on
capital(1) to conserve liquidity. As a result, total spending on capital for sustaining and growth activities for the year were both
lower than 2024 guidance.
Sustaining spending on capital for the three months and year ended December 31, 2024 was $6.0 million and $28.3 million
compared to $19.0 million and $51.3 million in the same periods in 2023, respectively.
Growth spending on capital for the three months and year ended December 31, 2024 was $5.3 million and $11.4 million
compared to $2.3 million and $11.4 million in the same periods in 2023, respectively. Spending on capital in 2024 was primarily
related to the second phase of the Moa JV expansion program.
(1)
Non-GAAP and other financial measures. For additional information see the Non-GAAP and other financial measures section.
(2)
Cobalt by-product credits include Sherritt’s share of cobalt revenue per pound of nickel sold only.
Expansion program and strategic developments
Moa JV expansion program and tailings update
Sherritt’s low cost and low capital intensity Moa JV expansion program continues to advance. Phase one, the SPP, was
completed in early 2024 reducing ore haulage distances, lowering carbon intensity from mining and increasing throughput over
the life of mine.
Construction on phase two progressed with piping installation and internal brick lining of vessels along with some pre-
commissioning activities. With lower nickel and cobalt prices, Sherritt continues to exercise capital preservation measures and
has scheduled certain expenditures for Q1 2025 when construction is expected to be completed and following which, the ramp-
up is expected to commence.
Concurrent with the phase two completion and ramp up, the Moa JV is undertaking a series of measures to remove minor
processing bottlenecks to support the expected 20% increase in annual MSP production. The additional MSP is expected to fill
the refinery to nameplate capacity to maximize profitability from the joint venture’s own mine feed, displacing lower margin third-
party feeds and increasing overall finished nickel and cobalt production.
In line with its life of mine plan and in consideration of growing international focus on tailings risks, the Moa JV is advancing a
tailings management project as outlined in its 2023 National Instrument 43-101 Technical Report. The new tailings facility will
be engineered and built to international standards and will provide a tailings solution for the Moa mine over the entirety of its
current mine life of approximately 25 years. The Corporation expects the new tailings facility to be commissioned in 2026.
Spending on capital(1) in 2024 was $13.1 million for initial engineering and infrastructure work and the expected remaining capital
cost is estimated to be approximately $40.0 million (50% basis) in each of 2025 and 2026. The tailings management project is
a capital efficient and robust tailings solution driven to meet expected production needs, international standards, and Moa JV’s
strategic environmental priorities.
Strategic developments
Sherritt, through its mixed hydroxide precipitate processing project (“MHP Project”), is advancing a flowsheet to convert nickel
intermediates via midstream processing to produce high-purity nickel and cobalt sulphates, two fundamental feedstock materials
for the electric vehicle supply chain.
During the quarter, Sherritt continued to advance and derisk the MHP Project. The refinery flow sheet was validated through the
completion of process development batch testing and continuous solvent extraction (“SX”) pilot work programs which yielded high-
purity nickel and cobalt products, meeting battery grade specifications. Initial engineering and capital cost estimates were
completed, and site assessment activities identified four potential refinery locations in Canada. Sherritt continued to engage with
federal and provincial governments, potential customers and funding partners, including offtake partners for refinery products and
by-products. These engagement activities will continue in 2025 with a focus on securing external partners and funding support.
Additionally, Sherritt continues to selectively advance metallurgy research and flowsheet development programs on potential
future sources of nickel and cobalt, in cooperation with third parties and via external technical services, towards ensuring sufficient
future critical mineral processing capacity and supply in North America.
Management’s discussion and analysis
26 Sherritt International Corporation
POWER
For the three months ended
For the year ended
2024
2023
2024
2023
$ millions (Sherritt's share, 33⅓% basis), except as otherwise noted
December 31
December 31
Change
December 31
December 31
Change
FINANCIAL HIGHLIGHTS
Revenue
$
11.1
$
14.0
(21%)
$
47.8
$
47.1
1%
Cost of sales
5.9
7.1
(17%)
30.1
22.7
33%
Earnings from operations
4.8
5.9
(19%)
13.5
20.7
(35%)
Adjusted EBITDA(1)
5.5
6.6
(17%)
16.0
23.2
(31%)
CASH FLOW
Cash (used) provided by continuing operations for operating
activities(1)
$
(1.1)
$
7.4
(115%)
$
(9.8)
$
16.9
(158%)
Free cash flow(1)
(1.6)
6.1
(126%)
(12.7)
13.7
(193%)
PRODUCTION AND SALES VOLUME
Electricity (GWh(2))
171
225
(24%)
816
745
10%
AVERAGE-REALIZED PRICE(1)
Electricity (per MWh(2))
$
53.19
$
57.96
(8%)
$
52.01
$
57.45
(9%)
UNIT OPERATING COST(1)
Electricity (per MWh)
30.64
29.16
5%
34.29
27.70
24%
SPENDING ON CAPITAL(1)
Sustaining
$
0.3
$
1.3
(77%)
$
2.9
$
3.2
(9%)
(1)
Non-GAAP and other financial measures. For additional information see the Non-GAAP and other financial measures section.
(2)
Gigawatt hours (GWh), Megawatt hours (MWh).
(1)
Non-GAAP and other financial measures. For additional information see the Non-GAAP and other financial measures section.
Sherritt International Corporation
27
Power revenue is composed of the following:
For the three months ended
For the year ended
2024
2023
2024
2023
$ millions (Sherritt's share, 33⅓% basis)
December 31
December 31
Change
December 31
December 31
Change
Electricity sales
$
9.2
$
13.0
(29%)
$
42.5
$
42.8
(1%)
Varadero frequency control revenue
1.1
-
-
1.1
-
-
By-products and other
0.8
1.0
(20%)
4.2
4.3
(2%)
$
11.1
$
14.0
(21%)
$
47.8
$
47.1
1%
During Q4 2024, as a result of the nationwide power outages in Cuba and challenges facing the national power grid, the
government agency Unión Eléctrica (“UNE”) required Energas to operate the Varadero facility in frequency control to help
support the stability of the power grid, which reduced the power generation volume by approximately 25 GWh (Sherritt’s share).
Energas was fully compensated for this reduction under the same terms and conditions outlined in its contract. Energas expects
that the Varadero facility will operate in frequency control throughout 2025 with an estimated reduction in electricity volume of
approximately 150 GWh. Energas expects to continue to be fully compensated for this reduction and therefore Sherritt expects
there will be no impact to Power’s Adjusted EBITDA(1), earnings from operations or dividends from Energas to Sherritt in Canada.
Energas’ other facilities are expected to continue operating as usual.
Revenue
Revenue for the three months and year ended December 31, 2024 was $11.1 million and $47.8 million down 21% and up 1%,
respectively, compared to the same periods in the prior year primarily due the impact of the nationwide power outages in Cuba
in Q4 2024 partly offset by higher production related to additional gas and equipment availability and $1.1 million of Varadero
frequency control revenue in compensation for lost electricity generation.
Production
Production volume for the three months and year ended December 31, 2024 was 171 GWh and 816 GWh, respectively.
Production in Q4 2024 was 24% lower than in Q4 2023 due to the national electricity grid outage that occurred in October 2024
and the absence of production in November and December at the Varadero facility operating in frequency control. Full year
2024, production was 10% higher than in 2023 on better equipment availability and additional gas from new wells brought online
in Q2 2023 and Q4 2024. Production for the full year 2024 was within the annual guidance range.
Unit operating cost(1)
Unit operating costs(1) for the three months and year ended December 31, 2024 were $30.64/MWh, and $34.29/MWh, compared
to $29.16/MWh, and $27.70/MWh, respectively, for the same periods in 2023. Operating costs were higher in full year 2024
compared 2023 reflecting higher planned maintenance work at Puerto Escondido on three gas turbines in Q2 and Q3 completed
in part to bring online an additional turbine to process gas being received from the new well that Power brought into production
during the year. This maintenance work and related spend was successfully funded by Energas through the Moa Swap and was
incorporated into Sherritt’s 2024 Power division guidance range. The impact of a weaker Canadian dollar on U.S. dollar-
denominated costs and lower electricity volumes as a result of the nationwide power outages in Cuba and subsequent
implementation of frequency control at Varadero in the fourth quarter of 2024 contributed to unit operating costs(1) for the full
year 2024 being slightly above the upper end of the annual guidance range of $34.00/MWh.
During Q3 2024, a new gas well was drilled and was put into production in early October. This new well was the third well to go
into production since the second quarter of 2023, contributing to the improved utilization rates in the Power division and is
expected to provide significantly higher levels of electricity production and increased levels of dividends in Canada going forward.
Spending on capital(1)
Spending on capital(1) for the three months and year ended December 31, 2024 was $0.3 million and $2.9 million, respectively
primarily driven by planned maintenance activities completed in the year. Sustaining spending on capital(1) for the full year 2024
was lower than annual guidance as a result of the deferral of some of non-essential spending.
Dividends from Energas
Sherritt received $7.0 million of dividends in Canada from Energas in Q4 2024, bringing the total dividends in Canada to
$13.0 million for the year, which was higher than previously estimated due to timing of dividend approvals at Energas, the impact
of a weaker Canadian dollar and the deferral on non-essential capital expenditures.
Management’s discussion and analysis
28 Sherritt International Corporation
With the completion of maintenance work in 2024 to bring online an additional turbine and to improve equipment availability to
process gas from the recently completed wells and based on 2025 guidance estimates for production volumes, unit operating
costs(1) and spending on capital(1) disclosed in the Outlook section total dividends in Canada from Energas in 2025 are expected
to be between $25.0 million and $30.0 million in 2025.
(1)
Non-GAAP and other financial measures. For additional information see the Non-GAAP and other financial measures section.
CORPORATE AND OTHER
For the three months ended
For the year ended
2023
2023
2024
December 31
2024
December 31
$ millions
December 31
(Restated)
Change
December 31
(Restated)
Change
EXPENSES
Administrative expenses
$
5.3
$
1.9
179%
$
25.7
$
17.0
51%
Corporate and Other’s administrative expenses are primarily composed of employee costs, severance expenses, share-based
compensation expenses (recoveries), legal fees, third-party consulting services and audit fees incurred to support head office
activities and joint venture management, as well as costs for external technical services, business and market development, and
growth activities including early-stage test work and engineering expenses.
Administrative expenses at Corporate and Other for the three months ended December 31, 2024 were $3.4 million higher
compared to the prior year primarily as a result of the classification of employee costs incurred by the former Technologies
reportable segment for business and market development, growth activities and external technical services as administrative
expenses following Technologies’ restructuring, while in the comparative period, employee costs incurred by the former
Technologies reportable segment were classified within cost of sales. In addition, share-based compensation expense of $0.2
million compared to a recovery of $1.5 million in the prior year period primarily as a result of a $0.12 decrease in the Corporation’s
share price in the prior year period.
Administrative expenses at Corporate and Other for the year ended December 31, 2024 were $8.7 million higher compared to
the prior year primarily as a result of the change in classification noted above following Technologies’ restructuring. In addition,
severance expense of $1.4 million was recognized in the current year period related to the restructuring of Technologies to
reduce its scale in line with a narrower focus to deliver essential support and enhancements to internal operations and business
development opportunities and the workforce reduction at Corporate. Lastly, share-based compensation expense of $1.5 million
compared to a recovery of $1.8 million in the prior year period primarily as a result of a $0.21 decrease in the Corporation’s
share price in the prior year period and higher stock option plan expense in the current year period due to additional grants and
vesting.
Sherritt International Corporation
29
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)
In Q2 2024, Sherritt issued its 2023 sustainability, climate, and tailings management reports as well as its sustainability scorecard
outlining the Corporation’s performance on ESG matters. Highlights included:
Achieved ISO 14001 (Environmental Management Systems) and ISO 45001 (Occupational Health and Safety
Management Systems) Certification at the Fort Site;
Maintained 100% alignment with the Organisation for Economic Co-operation and Development’s (“OECD”) 5-Step
Framework and maintained conformity with the LME’s Track B Responsible Sourcing Requirements;
Received independent verification that its minerals are not associated with conflict, or risks such as human rights
abuses, child or forced labour, or corruption;
Provided approximately $1 million of support to local community investment projects in 2023; and
Continued to support long-term community development project partnerships with UNICEF and Cowater in Cuba, and
the Northern Alberta Institute of Technology in Canada.
During 2024, Sherritt:
Had zero work-related fatalities across all Sherritt sites. In response to two fatalities in 2023, Sherritt completed a
comprehensive root cause analysis and began implementing the resulting Fatality Prevention Action Plan at the Moa
JV mine site, completed comprehensive safety strategy sessions with each of its operations, hired additional health
and safety personnel, and refocused its attention on felt leadership, supervisor competencies, and contractor safety.
Refreshed Sherritt’s sustainability strategy and five-year goals to reflect the completion of past objectives and
incorporate current priorities including the new health and safety strategy, Copper Mark certification, alignment with
international good practice standards, and compliance with emerging disclosure standards.
Completed baseline energy and greenhouse gas emission assessments at the Moa JV mine site and Fort Site. At both
sites, Sherritt identified several potential decarbonization opportunities that would reduce the GHG emissions per
quantity of product output;
Completed a climate risk and opportunity assessment for Energas operations;
Independently verified continued conformity with LME’s Track B Responsible Sourcing Requirements;
Completed a Responsible Business Alliance, Responsible Minerals Initiative and OECD-aligned risk assessment of
Sherritt’s mineral supply chain which did not identify any significant risks;
Achieved self-assessed Level A in all Towards Sustainable Mining protocols at the Fort Site; and
Continued to advance Sherritt’s community partner programs and completed the development of its Indigenous
Relations and Reconciliation Road Map.
Management’s discussion and analysis
30 Sherritt International Corporation
Outlook
2024 AND 2025 PRODUCTION VOLUMES, UNIT OPERATING COSTS(1) AND SPENDING ON CAPITAL(1)
GUIDANCE
Year-to-date
2024
actual to
2025
Production volumes, unit operating costs(1) and spending on capital(1)
Guidance
December 31, 2024
Guidance
Production volumes
Moa Joint Venture (tonnes, 100% basis)
Nickel, finished
30,000 - 32,000
30,331
31,000 - 33,000
Cobalt, finished
3,100 - 3,400
3,206
3,300 - 3,600
Electricity (GWh, 33⅓% basis)
775 - 825
816
800 - 850
Unit operating costs(1)
Metals - NDCC (US$ per pound)
$5.50 - $6.00
$5.94
$5.75 - $6.25
Electricity - unit operating cost ($ per MWh)
$32.50 - $34.00
$34.29
$23.00 - $24.50
Spending on capital(1)($ millions)
Sustaining
Moa Joint Venture (50% basis), Fort Site (100% basis)
$15.0
$15.2
$35.0
Moa Joint Venture - Tailings facility (50% basis)
$25.0
$13.1
$40.0
Power (33⅓% basis)
$5.5
$2.9
$2.0
Growth
Moa Joint Venture (50% basis)
$15.0
$11.4
$5.0
Spending on capital(2)
$60.5
$42.6
$82.0
(1)
Non-GAAP financial measures. For additional information, see the Non-GAAP and other financial measures section.
(2)
Excludes negligible spending on capital of the Metals Marketing, Oil and Gas and Corporate and Other segments.
Metals
Nickel and cobalt production are both expected to increase in 2025 compared to 2024 primarily due to the enhanced availability
of mixed sulphides from the Moa mine site to the refinery, following the completion, ramp up and debottlenecking of the phase
two expansion. To maximize refinery operation efficiencies before and during the ramp-up period, third-party feed will be
procured and processed as necessary, subject to market conditions. With the completion of the ramp up and as a result of the
external challenges during the fourth quarter of 2024 which has resulted in lower beginning MSP inventory at the refinery,
production is expected to be weighted towards the latter part of the year. Increased MSP production is expected to be delivered
to the refinery in the second half of the year, especially in the fourth quarter of 2025, and finished nickel and cobalt production
is expected to increase further in 2026.
NDCC(1) for 2025 is expected to be relatively consistent with 2024 and is expected to benefit from higher expected production
and sales volumes and from previously implemented and continued cost optimization initiatives. Offsetting these benefits is the
forecast negative impact from future commodity prices including lower cobalt prices, which are expected to result in year-over-
year lower cobalt by-product credits, and higher sulphur prices, which are expected to result in higher input costs. In addition,
guidance for 2025 includes the impact of the bi-annual Fort Site ammonia plant turnaround, and higher purchases of sulphuric
acid required during planned acid plant maintenance at Moa.
By-product credits and input commodities included in NDCC(1) are subject to considerable change given the volatility of cobalt,
fertilizer, sulphur, diesel and fuel prices. NDCC(1) guidance for 2025 is based on a forecast cobalt reference price of US$11.70
per pound and forecast sulphur price of US$215.00 per tonne including freight and handling.
Sustaining spending on capital(1), excluding spending on the new tailings facility, is expected to be $35.0 million (Moa JV 50%
basis, Fort Site 100% basis).
Sherritt International Corporation
31
Sustaining spending on capital(1) of $40.0 million (50% basis) is related to advancing Moa JV’s tailings management project as
outlined in its 2023 National Instrument 43-101 Technical Report. The new tailings facility will provide a tailings solution for the
Moa mine over the entirety of its current mine life of approximately 25 years. The Corporation expects the new tailings facility to
be commissioned in 2026. Spending on capital(1) in 2024 was $13.1 million for initial engineering and infrastructure work and the
remaining expected capital cost which includes early works spending that was deferred from 2024 is estimated to be
approximately $40.0 million (50% basis) in each of 2025 and 2026. The tailings management project is a capital efficient and
robust tailings solution driven to meet expected production needs, international standards, and Moa JV’s strategic environmental
priorities. Subsequent to year end, the Moa JV secured a US$60.0 million (100% basis) equivalent loan in Cuban pesos from a
Cuban financial institution with a 5-year maturity that will primarily be utilized to support capital spend on tailings management.
Growth spending on capital(1) is primarily related to deferred spending from 2024 which is to be used for the completion of
construction of phase two of the expansion program at the Moa JV which remains on budget and is expected to be completed
in the first half of 2025.
Power
Electricity production is expected to be higher in 2025 compared to 2024 despite the lower production at the Varadero facility
due to the requirement to operate in frequency control as noted above. Production at Power’s other facilities are expected to be
higher as a result of the full year receipt of additional gas from the gas well that went into production in Q4 2024, better equipment
availability and improved utilization rates with the completion of the maintenance in 2024.
The 2025 production guidance reflects a reduction of approximately 150 GWh associated with frequency control at the Varadero
facility. Enegas expects to continue to be fully compensated for this reduction under the same terms and conditions outlined in
its contract and the Corporation expects there will be no negative impact to Power’s Adjusted EBITDA(1), earnings from
operations or dividends from Energas to Sherritt in Canada as a result.
Unit operating cost(1) for electricity in 2025 reflects lower planned maintenance activities related to gas turbines and the impact
of higher electricity production and sales.
Spending on capital(1) for sustaining activities is primarily for maintenance and equipment purchases.
(1)
Non-GAAP and other financial measures. For additional information, see the Non-GAAP and other financial measures section.
Management’s discussion and analysis
32 Sherritt International Corporation
Liquidity
As at December 31, 2024, total available liquidity in Canada was $62.4 million, which is composed of cash and cash equivalents
in Canada in major currencies of $32.0 million and $30.4 million of available credit facilities and excludes restricted cash of $1.4
million. Cash in Cuba is primarily held by Energas for use locally by the joint operation. Cash in Cuba is denominated in Cuban
pesos and not exchangeable into other major currencies unless sufficient foreign currency reserves exist in Cuba.
The main factors that affect liquidity in Canada include realized sales prices, timing of collection of receivables, production
volume, cash production costs, working capital requirements, capital and environmental rehabilitation expenditure requirements,
the timing of distributions from the Moa JV (including pursuant to the Cobalt Swap), advances from/to the Moa JV, the timing of
cobalt sales and receipts, the timing of dividends from Energas in Canada, repayments of non-current loans and borrowings,
credit capacity and debt and equity capital market conditions.
During the year ended December 31, 2024, Sherritt received full repayment of the $30.0 million of advances made for short-term
working capital purposes at the Moa JV. Advances to the Moa JV under its credit facility with the Corporation were to the two
non-Cuban operating companies of the Moa JV and were interest bearing at the Corporation’s borrowing rates. Sherritt did not
advance further amounts to the Moa JV under its credit facility in 2024.
Moa JV’s cash and cobalt distributions to the Corporation are determined based on available cash in excess of liquidity
requirements. Determinants of liquidity include anticipated nickel and cobalt prices and sales volumes, planned spending on
capital at the Moa JV including growth capital, capital committed toward the new tailings facility net of financing, working capital
needs, expected financing and other expected liquidity requirements. Available cash is also impacted by changes in working
capital primarily related to changes in inventory, and timing of receipts and payments, including receipts on nickel and cobalt
sales subsequent to shipment. During the year December 31, 2024, the Moa JV secured loans totaling US$22.0 million (100%
basis), which it began utilizing during the year. Subsequent to period end, the Moa JV secured a US$60.0 million (100% basis)
equivalent loan in Cuban pesos from a Cuban financial institution with a 5-year maturity to support spending on capital for tailings
management. Refer to the Outlook section of the MD&A for further information on expected spending on capital related to tailings
management.
During the year ended December 31, 2024, the Corporation received $23.7 million of cash distributions and 223 tonnes of
finished cobalt with an in-kind value of $6.1 million (100% basis) pursuant to the Cobalt Swap. In Q3 2024, Sherritt had indicated
the Cobalt Swap distribution in Q4 2024 could be up to a maximum of $50.0 million (including both Sherritt’s share and GNC’s
redirected share), assuming first half 2024 average nickel and cobalt reference prices of US$8.00/lb and US$13.50/lb continued
in the second half of the year. Despite average nickel and cobalt reference prices in the second half of 2024 being US$7.32/lb
and US$11.92/lb, respectively, well below their first half averages, Sherritt’s focused effort to prudently manage and maximize
its cash flows in the Moa JV led to significant distributions, as noted above. As previously disclosed and as defined by the
agreement, the shortfall in the annual minimum payment in 2024 will be added to the annual minimum payment in 2025. At
current spot nickel prices, the Corporation expects that cobalt dividends and cash distributions under the Cobalt Swap agreement
will commence in the second half of the year and will not meet the annual minimum amount in 2025.
During the year ended December 31, 2024, the Corporation received $13.0 million of dividends from Energas in Canada. With
the completion of maintenance work in 2024 which brought online an additional turbine and to improve equipment availability to
process gas from the recently completed wells and based on 2025 guidance estimates for production volumes, unit operation
costs(1) and spending on capital(1) disclosed in the Outlook section, total dividends in Canada from Energas in 2025 are expected
to be between $25.0 million and $30.0 million.
During the year ended December 31, 2024, the Corporation purchased put options on 3,876 tonnes of nickel, or 646 tonnes per
month, at an exercise price of US$8.16/lb at a cost of $2.2 million for a six-month period from June 1, 2024, to November 30,
2024. The economic hedging strategy provided Sherritt with full exposure to upward changes in nickel prices, while protecting
against downward changes in nickel prices by providing a minimum price of US$8.16/lb on approximately 25% of the 2024 nickel
production from the Moa JV during the six-month period. During the year ended December 31, 2024, $5.9 million of cash was
received upon settlement of nickel put options, net of purchase cost.
The Corporation’s liquidity requirements are met through a variety of sources, including cash and cash equivalents, cash
generated from operations, the existing credit facility, leases and debt and equity capital markets. Refer to the Capital resources
section for further details on the 8.50% second lien secured notes due 2026 (“Second Lien Notes”), the 10.75% unsecured PIK
option notes due 2029 (“PIK Notes”) and the syndicated revolving-term credit facility (“Credit Facility”), including repurchases of
the PIK Notes during the year ended December 31, 2024.
Sherritt International Corporation
33
During the year ended December 31, 2024, the Corporation completed workforce reductions at its Corporate office and
restructuring at its Canadian operations, which resulted in a reduction of its workforce by approximately 10%, with annual cost
savings from employee and other cost reductions of $17.2 million expected to be realized.
(1) Non-GAAP and other financial measures. For additional information, see the Non-GAAP and other financial measures section.
Cash and cash equivalents as at December 31, 2024 increased by $26.6 million from December 31, 2023. The components of
this change are shown below:
(1)
Excludes net proceeds from nickel put options, liabilities settled for environmental rehabilitation provisions, interest paid on Second Lien Notes, share-based
compensation payments and income taxes paid presented separately above.
(2)
Other is composed of the effect of exchange rate changes on cash and cash equivalents, receipts of other financial assets, repayment of other financial liabilities and
cash used by discontinued operations.
The Corporation’s cash and cash equivalents are deposited in the following countries:
Cash
$ millions, as at December 31, 2024
Cash
equivalents
Total
Canada
$
31.8 $
0.2 $
32.0
Cuba(1)
113.1
-
113.1
Other
0.6
-
0.6
$
145.5 $
0.2 $
145.7
The Corporation's share of cash and cash equivalents in the Moa JV, not included in the above balances:
$
5.7
(1)
As at December 31, 2024, $111.4 million of the Corporation’s cash and cash equivalents was held by Energas in Cuba (December 31, 2023 - $93.9 million).
Management’s discussion and analysis
34 Sherritt International Corporation
SOURCES AND USES OF CASH
The Corporation’s cash provided/used by operating, investing and financing activities is summarized in the following table, as
derived from the Corporation’s condensed consolidated statements of cash flow.
For the three months ended
For the year ended
2024
2023
2024
2023
$ millions
December 31
December 31
Change
December 31
December 31
Change
Cash (used) provided by operating activities
Cash (used) provided by operating activities(1)
Metals - Fort Site
$
(12.0)
$
4.0
(400%)
$
36.2
$
(10.0)
462%
Metals - Metals Marketing(2)
(1.9)
(1.1)
(73%)
0.4
(0.4)
200%
Power
(1.1)
7.4
(115%)
(9.8)
19.3
(151%)
Oil and Gas(3)
0.4
(10.7)
104%
3.4
(3.3)
203%
Corporate and Other(4)
(10.1)
(5.8)
(74%)
(25.9)
(36.4)
29%
Distributions from Moa JV
Cash distributions - Cobalt Swap
11.9
-
-
11.9
32.0
(63%)
Proceeds from Cobalt Swap - GNC redirected share
-
1.3
(100%)
0.6
40.2
(99%)
Proceeds from Cobalt Swap - Sherritt share
-
1.3
(100%)
0.6
40.2
(99%)
Interest paid on notes
(9.4)
(9.4)
-
(18.9)
(22.3)
(15%)
Share-based compensation payments
(0.3)
(0.4)
(25%)
(3.0)
(24.9)
(88%)
Liabilities settled for environmental rehabilitation provisions
(3.6)
(4.2)
(14%)
(27.2)
(5.9)
361%
Net proceeds from nickel put options
4.7
-
-
5.9
-
-
Other cash used by operating activities
(0.1)
(0.5)
80%
(0.1)
(0.3)
67%
Cash (used) provided by continuing operations
(21.5)
(18.1)
(19%)
(25.9)
28.2
(192%)
Cash used by discontinued operations
-
(0.3)
100%
(0.2)
(0.9)
78%
Cash (used) provided by operating activities
$
(21.5)
$
(18.4)
(17%)
$
(26.1)
$
27.3
(196%)
Cash provided (used) by investing activities
$
11.9
$
(20.3)
159%
$
36.1
$
(18.4)
296%
Cash (used) provided by financing activities
(0.6)
39.5
(102%)
7.1
(11.7)
161%
Effect of exchange rate changes on cash and cash
equivalents
7.3
(2.1)
448%
9.5
(2.0)
575%
(Decrease) increase in cash and cash equivalents
$
(2.9)
$
(1.3)
(123%)
$
26.6
$
(4.8)
654%
Cash and cash equivalents:
Beginning of the year
$
148.6
$
120.4
23%
$
119.1
$
123.9
(4%)
End of the year
$
145.7
$
119.1
22%
$
145.7
$
119.1
22%
(1)
Non-GAAP financial measure. For additional information, see the Non-GAAP and other financial measures section.
(2)
Excluding proceeds from the Cobalt Swap, presented separately above.
(3)
Excluding liabilities settled for environmental rehabilitation provisions related to legacy Oil and Gas assets in Spain, presented separately above.
(4)
Excluding interest paid on notes and net proceeds from nickel put options, presented separately above.
The following significant items affected the sources and uses of cash:
Cash used by operating activities was higher for the three months ended December 31, 2024 and for the year ended December
31, 2024 compared to the same periods in the prior year, primarily as a result of the following:
Higher cash used by operating activities at Fort Site for the three months ended primarily due to timing of working
capital receipts with higher cash receipts on deferred revenue from fertilizer pre-buys in the third quarter of 2024 for
the fall season sales, which was partially offset by higher operating earnings. Higher cash provided by operating
activities at Fort Site for the year ended December 31, 2024 primarily due to higher operating earnings and timing of
working capital receipts and payments;
Higher cash used by operating activities at Power for the three months and year ended December 31, 2024 primarily
due to planned maintenance work in the current year periods and timing of working capital payments, partially offset
by higher receipts on higher production for the year. Refer to Power’s Review of operations section for further details
on the completion of the planned maintenance work. The planned maintenance costs were consistent with the
Corporation’s guidance for unit operating costs. Sherritt received dividends of $7.0 million and $13.0 million,
respectively, in Canada during the three months and year ended December 31, 2024, from Energas, which was higher
than previously estimated due to the timing of dividend approvals at Energas, impact of a weaker Canadian dollar and
deferral on non-essential capital expenditures. The dividends are not reflected in the above table due to eliminations
required for joint operations for accounting purposes;
Higher cash provided by operating activities at Oil and Gas for the three months and year ended December 31, 2024
primarily due to timing of customer receipts on oil and gas service revenue and timing of working capital payments;
Sherritt International Corporation
35
Higher cash used by operating activities at Corporate and Other for the three months ended December 31, 2024
primarily due to timing of working capital payments, higher consulting fees and higher severance costs, partially offset
by lower audit fees. During the year ended December 31, 2024, lower cash used by operating activities primarily due
to lower audit fees, and timing of working capital payments, partially offset by higher consulting fees and higher
severance costs;
During the year ended December 31, 2024, lower cash distributions from the Cobalt Swap due to lower cash available
for distribution primarily due to lower average-reference nickel and cobalt prices in 2024. Lower proceeds from the
Cobalt Swap from the sale of cobalt to customers for the year ended December 31, 2024 as in the current year, cobalt
was distributed in the fourth quarter with minimal sales prior to year end.
For the year ended December 31, 2024, significantly lower and normalized cash used for share-based compensation
payments following the payments for share-based units which vested in 2023 and were granted in 2020. The share-
based units paid in 2023 were impacted by the material increase in the Corporation’s share price during the vesting
period; and
For the year ended December 31, 2024, higher cash used for settlement of contractually obligated liabilities for
environmental rehabilitation provisions for legacy Oil and Gas assets in Spain as a result of a higher amount of
abandonment work required to be performed in the current year period.
Investing and financing activities for the three months ended December 31, 2024 primarily consist of expenditures on property,
plant and equipment and the receipts of the GNC receivable (GNC’s 50% share of cash distributions from the Moa JV redirected
to the Corporation) pursuant to the Cobalt Swap. Investing and financing activities for the year ended December 31, 2024
primarily consist of expenditures on property, plant and equipment, full repayment of the advance from the Moa JV to the
Corporation, receipts of the GNC receivable, repurchase of PIK Notes and borrowings on the Credit Facility.
Management’s discussion and analysis
36 Sherritt International Corporation
RECONCILIATION OF ADJUSTED EBITDA TO CHANGE IN CASH AND CASH EQUIVALENTS
The Corporation’s Adjusted EBITDA(1) reconciles to the change in cash and cash equivalents as follows:
For the three months ended
For the year ended
$ millions
December 31, 2024
December 31, 2024
Adjusted EBITDA(1)
$
15.4
$
32.4
Add (deduct) non-cash items:
Moa JV Adjusted EBITDA(1)
(6.7)
(25.2)
Oil and Gas earnings from operations, net of depletion, depreciation and
amortization and impairment of intangible assets
(10.3)
(9.7)
Finished cobalt cost of sales
1.4
2.2
Share-based compensation expense
0.1
0.3
Inventory write-down/obsolescence
0.1
1.0
Loss on environmental rehabilitation provisions
6.9
8.2
Net change in non-cash working capital
(30.0)
1.4
Interest received
1.1
5.0
Interest paid
(11.5)
(25.9)
Income taxes paid
(0.6)
(3.8)
Net proceeds from nickel put options
4.7
5.9
Distributions from Moa JV
Proceeds from Cobalt Swap - Sherritt share
-
0.6
Proceeds from Cobalt Swap - GNC redirected share
-
0.6
Cash distributions - Cobalt Swap
11.9
11.9
Liabilities settled for environmental rehabilitation provisions
(3.6)
(27.2)
Share-based compensation payments
(0.3)
(3.0)
Other(2)
(0.1)
(0.6)
Cash used by continuing operations for operating activities per
financial statements
(21.5)
(25.9)
Add (deduct):
Cash used by discontinued operations
-
(0.2)
Property, plant, equipment and intangible asset expenditures
(2.2)
(6.8)
Increase in Credit Facility
-
11.0
Receipts of GNC receivable
11.9
11.9
Repayment of other financial liabilities
(0.7)
(2.1)
Receipts of advances to Moa JV
-
30.0
Repurchase of PIK Notes
-
(1.9)
Effect of exchange rate changes on cash and cash equivalents
7.3
9.5
Other(2)
2.3
1.1
Change in cash and cash equivalents
$
(2.9)
$
26.6
(1)
Non-GAAP and other financial measures. For additional information see the Non-GAAP and other financial measures section.
(2)
Other is primarily composed of receipts of finance lease receivables and other finance charges.
The Moa JV’s Adjusted EBTIDA is based on revenue, cost of sales and other expenses recognized by the Moa JV based on the
accrual method, while the Moa JV’s cash and cobalt distributions to the Corporation are determined based on available cash in
excess of liquidity requirements, as described above.
Capital resources
CAPITAL RISK MANAGEMENT
The Corporation’s objectives when managing capital are to maintain financial liquidity and flexibility in order to preserve its ability
to meet financial obligations throughout the various resource cycles with sufficient capital and capacity to manage unforeseen
operational and industry developments and to ensure the Corporation has the capital and capacity to allow for business growth
opportunities and/or to support the growth of its existing businesses.
Subject to the limitations within the Second Lien Notes Indenture and Credit Facility agreement, in order to maintain or adjust its
capital structure, the Corporation may purchase shares for cancellation pursuant to normal course issuer bids, issue new shares,
repay outstanding debt, issue new debt (unsecured, convertible and/or other types of available debt instruments), issue
subscription receipts exchangeable for common shares and/or other securities, issue warrants exercisable to acquire common
shares and/or other securities, issue units of securities comprised of more than one of equity securities, debt securities,
subscription receipts and/or warrants, refinance existing debt with different characteristics, acquire or dispose of assets or adjust
the amount of cash and short-term investment balances.
Sherritt International Corporation
37
CONTRACTUAL OBLIGATIONS AND COMMITMENTS(1)
The Corporation’s significant contractual commitments, obligations, and interest and principal repayments in respect of its
financial liabilities, income taxes payable, provisions and capital commitments are presented in the following table on an
undiscounted basis. For amounts payable that are not fixed, including mandatory redemptions discussed below, the amount
disclosed is determined by reference to the conditions existing as at December 31, 2024.
Falling
Falling
Falling
Falling
Falling
Falling
due
due
due
due
due in
due within
between
between
between
between
more than
Canadian $ millions, as at December 31, 2024
Total
1 year
1-2 years
2-3 years
3-4 years
4-5 years
5 years
Trade accounts payable and
accrued liabilities
$
172.5 $
172.5 $
- $
- $
- $
- $
-
Income taxes payable
1.7
1.7
-
-
-
-
-
Second Lien Notes
(includes principal, interest and premium)
285.5
18.8
266.7
-
-
-
-
PIK Notes
(includes principal and interest)
109.5
-
-
8.8
8.8
91.9
-
Credit Facility
76.0
5.3
70.7
-
-
-
-
Other non-current financial liabilities
1.3
-
0.1
-
0.3
-
0.9
Provisions
194.5
4.8
2.4
9.1
10.2
11.7
156.3
Energas payable(2)
97.3
16.6
7.5
73.2
-
-
-
Lease liabilities
11.6
2.8
1.5
1.4
1.3
1.2
3.4
Capital commitments
4.0
4.0
-
-
-
-
-
Total
$
953.9 $
226.5 $
348.9 $
92.5 $
20.6 $
104.8 $
160.6
(1)
Excludes the contractual obligations and commitments of the Moa JV, which are disclosed separately in the Supplementary Information section below and are non-
recourse to the Corporation.
(2)
Repayment of the Energas payable is from Energas to GNC in Cuban pesos in Cuba and does not impact cash in Canada.
SECOND LIEN NOTES
As at December 31, 2024, the outstanding principal amount of the Second Lien Notes is $221.3 million (December 31, 2023 -
$221.3 million) and the notes mature on November 30, 2026. Interest is payable semi-annually in cash in April and October.
The indenture governing the Second Lien Notes (the “Second Lien Notes Indenture”) requires mandatory redemptions from
excess cash (subject to the minimum liquidity condition noted below and the other terms and conditions set forth in the Second
Lien Notes Indenture). The mandatory Excess Cash Flow redemption provision is in effect beginning with the two-quarter period
ending June 30, 2021 and mandatory redemptions are based on Excess Cash Flow in the first half and second half of each year
(a measure calculated based on cash provided (used) by operating activities excluding Energas, less sustaining property, plant
and equipment expenditures excluding Energas, plus all cash distributed by Energas to the Corporation held in Canada,
including cash distributions received by the Corporation from GNC pursuant to the Cobalt Swap and its assumption of the
Energas CSA), which mandatory redemption shall be required to be made only if the Corporation has minimum liquidity of $75.0
million before and after the interest payment dates in April and October of each year calculated in accordance with the Second
Lien Notes Indenture. Expected mandatory Excess Cash Flow redemptions have been included in the calculation of the effective
interest rate of the Second Lien Notes.
For the two-quarter period ended December 31, 2024, Excess Cash Flow, as defined in the Second Lien Notes Indenture, was
$5.5 million. At the interest payment date in April 2025, the Corporation will be required to redeem, at par, total Second Lien
Notes up to an amount equal to 50% of Excess Cash Flow, or $2.8 million, subject to the minimum liquidity of $75.0 million being
maintained before and after such payment is made, as defined in the indenture agreement.
The minimum liquidity amount is defined in the Second Lien Notes Indenture as all unrestricted cash, cash equivalents and
short-term investments measured in accordance with IFRS Accounting Standards, held by the Corporation and its restricted
subsidiaries in bank accounts located in Canada, less the principal amount drawn on the Credit Facility, plus the total amount of
cash used on all repurchases of Second Lien Notes and 10.75% unsecured PIK option notes due 2029 during the relevant two-
fiscal quarter period. As a result, the $0.4 million of cash used to repurchase unsecured PIK option notes during the six months
ended December 31, 2024 and any outstanding amounts drawn on the syndicated revolving-term credit facility as at the interest
payment date in April 2025 will be taken into account when calculating the minimum liquidity amount. The minimum liquidity
provision of the indenture agreement was not met as at October 30, 2024, the most recent interest payment date.
Management’s discussion and analysis
38 Sherritt International Corporation
The Second Lien Notes also include an option for the Corporation to redeem all or part of the notes outstanding prior to maturity
at a price equal to 107% of the principal amount so redeemed, which was determined to be an embedded derivative. The fair
value of this embedded derivative was nominal at inception and has not been presented separately from the Second Lien Notes
within the Corporation’s consolidated statements of financial position.
The Second Lien Notes Indenture provides for a 7% premium on (i) any optional early redemptions made at the election of the
Corporation prior to maturity as mentioned above, and (ii) on repayment on the maturity date, provided that the aggregate amount
of all premium payments paid by Sherritt with respect to the foregoing shall collectively not be less than $25.0 million. Mandatory
redemptions do not incur a premium and ultimately do not affect the timing of when this 7% premium is paid. This premium is
due upon the earlier of optional redemption and maturity of the Second Lien Notes and is accreted over the life of the instrument.
Under the Second Lien Notes Indenture, the Corporation is subject to various restrictions, which limit, among other things, the
incurrence of indebtedness, liens, asset sales and payment of distributions and other restricted payments, unless certain financial
ratios are met and subject to certain customary carve-outs and permissions, often referred to as “baskets”. If the ratio of earnings
before interest, taxes, depreciation and amortization (“EBITDA”)-to-interest expense, both as defined in the agreement, is above
2.5:1, unsecured debt can be incurred without the use of a basket and restricted payments can be made to the extent the
Corporation has sufficient room in an applicable basket, including the “builder basket” as calculated under the Second Lien Notes
Indenture. As at December 31, 2024, the Corporation met the required financial ratio and has the capacity to make restricted
payments up to $122.2 million.
As at December 31, 2024, the Corporation was in compliance with all the Second Lien Note covenants.
PIK NOTES
As at December 31, 2024, the outstanding principal amount of the PIK Notes is $66.7 million (December 31, 2023 - $63.4 million)
and the notes mature on August 31, 2029. Interest is payable semi-annually in cash or in-kind, at Sherritt’s election, in January
and July. Expected payments of interest in-kind have been included in the calculation of the effective interest rate.
During the year ended December 31, 2024, the Corporation repurchased $3.7 million of principal of the PIK Notes at a cost of
$1.9 million, plus $0.1 million of accrued interest, resulting in a gain on repurchase of notes of $1.8 million. During the year ended
December 31, 2023, the Corporation repurchased $11.2 million of principal of the PIK Notes at a cost of $7.8 million, plus $0.1
million of accrued interest, resulting in a gain on repurchase of notes of $3.5 million.
During the year ended December 31, 2024, in accordance with the terms of the PIK Notes Indenture, the Corporation elected
not to pay cash interest of $6.9 million and added the payment-in-kind interest to the principal amount owed to noteholders.
During the year ended December 31, 2023, the Corporation elected not to pay cash interest of $3.8 million in January 2023 and
added the payment-in-kind interest to the principal amount owed to noteholders and paid $3.4 million of interest in cash in July
2023.
Subsequent to period end, in accordance with the terms of the PIK Notes Indenture, the Corporation elected not to pay cash
interest due in January 2025 of $3.6 million and added the payment-in-kind interest to the principal amount owed to noteholders.
As at December 31, 2024, the Corporation was in compliance with all PIK Notes covenants.
CREDIT FACILITY
As at December 31, 2024, the outstanding principal amount of the Credit Facility is $69.0 million (December 31, 2023 - $58.0
million) and the Credit Facility matures on April 30, 2026.
The maximum credit available is $100.0 million and the interest rate is CORRA plus 4.00%. Borrowings on the Credit Facility
are available to fund working capital and capital expenditures. Borrowings under the Credit Facility for spending on capital
expenditures cannot exceed $75.0 million in a fiscal year. This restriction does not apply to capital expenditures of Moa Nickel
S.A. The total available draw is based on eligible receivables and inventories, which are pledged as collateral. Certain cash held
in banks in Canada is also pledged as collateral.
The facility is subject to the following financial covenants and restrictions:
Net Available Cash covenant, as defined in the agreement, of $25.0 million. The amount compared against this
covenant is composed of cash and cash equivalents and short-term investments of the Corporation and its wholly-
owned subsidiaries held in Canada, plus undrawn amounts on the Credit Facility;
Sherritt International Corporation
39
Senior Secured Net Debt-to-EBITDA covenant, as defined in the agreement, of less than 2:1. Senior Secured Net Debt
is calculated as first-lien debt, or amounts drawn on the Credit Facility, any derivative liability and any additional security
ranked equal to first-lien debt, less cash and cash equivalents and short-term investments of the Corporation and its
wholly-owned subsidiaries held in Canada up to $25.0 million. EBITDA is calculated on a trailing 12-month basis with
Energas included on a cash basis;
EBITDA-to-Interest Expense covenant, as defined in the agreement, of not less than 1:1 and 1.5:1 for the quarters
ended June 30, 2024 and September 30, 2024, respectively and not less than 2:1 thereafter. EBITDA is calculated on
a trailing 12-month basis with Energas included on a cash basis. Interest expense excludes the payment-in-kind (PIK)
interest on the Corporation’s PIK Notes; and
Minimum Tangible Net Worth covenant, as defined in the agreement, of $600.0 million plus 50% of positive net
earnings. Tangible Net Worth is calculated as total assets, less intangible assets, less amounts drawn on the Credit
Facility, less the principal amount of the Second Lien Notes, less the principal amount of the PIK Notes, less any
derivative liability and less any additional secured financing ranked equal to first-lien debt.
As at December 31, 2024, the Corporation has $0.6 million of letters of credit outstanding pursuant to this facility (December 31,
2023 - $0.5 million).
During the year ended December 31, 2024, the Credit Facility was amended to (i) extend its maturity for one year from April 30,
2025 to April 30, 2026 and (ii) change the EBITDA-to-Interest Expense covenant, as defined in the agreement, to not less than
1:1 and 1.5:1 for the quarters ended June 30, 2024 and September 30, 2024, respectively, and not less than 2:1 thereafter. The
amendment included terms to transition the interest rate of bankers’ acceptance plus 4.00% to CORRA plus 4.00%. There were
no other significant changes to the terms, financial covenants or restrictions.
During the year ended December 31, 2023, the Credit Facility was amended to (i) extend its maturity for one year from April 30,
2024 to April 30, 2025, (ii) add an accordion feature, which allows additional lenders to join the Credit Facility and increase the
maximum credit available by up to $25.0 million, subject to certain conditions and (iii) increase the permitted debt outside of the
Credit Facility from $25.0 million to $35.0 million, with no other significant changes to the terms, financial covenants or
restrictions.
As at December 31, 2024, the Corporation was in compliance with all Credit Facility covenants.
GUARANTEES
The environmental rehabilitation obligations held by the Corporation’s Spanish Oil and Gas operations are secured by a parent
company guarantee of €35.8 million until December 31, 2027. The parent company guarantee has no impact on the
Corporation’s available liquidity.
CAPITAL STRUCTURE
2024
2023
$ millions, except as otherwise noted
December 31
December 31
Change
Loans and borrowings
$
372.5 $
355.6
5%
Other financial liabilities(1)
107.2
97.1
10%
Total debt
$
479.7 $
452.7
6%
Shareholders' equity
597.4
613.6
(3%)
Total debt-to-capital(2)
45%
42%
7%
Common shares outstanding
397,288,680
397,288,680
-
Stock options outstanding
9,855,313
6,612,673
49%
(1)
Other financial liabilities include the Energas payable recognized as a result of the Cobalt Swap, as described in the Loans, borrowings and other financial liabilities
(note 15) of the corporation’s consolidated financial statements for the year ended December 31, 2024.
(2)
Calculated as total debt divided by the sum of total debt and shareholders’ equity.
COMMON SHARES
As at February 5, 2025, the Corporation had 397,288,680 common shares outstanding. An additional 9,855,313 common shares
are issuable upon exercise of outstanding stock options granted to employees pursuant to the Corporation’s stock option plan.
Management’s discussion and analysis
40 Sherritt International Corporation
Managing risk
For the purposes of this section, all capitalized terms that are not specifically defined herein, have the meaning ascribed to them
in the 2023 AIF.
Sherritt manages a number of risks in each of its businesses in order to achieve an acceptable level of risk without appreciably
hindering its ability to maximize returns. Management has procedures to identify and manage significant operational and financial
risks. Significant risks include, amongst others:
Commodity Risk
Securities Market Fluctuations and Price Volatility
Liquidity and Access to Capital
Risks Related to Sherritt’s Operations in Cuba
Risks Related to U.S. Government Policy Towards Cuba
Restrictions in Debt Instruments, Debt Covenants and Mandatory Repayments
Environmental Risks and Liabilities
Risks in relation to Information Technologies Systems and Cybersecurity
Operating Risks
Project Operations – Generally and Capital and Operating Cost Estimates
Equipment Failure and Other Unexpected Failures
Sourcing and Supply
Identification and Management of Growth Opportunities
Operating Risks
Depletion of Reserves
Reliance on Partners
COMMODITY RISK
Sherritt’s principal businesses involve the sale of several commodities. Revenues, earnings and cash flows from the sale of
nickel, cobalt and fertilizers are sensitive to changes in market prices, over which the Corporation has no control. The
Corporation’s earnings and financial condition depend largely upon the market prices for nickel, cobalt, fertilizers and other
commodities, which are volatile. Significant reductions in commodity prices or sustained low commodity prices could have a
material adverse effect on the Corporation’s business, results of operations and financial performance. The prices for
commodities produced by the Corporation can be affected by numerous factors beyond the Corporation’s control, including
expectations for inflation, speculative activities, relative exchange rates to the U.S. dollar, production activities of other mining
companies, global and regional supply and demand, supply and market prices for substitute commodities, international trade
dynamics and disputes, tariffs, political and economic conditions, global conflicts and hostilities, and production costs in major
producing regions. The prices for these commodities have fluctuated widely in recent years and may continue to do so in the
future. Forecasts of commodity prices can prove to be inaccurate, as factors such as supply and demand fundamentals (including
the potential growth in the electric vehicle market), speculative market participation by financial entities, and structural and
economic changes may not behave as predicted.
Sherritt’s current businesses are dependent upon commodity inputs such as natural gas, sulphur, sulphuric acid, electricity, fuel
oil, diesel and materials that are subject to prevailing commodity prices. Costs and earnings from the use of these products are
sensitive to changes in market prices, over which Sherritt has no control and the prices for these commodities have fluctuated
widely in recent years and may continue to do so in the future.
Sherritt International Corporation
41
SECURITIES MARKET FLUCTUATIONS AND PRICE VOLATILITY
The securities markets in Canada and elsewhere can experience significant price and volume volatility which can affect the
prices of Sherritt’s securities. The prices of Sherritt’s securities have been, and may continue to be, affected by this market
volatility, as well as varying in response to a number of other events and factors. These factors may include, but are not limited
to: the price of products and commodities; realized prices for production, global demand for EVs and the anticipated
corresponding demand for cobalt and nickel; political and macro-economic factors, including global conflicts and hostilities;
tariffs; Sherritt’s operating performance; the proximity of the maturity dates of the Corporation’s Notes and perceptions as to the
Corporation’s ability to repay or refinance this indebtedness, the public’s reaction to the Corporation’s press releases, other
public announcements and the Corporation’s filings with the various securities regulatory authorities; and changes in earnings
estimates or recommendations by research analysts who cover Sherritt securities or the securities of other companies in the
resource sector.
Securities of the Corporation listed on these markets or traded over the counter can experience wide fluctuations which are not
necessarily related to the operating performance, underlying asset values or prospects of the Corporation. Such securities can
be affected by a number of factors outside the Corporation’s control and which affect the price and value of securities more
generally; these factors may include, but are not limited to: changes in interest rates, tax policy, international trade dynamics
and disputes political and macro-economic factors, including global conflicts and hostilities, as well as economic growth rates.
As such, the Corporation’s securities have been, and could continue to be, subject to significant volatility in trading volumes and
market prices. There can be no assurance that the market price of the Corporation’s securities will accurately reflect the value
of the Corporation’s underlying assets and future business prospects at any time (including the value of its interests in
commodities and their current and forecasted market prices).
LIQUIDITY AND ACCESS TO CAPITAL
Sherritt’s ability to fund its capital and operating expenses and to meet its financial obligations depends on being able to generate
sufficient cash flow from its operations and its ability to obtain additional financing and/or refinance its existing credit facilities
and Notes on terms that are acceptable to the Corporation. As noted in the risk factor entitled “Commodity Risk” above, Sherritt’s
earnings and financial condition are highly dependent upon the market prices for nickel, cobalt and other commodities, which
are highly volatile in nature. Depending upon commodity prices in particular, Sherritt may find itself unable to access sufficient
capital to fund its operations in the manner required for the long-term viability of the business and/or remain in compliance with
its debt covenants. There can be no assurance that Sherritt will have sufficient funds to repay its outstanding Second Lien Notes
and Junior Notes at maturity, nor can there be any assurance that Sherritt will be able to refinance its Notes or raise funds in the
equity capital markets on terms and conditions that would be acceptable. Failure to provide adequate funds to its operations,
execute growth strategies, replace depleted reserves or meet or refinance its financial obligations could have a material adverse
effect on Sherritt’s business, results of operations and financial performance.
Sherritt’s current financing includes, among other things, the Credit Facility. The total available draw under the Credit Facility is
based on eligible receivables and inventory. If prices for nickel and cobalt decline, this could result in a material reduction in the
amount of funding available under the Credit Facility. Certain debt covenants under the Credit Facility are based on ratios
involving the Corporation’s EBITDA and/or interest expense and other covenants require the maintenance of minimum cash
balances. The Corporation’s ability to satisfy these covenants could also be negatively affected by decreases in commodity
prices. As a result, there can be no assurance that this Credit Facility can be extended or renewed at any time, or otherwise
replaced with a different credit facility on similar terms, or that required consent or waivers under the Credit Facility will be
provided without concessions on the part of the Corporation or at all.
Agencies of the Government of Cuba have significant payment obligations to the Corporation in connection with the
Corporation’s operations in Cuba. Although the risk associated with payment of these obligations may be mitigated by the Cobalt
Swap, this exposure to the Government of Cuba and its potential inability to timely or fully pay such amounts could have a
material adverse effect on the Corporation’s financial condition and results of operations. Please see the risk factor entitled
“Risks Related to Sherritt’s Operations in Cuba” for additional information. Please see the risk factor entitled “Restrictions in
Debt Instruments and Debt Covenants and Mandatory Repayments” for more information on Sherritt’s loans and borrowings
and on the effect of non-compliance with certain debt covenants.
Management’s discussion and analysis
42 Sherritt International Corporation
RISKS RELATED TO SHERRITT’S OPERATIONS IN CUBA
The Corporation directly or indirectly holds significant interests in mining, metals processing and the generation of electricity in
Cuba. The operations of the Cuban businesses and the ability of the Government of Cuba to fulfil payment obligations to the
Corporation may be affected by economic and other pressures on Cuba. Risks include, but are not limited to, fluctuations in
official or convertible currency exchange rates, access to foreign currency, and high rates of inflation. In addition, in 2021 and
thereafter, Cuba has experienced increased hardships as a result of the impact of COVID-19 and continued U.S. sanctions,
impacting the country’s tourism and other industries, hampering the country’s foreign currency liquidity and resulting in prolonged
border closures, fuel, food and medicine shortages, electricity outages and sporadic civil demonstrations. The first President
Trump administration increased its sanctions against Cuba and its trading partners and these measures had an adverse impact
on Cuba and its economy, as well as its ability to conduct international trade. In addition, with resulting additional adverse
impacts, on January 12, 2021, that administration designated Cuba as a State Sponsor of Terrorism. While the now former U.S.
administration of President Biden announced on January 14, 2025 that it would remove Cuba from the State Sponsor of
Terrorism list, this decision was revoked by President Trump a few days later, on January 20, 2025, the first day of his second
administration. Changes in regulations and political attitudes are beyond the control of Sherritt and may adversely affect its
business. Operations may be affected in varying degrees by such factors as the Government of Cuba regulations with respect
to currency conversion, production, project approval and execution, price controls, import and export controls, income taxes or
reinvestment credits, expropriation of property, environmental legislation, land use, water use and mine and plant safety. Cuba
may also be adversely impacted by risks associated with the imposition by other countries globally of additional economic
restrictions or sanctions, or the indirect impact on Cuba of sanctions imposed on other countries (such as Russia and Belarus,
for example) that could have a material adverse effect on Cuba or on Sherritt’s ability to operate in Cuba.
Operations in Cuba may also be affected by the fact that, as a Caribbean nation, Cuba regularly experiences hurricanes and
tropical storms of varying intensities, often accompanied by power outages. The risk of damage is dependent upon such factors
as intensity, footprint, wind direction and the amount of precipitation associated with the storm and tidal surges. While the
Corporation, its joint venture partners and agencies of the Government of Cuba maintain comprehensive disaster plans and the
Corporation’s Cuban facilities have been constructed to the extent reasonably possible to minimize damage, there can be no
guarantee against severe property damage and disruptions to operations.
There is increased demand from downstream customers that electronics, automotive and other manufacturers demonstrate that
their product supply chains are ethical and responsible. Such responsible sourcing requirements are affecting the metals sector
broadly. Requests for assurance of a responsible cobalt supply chain from the refinery to the mine site are increasingly being
received by downstream customers of the Corporation. The Corporation believes that its supply of minerals is ethical and
responsible and in order to demonstrate this the Corporation is engaged in activities to implement policies and due diligence
systems to independently verify that its mineral supply chain conforms to internationally accepted best practices. While the
Corporation is committed to demonstrating a responsible supply of minerals, the Corporation has no control over the purchasing
decisions of its customers or the factors on which they are based and there is no guarantee that the Corporation’s efforts will
mitigate this potential risk. Please see also the risk factor entitled “Risks Related to U.S. Government Policy Towards Cuba”.
The Government of Cuba has allowed, for more than two decades, foreign entities to repatriate profits out of Cuba. However,
there can be no assurance that allowing foreign investment and profit repatriation will continue or that a change in economic
conditions will not result in a change in the policies of the Government of Cuba or the imposition of more stringent foreign
investment or foreign exchange restrictions. Such changes are beyond the control of Sherritt and the effect of any such changes
cannot be accurately predicted.
All sales of electricity made by Energas in Cuba are made to an agency of the Government of Cuba. The access of the
Government of Cuba to foreign exchange is severely limited. As a consequence, from time to time, the Cuban agencies have
had difficulty in discharging their foreign currency obligations. During such times, Sherritt has worked with these agencies in
order to ensure that Sherritt’s operations continue to generate positive cash flow to the extent possible. However, there is a risk,
beyond the control of Sherritt, that receivables and contractual performance due from Cuban entities will not be paid or performed
in a timely manner, or at all. In 2022, Sherritt finalized the Cobalt Swap with its Cuban Partners to recover $368 million of total
outstanding receivables. In 2023, the Moa Joint Venture distributed 100% of the annual maximum cobalt volume pursuant to the
Cobalt Swap and paid cash distributions in order for the total value of cobalt and cash distributions to meet the annual dollar
minimum of US$114.0 million (100% basis) pursuant to the Cobalt Swap. In 2024, the Moa Joint Venture distributed $29.8
million of cash and in-kind cobalt to the Corporation pursuant to the Cobalt Swap. While the Cobalt Swap agreement contains
default and retroactive interest provisions in the event that the total outstanding principal amount is not repaid by December 31,
2027, there can be no assurance that it will be repaid by maturity, as cobalt and cash distributions are at the discretion of the
Board of Directors of the Moa Joint Venture and subject to its available liquidity and finished cobalt production to make such
distributions to the Corporation.
Sherritt International Corporation
43
Sherritt is entitled to the benefit of certain assurances received from the Government of Cuba and certain agencies of the
Government of Cuba that protect it in many circumstances from adverse changes in law, although such changes remain beyond
the control of the Corporation and the effect of any such changes cannot be accurately predicted.
RISKS RELATED TO U.S. GOVERNMENT POLICY TOWARDS CUBA
The United States has maintained a comprehensive embargo against Cuba since the early 1960s, and the enactment in 1996
of the Cuban Liberty and Democratic Solidarity (Libertad) Act (commonly known as the “Helms-Burton Act”) extended the reach
of the U.S. embargo.
The U.S. Embargo
In its current form, apart from the Helms-Burton Act, the embargo applies to most transactions directly or indirectly involving
Cuba, Cuban entities, Cuban-origin goods, and Cuban nationals, and it bars all persons subject to the jurisdiction of the United
States from participating in such transactions or dealings unless such persons have general or specific licenses from the U.S.
Department of the Treasury (“U.S. Treasury”) authorizing their participation in such activities. Persons “subject to the jurisdiction
of the United States” include U.S. citizens and U.S. lawful permanent residents, regardless of where they reside or by whom
they are employed; legal entities organized under U.S. laws; and entities wherever located that are owned or controlled by any
of the foregoing; as well as individuals and entities located in the United States. The embargo also targets dealings directly or
indirectly involving entities deemed to be owned or controlled by Cuba, including entities owned or controlled by the Government
of Cuba, by entities organized under the laws of Cuba, or by Cuban nationals. Additionally, the embargo applies to persons and
entities designated by the U.S. Treasury as specially designated nationals (“SDNs”) pursuant to the U.S. embargo against Cuba.
The three entities constituting the Moa Joint Venture in which Sherritt holds an indirect 50% interest have been designated SDNs
by the U.S. Treasury. Sherritt, however, is not an SDN. The U.S. embargo generally prohibits persons subject to the jurisdiction
of the United States from engaging in transactions or dealings involving the Cuban-related businesses of the Corporation, and
may in certain circumstances restrict the ability of persons subject to the jurisdiction of the U.S. from engaging in transactions
with Sherritt more generally. Furthermore, goods, technology and software (“items”) that are subject to U.S. jurisdictions,
including U.S. origin items, non-U.S. items that include more than 10% U.S.-origin content by value, and certain non-U.S. direct
products of specified U.S. technology or software, cannot under U.S. law be transferred to Cuba or used in the Corporation’s
operations in Cuba. Additionally, the embargo also generally prohibits imports into the United States of Cuban-origin goods, of
goods located in or transported from or through Cuba, or of foreign goods made or derived, in whole or in part, of Cuban-origin
goods, including Cuban nickel and cobalt. In 1992, Canada issued an order pursuant to the Foreign Extraterritorial Measures
Act (Canada) to block the application of the U.S. embargo under Canadian law to Canadian subsidiaries of U.S. enterprises.
However, the general embargo limits Sherritt’s access to U.S. capital, financing sources, customers, and suppliers. Persons
subject to the jurisdiction of the United States are advised to consult their independent advisors before acquiring common shares
of Sherritt.
The Helms Burton Act
Separately from the general provisions of the embargo summarized above, the Helms-Burton Act creates civil liability and
authorizes sanctions on U.S. or non-U.S. individuals or entities that “traffic” in Cuban property that was confiscated by the
Government of Cuba from U.S. nationals or from persons who have become U.S. nationals. The term “traffic” is broadly defined
and includes various forms of use of, or benefit from, confiscated Cuban property as well as “profiting from” or “participating in”
the trafficking.
Title III of the Helms-Burton Act creates a private cause of action and authorizes U.S. nationals with claims to confiscated
property in Cuba to file suit in U.S. courts against persons that may be "trafficking" in that property. All Presidents of the United
States in office since the enactment of the Helms-Burton Act suspended Title III for successive six-month periods until the first
administration of President Trump ceased that practice and allowed Title III to come into effect on May 2, 2019. Since that time,
a number of lawsuits have been filed pursuant to Title III in the United States against companies in the U.S., Canada and
elsewhere. On January 14, 2025, President Biden issued a six-month suspension of Title III prior to leaving office, however,
President Trump then revoked the suspension before it took effect, allowing Title III to remain in force. The Corporation has
received letters in the past from U.S. nationals claiming ownership of certain Cuban properties or rights in which the Corporation
has an indirect interest, including in relation to claims certified by the U.S. Foreign Claims Settlement Commission. However,
Sherritt has not been subjected to any lawsuits in this regard. In the event that any such lawsuits were to be filed, Sherritt does
not believe that its operations would be materially affected because Sherritt’s current minimal contacts with the United States
would likely deprive any U.S. court of personal jurisdiction over Sherritt. Furthermore, even if personal jurisdiction were
exercised, any successful U.S. claimant would currently have to seek enforcement of the U.S. court judgment outside the U.S.
in order to reach material Sherritt assets. Management believes it unlikely that a court in Canada or in any country in which
Sherritt has material assets would enforce a Helms-Burton Act judgment against it.
Management’s discussion and analysis
44 Sherritt International Corporation
The Foreign Extraterritorial Measures Act (Canada) was amended as of January 1, 1997 to provide that any judgment given
under the Helms-Burton Act will not be recognized or enforceable in any manner in Canada and certain other countries
implemented “blocking statutes” at that time. The amendments to the Canadian statute permit the Attorney General of Canada
to declare, by order, that a Canadian corporation may sue for and recover in Canada any loss or damage it may have suffered
by reason of the enforcement of a Helms-Burton Act judgment abroad. In such a proceeding, the Canadian court could order
the seizure and sale of any property in which the defendant (i.e., a claimant under the Helms-Burton Act) has a direct or indirect
beneficial interest, or the property of any person who controls or is a member of a group of persons that controls, in law or in
fact, the defendant. The property seized and sold could include shares of any company incorporated under the laws of Canada
or a province.
The Government of Canada also responded to the Helms-Burton Act through diplomatic channels. Other countries, such as the
members of the European Union and the Organization of American States, have expressed their strong opposition to the Helms-
Burton Act as well.
Nevertheless, the threat of potential litigation creates a distraction from constructive business operations and may discourage
some potential investors, lenders, suppliers and customers from doing business with Sherritt and there can be no assurance
that any litigation against Sherritt pursuant to the Helms-Burton Act would not ultimately be successful or have a material adverse
effect on Sherritt’s business, results of operations or financial performance.
In addition to authorizing private lawsuits through Title III, Title IV of the Helms-Burton Act authorizes the U.S. Secretary of State
and the U.S. Attorney General to deny visas and exclude from the United States those aliens who engage in certain “trafficking”
activities, as well as those aliens who are corporate officers, principals, or controlling shareholders of “traffickers” or who are
spouses, minor children, or agents of such excludable persons. The U.S. Department of State has deemed Sherritt’s indirect
50% interest in Moa Nickel S.A. to be a form of “trafficking” under the Helms-Burton Act. In their capacities as officers of the
Corporation, certain individuals have been excluded from entry into the U.S. under this provision. Management does not believe
the exclusion from entry into the U.S. of such individuals will have any material adverse effect on the conduct of the Corporation’s
business.
The U.S. Department of State has issued guidelines for the implementation of the immigration provision, which state that it is
“not sufficient in itself for a determination” of exclusion that a person “has merely had business dealings with a person” deemed
to be “trafficking”.
The embargo has been, and may be, amended from time to time, including the Helms-Burton Act, and therefore the U.S.
sanctions applicable to transactions with Cuba may become more or less stringent. The stringency and longevity of the U.S.
laws relating to Cuba are likely to continue to be functions of political developments in the United States and Cuba, over which
Sherritt has no control. During its first term in office, President Trump’s administration increased its sanctions against Cuba and
its trading partners and these measures have had an adverse impact on Cuba and its economy, as well as its ability to conduct
international trade. The pace and extent of any future changes are uncertain and beyond Sherritt’s control. There can be no
assurance that the general embargo and the Helms-Burton Act will not have a material adverse effect on the Corporation’s
business, results of operations or financial performance.
RESTRICTIONS IN DEBT INSTRUMENTS, DEBT COVENANTS AND MANDATORY REPAYMENTS
Sherritt is a party to certain agreements in connection with the Credit facility, as well as the trust indenture governing the
outstanding Second Lien Notes and the Junior Notes (collectively, the indentures). These agreements and loans contain
covenants which restrict Sherritt’s activities including without limitation, permitted investments, the incurrence of indebtedness,
liens, asset sales, payment of distributions and other restricted payments which could have the effect of restricting Sherritt’s
ability to react to changes in Sherritt’s business or to local and global economic conditions. In addition, Sherritt’s ability to comply
with these covenants and other terms of its indebtedness may be affected by changes in the Corporation’s business, local or
global economic conditions or other events beyond the Corporation’s control. Failure by Sherritt to comply with any of the
covenants contained in the indentures, the Credit Facility or any future debt instruments or credit agreements, could materially
adversely affect the Corporation’s business, results of operations and financial performance.
Sherritt International Corporation
45
ENVIRONMENTAL RISKS AND LIABILITIES
The Corporation is subject to risks related to environmental liability, including liability for reclamation costs and related liabilities,
tailings facility failures and toxic gas releases. Mining, like many other extractive natural resource industries, is subject to potential
risks and liabilities associated with the effects on the environment resulting from mineral development and production.
Environmental regulation and increasing environmental awareness is broadening the scope of environmental stewardship
responsibilities. The Corporation may be held responsible for the costs of addressing contamination at, or arising from, current
or former activities. The costs associated with such responsibilities and liabilities may be substantial. The payment of such
liabilities would reduce funds otherwise available and could have a material adverse effect on the Corporation. Additionally, the
Corporation recognizes that material non-compliances would likely impact its social license to operate, the costs of which are
indefinable, but may be significant in scope. An example of such liabilities are the environmental rehabilitation obligations
associated with the Corporation’s legacy Oil and Gas assets in Spain.
As part of the normal course of business, environmental and regulatory authorities may conduct periodic or annual inspections
of the Corporation’s tailings facility, and as a result of these inspections, the Corporation may be required to modify its tailings
management approach, complete additional monitoring work or take remedial actions. Liabilities resulting from non-compliance,
damage, regulatory orders or demands, or similar, could adversely and materially affect the Corporation’s operations and
financial performance.
The Corporation has an obligation under applicable mining, oil and gas and environmental legislation to reclaim certain lands
that it disturbs during mining, oil and gas production or other industrial activities. The Corporation is required to provide financial
security to certain government authorities or third parties for some of its future reclamation costs. Currently, the Corporation
provides this reclamation security by way of bank guarantees, corporate guarantees and irrevocable letters of credit issued
under its Credit Facility. The Corporation may be unable to obtain adequate financial security or may be required to replace its
existing security with more expensive forms of security, including cash deposits, which would reduce cash available for
operations. In addition, any increase in costs associated with reclamation and mine closure or termination of oil and gas field
operations resulting from changes in the applicable legislation (including any additional bonding requirements) could have a
material adverse effect on the Corporation’s business, results of operations and financial performance.
In order to adequately prepare for operational changes or closure of its operating sites, Sherritt has estimated environmental
rehabilitation provisions that management believes will meet current regulatory requirements. These future provisions are
estimated by management using closure plans and other similar plans which outline the requirements that are expected to be
carried out to meet the provisions. The provisions are dependent on legislative and regulatory requirements which could change.
Given that the estimate of provisions is based on future expectations, a number of assumptions and judgments are made by
management in the determination of these provisions which may prove to be incorrect. As a result, estimates may change from
time to time and actual payments to settle the provisions may differ from those estimated and such differences may be material.
In 2002, Dynatec acquired Highwood Resources and in 2007 Sherritt International acquired Dynatec and its assets. This
purchase included liabilities and reclamation obligations for three closed mine assets that are being administered by Sherritt
International Corporation. Reclamation, monitoring, reporting, and contact with regulators is ongoing for each of the sites.
RISKS IN RELATION TO INFORMATION TECHNOLOGIES SYSTEMS AND CYBERSECURITY
The global mining industry has seen a rise in cybersecurity threats and the Corporation may be negatively affected by
cybersecurity incidents or other IT systems disruption. The Corporation relies heavily on its information technology systems
including, without limitation, its networks, equipment, hardware, software, telecommunications, and other information technology
(collectively, “IT systems”), and the IT systems of its vendors and third party service providers, to operate its business as a
whole, including mining operations. Although the Corporation has not experienced any material losses to date relating to
cybersecurity, or other IT systems disruptions, there can be no assurance that the Corporation will not incur such losses in the
future. Despite the Corporation’s mitigation efforts including implementing an IT systems security risk management framework,
the risk and exposure to these threats cannot be fully mitigated because of, among other things, the evolving nature of
cybersecurity threats. As a result, cybersecurity and the continued development and enhancement of controls, processes and
practices designed to protect IT systems from cybersecurity threats remain a priority. As these threats continue to evolve, the
Corporation may be required to expend additional resources to continue to modify or enhance protective measures or to
investigate and remediate any cybersecurity vulnerabilities. Any cybersecurity incidents or other IT systems disruption could
result in production downtimes, operational delays, destruction or corruption of data, security breaches, financial losses from
remedial actions, the theft or other compromising of confidential or otherwise protected information, fines and lawsuits, or
damage to the Corporation’s reputation. Any such occurrence could have an adverse impact on the Corporation’s financial
condition and operations.
Management’s discussion and analysis
46 Sherritt International Corporation
The Corporation may also be negatively impacted by the rise of disruptive technologies including robotics, automation, and data
analytics should it not adapt to these technological advancements in a timely manner.
OPERATING RISKS
Variability in production at Sherritt’s operations in Cuba is most likely to arise from the following categories of potential risk:
(i) Parts and Equipment – the inherent risk that parts and equipment may fail or fail to perform in accordance with design due to
mechanical or engineering issues (given the location and associated logistics, replacement components may not be immediately
available); (ii) Operational Risk – production is directly affected by the performance of core operators and maintenance teams;
(iii) Weather and Natural Disasters – risks related to increased frequency of severe weather events, including hurricanes in
Cuba, and other natural disasters, including pandemics, that can impede operations before, during and after such events; and
(iv) Supply of Critical Commodities – production may be impacted by the availability of critical commodities to operate the facility.
Please see the Risk Factors entitled “Risks Related to Sherritt’s Operations in Cuba” and “Climate Change/Greenhouse Gas
Emissions” in Sherritt’s 2023 AIF for additional information.
PROJECT OPERATIONS
Generally, Sherritt’s business includes the operation of large mining, metals refining projects and electrical generation projects.
Unforeseen conditions or developments could arise during the course of these projects that could affect the current and projected
level of production, the sustaining capital requirements or operating cost estimates relating to the projects. Such conditions or
developments may include, without limitation, shortages of equipment, materials or labour; delays in delivery of equipment or
materials; customs issues; labour disruptions; poor labour productivity; community protests; difficulties in obtaining necessary
services; delays in obtaining regulatory permits; local government issues; political events; regulatory changes; investigations
involving various authorities; adverse weather conditions; unanticipated increases in equipment, material and labour costs;
unfavourable currency fluctuations; access to financing; natural or man-made disasters or accidents; and unforeseen
engineering, technical and technological design, geotechnical, environmental, infrastructure or geological problems. Any such
event could affect production, timely execution and cost estimates.
These risks and uncertainties could have a material adverse effect on the Corporation’s business, results of operations and
financial performance.
Capital and operating cost estimates
Capital and operating cost estimates made in respect of the Corporation’s operations and projects may not prove accurate.
Capital and operating costs are estimated based on the interpretation of geological data, feasibility studies, anticipated climatic
conditions and other factors. Any of the following, among the other events and uncertainties described herein, could affect the
ultimate accuracy of such estimates: unanticipated changes in grade and tonnage to be mined and processed; incorrect data on
which engineering assumptions are made; unanticipated transportation costs; the accuracy of major equipment and construction
cost estimates; expenditures in connection with a failure to meet such scheduled dates; unsatisfactory construction quality
resulting in failure to meet such scheduled dates; labour negotiations; unanticipated costs related to sustaining production;
changes in government regulation (including regulations regarding prices, cost of consumables, royalties, duties, taxes,
permitting and restrictions on production quotas or exportation of the Corporation’s products); and unanticipated changes in
commodity input costs and quantities.
As part of the Life of Mine (“LOM”) optimization planning, Moa Nickel has set out a proposed sequence for the development,
operation, and closure of its Tailings Management Facilities (“TMFs”), including with respect to the Acid Leach Tailings Facility,
the North Extension, phased construction of Area 22 and a long term storage facility thereafter. There can be no assurance that
the construction of tailings facilities can be completed within original budget or on a timely basis. Delays to construction can
occur as a result of many factors, many of which are outside management’s control. Any material delay could require the
consideration of alternative or interim solutions and could increase cost, or in the worst case, result in a disruption to operations,
all of which could have a material adverse effect on the Corporation’s business, financial condition and results of operations.
Sherritt International Corporation
47
EQUIPMENT FAILURE AND OTHER UNEXPECTED FAILURES
Interruptions in Sherritt’s production capabilities would be expected to increase its production costs and reduce its profitability.
The Corporation may experience material shutdowns or periods of reduced production because of equipment failures and this
risk may be increased by the age of certain of the Corporation’s facilities or facilities of third parties in which the Corporation’s
products are processed. In addition to equipment failures, the Corporation’s facilities are also subject to the risk of loss due to
unanticipated events such as fires, explosions or adverse weather conditions. The foregoing risks may be heightened in
circumstances in which capital expenditure is constrained. Shutdowns or reductions in operations could have a material adverse
effect on the Corporation’s business, results of operations and financial performance. Remediation of an interruption in
production capability could require the Corporation to make large expenditures. Further, longer-term business disruptions could
result in a loss of customers. All of these factors could have a material adverse effect on the Corporation’s business, results of
operations and financial performance.
SOURCING AND SUPPLY
Sherritt’s operations depend on an uninterrupted flow of materials, supplies, equipment, services and finished products. Due to
the geographic location of many of Sherritt’s properties and operations, this flow is highly dependent on third parties for the
provision of rail, port, marine, shipping and other transportation services. Sherritt negotiates prices for the provision of these
services in circumstances where it may not have viable alternatives to using specific providers, or have access to regulated rate
setting mechanisms. Contractual disputes, demurrage charges, classification of commodity inputs and finished products, rail,
marine and port capacity and infrastructure issues, availability of vessels and rail cars, weather problems, labour disruptions or
other factors could have a material adverse effect on Sherritt’s ability to transport materials according to schedules and
contractual commitments and could have a material adverse effect on the Corporation’s business, results of operations and
financial performance.
The global demand for some of the equipment and related goods used in Sherritt’s operations vary and may exceed supply.
Global conflicts and hostilities, such as Russia’s invasion of Ukraine in February 2022 and Hamas’ attack on Israel on October
7, 2023 and resulting sanctions, restrictions and impacts, tariffs, together with the global pandemic, have had a material adverse
impact on the global supply chain. Furthermore, due to increased U.S. sanctions on Cuba the Corporation’s ability to obtain
certain equipment and supplies, including fuel, in that country may be limited. If equipment or other supplies cannot be procured
on a timely or competitive basis, Sherritt’s growth activities, production, development or operations could be negatively affected.
In particular, the Corporation’s metals process plants rely on access to rail, port and marine shipping for certain raw material
inputs and for the export of products and fertilizers. These services are owned and operated by third parties, and in the case of
rail and port access and in certain other circumstances, the Corporation may rely on a single supplier with no commercially
reasonable alternative.
IDENTIFICATION AND MANAGEMENT OF GROWTH OPPORTUNITIES
In order to manage its current operations and any future growth effectively, Sherritt must examine opportunities to replace and
expand its reserves through the exploration of its existing properties and through acquisitions of interests in new properties or
of interests in companies which own such properties. The Corporation’s growth strategy depends on pursuing a range of
expansion opportunities, including without limitation, process technology solutions, the commercialization of certain proprietary
technologies and services, development projects, commercial implementation opportunities, life of mine extension opportunities
and the conversion of mineral resources to reserves. In addition to the risks noted above, factors that could, alone or in
combination, prevent the Corporation from successfully achieving these opportunities may include, without limitation: identifying
suitable commercialization and other partners; successfully advancing discussions and successfully concluding applicable
agreements with external parties and/or partners; successfully attracting required financing; successfully developing and proving
technology required for the potential opportunity; successfully overcoming technical and technological challenges; successful
environmental assessment and stakeholder engagement; successfully obtaining intellectual property protection; successfully
completing test work and engineering studies, prefeasibility and feasibility studies, piloting, scaling from small scale to large
scale production, commissioning, procurement, construction, commissioning, ramp-up to commercial scale production and
completion; and securing regulatory and government approvals. There can be no assurance that any opportunity will be
successful, commercially viable, or will generate any meaningful revenues, savings or earnings, as the case may be for the
Corporation. The Corporation will incur costs in pursuing any particular opportunity, which may be significant.
Management’s discussion and analysis
48 Sherritt International Corporation
The development of Sherritt’s business may also be in part dependent on management’s ability to identify, acquire and develop
suitable acquisition opportunities in both new and existing markets. In certain circumstances, acceptable acquisition
opportunities might not be available. Sherritt may also not be able to identify suitable partners with whom it could pursue such
opportunities. Acquisitions involve a number of risks, which may include, without limitation: (i) the possibility that the Corporation,
as a successor owner, may be legally and financially responsible for liabilities of prior owners; (ii) the possibility that the
Corporation may pay more than the acquired company or assets are worth; (iii) the additional expenses associated with
completing an acquisition and amortizing any acquired intangible assets; (iv) the difficulty of integrating the operations and
personnel of an acquired business; (v) the challenge of implementing uniform standards, controls, procedures and policies
throughout an acquired business; (vi) the inability to integrate, train, retain and motivate key personnel of an acquired business;
and (vii) the potential disruption of the Corporation’s ongoing business and the distraction of management from its day-to-day
operations.
Additionally, the future viability of the Corporation will also depend on its ability to implement and improve its operational, financial
and management information systems and to hire, train, motivate, manage and retain its employees. If and when any such
growth occurs, there can be no assurance that the Corporation will be able to manage such growth effectively, that its
management, personnel or systems will be adequate to support the Corporation’s operations or that the Corporation will be able
to achieve the increased levels of revenue commensurate with increased levels of operating expenses associated with this
growth, and failure to do so could have a material adverse effect on the Corporation’s business, financial condition and results
of operations.
DEPLETION OF RESERVES
Subject to any future expansion or other development, production from existing operations at the Corporation’s mines and wells
will typically decline over the life of the mine or well. As a result, Sherritt’s ability to maintain or increase its current production of
nickel, cobalt and oil and gas and generate revenues therefrom will depend significantly upon the Corporation’s ability to discover
or acquire and to successfully bring new mines and wells into production and to expand mineral and oil and gas reserves at
existing or new operations. Exploration and development of mineral and oil and gas properties involves significant financial risk.
Very few exploratory properties are developed into operating mines or wells. Whether a deposit will be commercially viable
depends on a number of factors, including: the particular attributes of the deposit, such as size, grade and proximity to
infrastructure; commodity prices, which are highly cyclical; political and social stability; and government regulation, including
regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting of natural resources and supplies
and environmental protection. Even if the Corporation identifies and acquires an economically viable deposit, several years may
elapse from the initial stages of development. Significant expenses could be incurred to locate and establish reserves, to develop
the required extractive processes and to construct mining facilities, drill wells and construct oil and gas processing facilities.
In November 2017 the PSC for Block II (Varadero West) reverted to the Government of Cuba. The PSC for the PE-Yumuri Block
reverted to the Government of Cuba on March 19, 2021. The majority of future oil and gas production will depend on new
reserves in Blocks 10 and 6A and/or the ability to obtain and develop additional PSCs. Sherritt cannot provide assurance that
its exploration or development efforts will result in any new commercial operations or yield new mineral or oil and gas reserves
to replace or increase current reserves.
RELIANCE ON PARTNERS
The Corporation holds its interest in certain projects and operations through joint ventures or partnerships. A failure by a partner
to comply with its obligations under applicable partnership or similar joint venture arrangements, to continue to fund such projects
or operations, a breakdown in relations with its partners or the decision of a partner to adopt a competing strategy could have a
material adverse effect on the Corporation’s business, results of operations and financial performance.
MINING, PROCESSING AND REFINING RISKS
The business of mining, processing and refining involves many risks and hazards, including environmental hazards, industrial
accidents, labour-force disruptions, supply problems and delays, unusual or unexpected geological or operating conditions,
geology-related failures, change in the regulatory and geopolitical environment, weather conditions, floods, earthquakes and
water conditions.
Sherritt International Corporation
49
Such occurrences could result in damage to, or destruction of, mineral properties or production facilities, the failure of tailings
management facilities and damage to infrastructure, personal injury or death, environmental damage, delays in mining, monetary
losses and possible legal liability. As a result, Sherritt may incur significant liabilities and costs that could have a material adverse
effect upon its business, results of operations and financial performance. In addition, failure to maintain high levels of safety,
health and security could adversely affect the Corporation’s operations, financial performance, reputation and social license
to operate.
Other risks and uncertainties which could impact the performance of mining projects include factors such as the ore
characteristics; adverse impacts from construction or commissioning activities on ongoing operations; and difficulties with
commissioning, changing geological conditions and integrating the operations of newly constructed mines and processing
facilities.
The Corporation’s business is also inherently subject to the risk of disruptive successful technological change in nickel and
cobalt processing or otherwise and to market shifts to substitute products.
OTHER RISKS
Below is a list of the other significant business risks as presented in the Corporation’s 2023 AIF. Further detail of these and other
risks and the strategies designed to manage them can be found in the Corporation’s 2023 AIF to the extent not included herein.
Political, economic, and other risks of foreign
operations
Environment, health, and safety
Climate change/greenhouse gas emissions
Community relations and social license to grow
and operate
Sourcing and Supply
Uncertainty of gas supply to Energas
Reliance on key personnel and skilled workers
Uncertainty
of
resources
and
reserves
estimates
Risks related to Sherritt’s corporate structure
Foreign exchange and pricing risks
Credit risk
Competition in product markets
Future market access
Interest rate changes
Insurable risk
Labour relations
Legal rights
Legal contingencies
Accounting policies
Government permits
Government regulation
Anti-corruption and bribery
Controls Relating to Corporate Structure Risk
Management’s discussion and analysis
50 Sherritt International Corporation
Critical accounting estimates and judgments
For the purposes of this section, all capitalized terms that are not specifically defined herein, have the meaning ascribed to them
in the December 31, 2024 consolidated financial statements.
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise judgment in applying the Corporation’s accounting policies. These estimates and judgments are continuously evaluated
and are based on management’s experience and knowledge of relevant facts and circumstances. Actual results may differ from
estimates. The critical accounting estimates and judgments the Corporation has made, and how they affect the amounts reported
in the consolidated financial statements, are incorporated in this section.
CRITICAL ACCOUNTING ESTIMATES
Measurement of the recoverable amount of the Metals CGU
The recoverable amount of the Corporation’s Metals CGU is the higher of its fair value less costs of disposal (“FVLCD”) and its
value in use. The Corporation determined that the Metals CGU’s FVLCD exceeded its value in use. The Metals CGU’s fair
value is measured based on a forecast of future cash flows including estimated recoverable production, market or contracted
commodity prices, foreign exchange rates, an inflation rate, production levels, cash costs of production, capital expenditures,
reclamation costs and conversion of resources to reserves, discounted at an appropriate discount rate reflecting the time value
of money, uncertainty inherent in the cash flows and a risk premium. Forecasts inherently require assumptions and judgments
to be made about each of the factors affecting future cash flows.
Measurement of the recoverable amount of the investment in Moa Joint Venture
In determining the recoverable amount of the investment in Moa Joint Venture, the Corporation estimates: (a) its share of the
present value of the estimated future cash flows expected to be generated by the Moa Joint Venture, including the cash flows
from the operations of the Moa Joint Venture and the proceeds from the ultimate disposal of the investment; or (b) the present
value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate
disposal, both of which are based on the same assumptions as the measurement of the recoverable amount of the Metals CGU,
noted above.
Measurement of the fair value of the GNC receivable and Energas payable
The Corporation estimates the fair value of the GNC receivable and Energas payable at each reporting period using discounted
cash flows in a Monte Carlo simulation model, which includes the use of in-kind forecast cobalt prices and discount rates, which
are significant unobservable inputs in the case of the GNC receivable, and changes in the fair value of these financial instruments
may have a significant impact on the Corporation’s financial results.
Environmental rehabilitation provision costs
The Corporation’s environmental rehabilitation provisions are subject to environmental regulations in Canada, Cuba and Spain.
Many factors such as future changes to environmental laws and regulations, life of mine estimates, the cost and time it will take
to rehabilitate the property and discount rates, all affect the carrying amount of environmental rehabilitation provisions. As a
result, the actual cost of environmental rehabilitation could be higher than the amounts the Corporation has estimated. For certain
operations, actual costs will ultimately be determined after site closure in agreement with predecessor companies.
Environmental rehabilitation provision discount rates
The Corporation’s environmental rehabilitation provisions are assessed quarterly and measured by discounting the expected
cash flows. The applicable discount rates are pre-tax rates that reflect the current market assessment of the time value of money
which is determined based on government bond interest rates and inflation rates. The actual rates depend on a number of
factors, including the timing of rehabilitation activities that can extend decades into the future and the location of the property.
Sherritt International Corporation
51
Property, plant and equipment
The capitalization of costs, the determination of estimated recoverable amounts and the depletion and depreciation of these
assets have a significant impact on the Corporation’s financial results.
For those assets depreciated on a straight-line basis, management estimates the useful life of the assets and their components,
which in certain cases may be based on an estimate of the producing life of the property. These assessments require the use
of estimates and assumptions including market conditions at the end of the asset’s useful life, costs of decommissioning the
asset and the amount of recoverable reserves.
Asset useful lives and residual values are re-evaluated at each reporting date.
CRITICAL ACCOUNTING JUDGMENTS
Interests in other entities
The Corporation applies judgment in determining the classification of its interest in other entities, such as: (i) the determination
of the level of control or significant influence held by the Corporation; (ii) the legal structure and contractual terms of the
arrangement; (iii) concluding whether the Corporation has rights to assets and liabilities or to net assets of the arrangement; and
(iv) when relevant, other facts and circumstances. The Corporation has determined that Energas represents a joint operation,
while the Moa JV represents a joint venture as described in IFRS 11, “Joint Arrangements”. All other interests in other entities
have been determined to be subsidiaries as described in IFRS 10, “Consolidated Financial Statements”.
Assessment for impairment of non-financial assets and identification of CGUs
The Corporation assesses the carrying amount of non-financial assets, including property, plant and equipment, intangible assets
subject to depreciation and amortization and assets under construction, at each reporting date to determine whether there are
any indicators that the carrying amount of the assets may be impaired or require a reversal of impairment. Impairment is
assessed at the asset or CGU level and the determination of CGUs is an area of significant judgment, particularly with the
grouping of the Metals assets as a single CGU on the basis that it is a vertically integrated operation which generates largely
independent cash inflows. The Moa Joint Venture is a significant part of the vertically integrated assets within the Metals CGU.
There are a number of potential indicators that could trigger an impairment or impairment reversal, which may require critical
accounting judgments to determine the extent to which external and/or internal factors may impact the assets’ recoverable
amount. Such internal factors include changes to estimated recoverable production, contracted prices, production levels, cash
costs of production, capital expenditures and reclamation costs. External factors include commodity prices, foreign exchange
rates, the inflation rate and the Corporation’s market capitalization deficiency and other changes in economic conditions.
For purposes of determining recoverable amount, management uses the higher of value in use and fair value less costs of
disposal and an appropriate discount rate. Projections of future cash flows are based on factors relevant to the asset and
inherently require assumptions and judgments to be made about each of the factors affecting future cash flows. Changes in any
of these assumptions or judgments could result in a significant difference between the carrying amount and fair value of these
assets. In the event that management’s estimate of future cash flows is not representative of actual events, impairments may
be identified, which could have a material impact on the Corporation’s consolidated financial statements. Where necessary,
management engages qualified third-party professionals to assist in the determination of the recoverable amount.
Assessment for Impairment of the Corporation’s investment in the Moa JV
The Corporation accounts for its investment in the Moa JV using the equity method. The Corporation assesses the carrying
amount of the investment in the Moa JV at each reporting date to determine whether there are any indicators that the carrying
amount may be impaired. The Corporation applies judgment in determining if there has been objective evidence of impairment
as a result of one or more loss events which has an impact on the estimated future cash flows from the investment that can be
reliably estimated.
Measurement of the fair value of the GNC receivable and Energas payable
The Corporation measures the GNC receivable and Energas payable at fair value. For purposes of determining fair value,
management uses discounted cash flows in a Monte Carlo simulation model, which includes the use of in-kind forecast cobalt
prices and discount rates, which are significant unobservable inputs in the case of the GNC receivable and requires assumptions
and judgments to be made. Management engages a third-party valuation specialist to assist in the valuation. Changes in these
assumptions or judgments may result in a significant change in fair value.
Management’s discussion and analysis
52 Sherritt International Corporation
Service concession arrangements
The Corporation determined that the contract terms regarding the Boca de Jaruco and Puerto Escondido, Cuba, facilities
operated by Energas represent service concession arrangements as described in IFRIC 12, “Service concession arrangements”
(IFRIC 12). The Corporation uses judgment to determine whether the grantor sets elements of the services provided by the
operator, whether the grantor retains any significant ownership interest in the infrastructure at the end of the agreement, and to
determine the classification of the service concession asset as either a financial asset or intangible asset.
Accounting pronouncements
ADOPTION OF NEW AND AMENDED ACCOUNTING PRONOUNCEMENTS
Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants (Amendments to IAS
1)
In October 2022, the IASB finalised issuance of Classification of Liabilities as Current or Non-current and Non-Current Liabilities
with Covenants, which made amendments to IAS 1 Presentation of Financial Statements. The amendments clarify that only
covenants with which an entity is required to comply on or before the reporting date affect the classification of a liability as current
or non-current. In addition, an entity has to disclose information in the notes that enables users of financial statements to
understand the risk that non-current liabilities with covenants could become repayable within twelve months.
The amendments are effective for annual periods beginning on or after January 1, 2024. Effective January 1, 2024, the Corporation
adopted these requirements. The application of these amendments did not have a material impact on the Corporation’s
consolidated financial statements.
International Tax Reform—Pillar Two Model Rules (Amendments to IAS 12)
In December 2021, the Organisation for Economic Co-operation and Development (“OECD”) issued model rules for a new global
minimum tax framework (“Pillar Two”) and on June 20, 2024, the Government of Canada enacted the Global Minimum Tax Act
(“GMTA”) for fiscal years beginning on or after December 31, 2023. Based on the currently applicable revenue thresholds, the
Corporation would not be in scope of the GMTA rules that implement the global minimum tax under Pillar Two into Canadian
domestic law.
Amendments to the IAS 12 standard apply to income taxes arising from the GMTA enacted to implement the Pillar Two model
rules including tax law that implements qualified domestic minimum top-up taxes described in those rules. The amendments
apply for annual periods beginning on or after January 1, 2023. Effective January 1, 2023, the Corporation adopted these
requirements. Following the amendments to IAS 12, the Corporation has applied the exception available under the amendments
to IAS 12 published by the IASB in May 2023. Given that the Corporation’s revenues are below the currently applicable thresholds
and hence not in scope of the GMTA rules, it is not recognizing or disclosing information about deferred tax assets and liabilities
related to Pillar Two income taxes.
On November 28, 2024, the Government of The Bahamas enacted the Domestic Minimum Top-Up Tax Act, 2024 (“the Act”),
which seeks to impose a Domestic Minimum Top-Up Tax (“DMTT”) and would result in an effective tax rate of 15% on the profits
of multinational entities (“MNE”) operating in The Bahamas with revenues of at least €750 million in two of the last four years. The
Act became effective January 1, 2024 and applies to fiscal years of an MNE group that begin after December 31, 2023 where any
Constituent Entities in The Bahamas would be subject to the Income Inclusion Rule (“IIR”) or the Undertaxed Profits Rules
(“UTPR”) in another jurisdiction. For all other MNE groups, the Constituent Entity would be subject to a DMTT for fiscal years
beginning January 1, 2025. The Corporation did not meet the revenue threshold of at least €750 million in any MNEs operating in
The Bahamas in any two years of the four years prior to January 1, 2024 and therefore is not in scope of the DMTT for the year
ended December 31, 2024 and deferred until fiscal year beginning January 1, 2025.
On May 15, 2024, the Government of Barbados enacted the Corporation Top-up Tax Act, 2024 for fiscal years commencing on
or after January 1, 2024, and every subsequent fiscal year, which will result in a DMTT of 15% being levied on Qualifying
Multinational Enterprises with annual revenue surpassing €750 million. Based on the currently applicable revenue thresholds, the
Corporation was not in scope of the rules for the year ended December 31, 2024.
Sherritt International Corporation
53
ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT YET EFFECTIVE
The Corporation has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Lack of Exchangeability (Amendments to IAS 21)
In August 2023, the IASB finalised issuance of Lack of Exchangeability, which made amendments to IAS 21 The Effects of
Changes in Foreign Exchange Rates. The amendments require an entity to apply a consistent approach to assessing whether a
currency is exchangeable into another currency and, when it is not, to determining the exchange rate to use and the disclosures
to provide.
The amendments are effective for annual periods beginning on or after January 1, 2025. Earlier application was permitted, but
the amendments were not early adopted.
The Corporation does not expect the application of these amendments to have a material impact on the Corporation’s consolidated
financial statements.
Presentation and Disclosure in Financial Statements (“IFRS 18”)
In April 2024, the IASB finalised issuance of Presentation and Disclosure in Financial Statements, which will replace IAS 1,
“Presentation of Financial Statements”. The objective of IFRS 18 is to set out requirements for the presentation and disclosure of
information in general purpose financial statements to help ensure they provide relevant information that faithfully represents an
entity’s assets, liabilities, equity, income and expenses and provide disclosures on management-defined performance measures
in the notes to the financial statements.
The standard is effective for annual periods beginning on or after January 1, 2027. The Corporation is currently evaluating the
impact of this standard on its consolidated financial statements.
Management’s discussion and analysis
54 Sherritt International Corporation
Summary of quarterly results
The following table presents selected amounts derived from the Corporation’s consolidated financial statements:
$ millions, except per share amounts,
2024
2024
2024
2024
2023
2023
2023
2023
for the three months ended
Dec 31
Sept 30
Jun 30
Mar 31
Dec 31
Sept 30
Jun 30
Mar 31
Revenue
$
45.7 $
32.9 $
51.4 $
28.8 $
34.8 $
36.4 $
93.5 $
58.6
Share of (loss) earnings of Moa Joint
Venture, net of tax
(3.4)
(1.8)
(1.2)
(12.3)
(14.5)
(5.0)
11.5
29.9
Net (loss) earnings from continuing
operations
(22.5)
1.8
(11.5)
(40.9)
(53.4)
(24.8)
0.3
13.6
(Loss) earnings from discontinued
operations, net of tax(1)
(0.4)
0.3
-
0.4
-
-
-
(0.3)
Net (loss) earnings for the period
$
(22.9) $
2.1 $
(11.5) $
(40.5) $
(53.4) $
(24.8) $
0.3 $
13.3
Net (loss) earnings per share, basic ($ per share)
Net (loss) earnings from continuing
operations
$
(0.06) $
0.00 $
(0.03) $
(0.10) $
(0.13) $
(0.06) $
0.00 $
0.03
Net (loss) earnings
(0.06)
0.01
(0.03)
(0.10)
(0.13)
(0.06)
0.00
0.03
(1)
(Loss) earnings from discontinued operations, net of tax, relates to expenses in respect of provisions retained by the Corporation.
In general, net earnings or losses of the Corporation are primarily affected by production and sales volumes, commodity prices,
maintenance and operating costs, and exchange rates. The average Canadian dollar cost to purchase one U.S. dollar for the
above quarters ranged from $1.3414 (Q3 2023) to $1.3982 (Q4 2024) and period-end rates ranged between $1.3226 (Q4 2023)
to $1.4389 (Q4 2024).
In addition to the impact of commodity prices and sales volumes, the net earnings/losses in the last eight quarters were impacted
by the following significant items (pre-tax):
Q4 2024: $8.4 million non-cash loss on impairment of intangible assets in the Oil and Gas reportable segment and a
$6.9 million non-cash loss on legacy environmental rehabilitation provisions partially offset by a $2.5 million realized
gain on nickel put options. In addition, the Corporation’s net loss includes a net non-cash gain on revaluation of the
GNC receivable and Energas payable of $3.5 million pursuant to the Cobalt Swap;
Q3 2024: $1.1 million gain on repurchase of notes and a $1.8 million non-cash gain on environmental rehabilitation
provisions. In addition, the Corporation’s net earnings includes a net non-cash gain on revaluation of the GNC
receivable and Energas payable of $11.5 million pursuant to the Cobalt Swap;
Q2 2024: $3.4 million unrealized gain on nickel put options and $1.6 million (50% basis) inventory write-
down/obsolescence at the Moa JV. In addition, the Corporation’s net loss includes a net non-cash loss on revaluation
of the GNC receivable and Energas payable of $5.3 million pursuant to the Cobalt Swap;
Q1 2024: $3.6 million non-cash loss on environmental rehabilitation provisions and $3.5 million of severance expense
related to the restructuring (Sherritt’s share). In addition, the Corporation’s net loss includes a net non-cash loss on
revaluation of the GNC receivable and Energas payable of $9.1 million pursuant to the Cobalt Swap;
Q4 2023: $20.0 million loss on environmental rehabilitation provisions. The net impact of the Cobalt Swap on the
Corporation’s net loss was not material;
Q3 2023: $7.3 million write-down of inventory, $6.8 million non-cash loss on environmental rehabilitation provisions
and $0.9 million unrealized foreign exchange gains in continuing operations. The net impact of the Cobalt Swap on the
Corporation’s net loss was not material;
Q2 2023: $2.2 million gain on repurchase of notes. The net impact of the Cobalt Swap on the Corporation’s net earnings
was not material; and
Q1 2023: $1.3 million gain on repurchase of notes, $1.9 million of share-based compensation expense within cost of
sales and administrative expenses and $0.9 million of unrealized foreign exchange losses in continuing operations.
The net impact of the Cobalt Swap on the Corporation’s net earnings was not material.
Sherritt International Corporation
55
Three-year trend analysis
The following table presents select financial and operational results for the last three years:
$ millions, except per share amounts for the years ended December 31
2024
2023
2022
Revenue
$
158.8
$
223.3
$
178.8
(Loss) earnings from operations and joint venture
(43.5)
(43.4)
118.7
Net (loss) earnings from continuing operations
(73.1)
(64.3)
63.7
Net (loss) earnings for the year
(72.8)
(64.6)
63.5
Adjusted EBITDA(1)
32.4
46.2
233.1
Loss per common share (basic and diluted) ($ per share):
Net loss from continuing operations
(0.18)
(0.16)
0.16
Net loss for the year
(0.18)
(0.16)
0.16
Total assets
1,382.8
1,390.6
1,555.6
Non-current liabilities
492.4
489.7
493.1
PRODUCTION VOLUMES
Moa Joint Venture (50% basis)
Finished nickel (tonnes)
15,166
14,336
16,134
Finished cobalt (tonnes)
1,603
1,438
1,684
Electricity (gigawatt hours) (33⅓% basis)
816
745
598
(1)
Non-GAAP and other financial measure. For additional information, see the Non-GAAP and other financial measures section.
In each year, the primary factors affecting on-going operating results are production and sales volumes, commodity prices,
primarily nickel, cobalt and fertilizer; input commodity prices; maintenance and operating costs, which are discussed in the
Review of operations sections; and the foreign exchange relationship between the Canadian and U.S. dollars. Other impacts
such as impairments, gains/losses on sale of assets, fair value gains/losses on financial instruments and changes in estimates
on environmental rehabilitation provisions, among others, are recognized periodically as events occur.
In addition to the impacts of production volumes, commodity prices and input commodity prices, the following factors impacted
operating results:
In 2024, net loss from continuing operations was negatively impacted by a non-cash $8.4 million loss on impairment of intangible
assets in the Oil and Gas reportable segment, a loss on legacy Oil and Gas environmental rehabilitation provisions in Spain of
$8.2 million and $3.5 million (Sherritt’s share) of severance expense related to restructuring and workforce reductions. The
aforementioned losses and expense were partially offset by employee cost savings due to the restructuring and workforce
reductions, a realized gain on nickel put options of $5.9 million and a gain on the repurchase of notes of $1.8 million.
In 2023, net loss from continuing operations was negatively impacted by a loss on legacy Oil and Gas environmental
rehabilitation provisions in Spain of $22.9 million and an inventory write-down of $9.8 million. The aforementioned losses were
partially offset by a net gain on the revaluation of the GNC receivable and Energas payable of $7.1 million and a gain on the
repurchase of notes of $3.5 million.
In 2022, net earnings from continuing operations was positively impacted by a gain on repurchase of notes of $20.9 million and
a gain on the modification of Cuban receivables of $4.0 million. The aforementioned gains were partially offset by a revaluation
of allowances for expected credit losses related to the Energas conditional sales agreement of $49.0 million, primarily as a result
of the Cobalt Swap, a net loss on revaluation of the GNC receivable and Energas payable of $1.6 million, an impairment loss of
intangible assets of $1.3 million and a loss on environmental rehabilitation provisions of $15.0 million.
Off-balance sheet arrangements
As at December 31, 2024, the Corporation had no off-balance sheet arrangements.
Management’s discussion and analysis
56 Sherritt International Corporation
Transactions with related parties
The Corporation and its subsidiaries provide goods, labour, advisory and other administrative services to jointly controlled entities
at fair value. The Corporation and its subsidiaries also market, pursuant to sales agreements, a portion of the nickel, cobalt and
certain by-products produced by and purchased from certain jointly controlled entities. For further detail, refer to notes 7 and 22
of the Corporation’s consolidated financial statements for the year ended December 31, 2024.
Transactions between related parties are generally based on standard commercial terms. All amounts outstanding are unsecured
and will be settled in cash. No guarantees have been given or received on the outstanding amounts. No expense has been
recognized in the current or prior periods for bad debts in respect of amounts owed by related parties.
Canadian $ millions, for the years ended December 31
2024
2023
Total value of goods and services:
Provided to Energas
$
48.7 $
46.6
Provided to Moa Joint Venture
262.8
372.8
Purchased from Moa Joint Venture
781.7
844.0
Net financing income from Moa Joint Venture
1.7
0.8
Canadian $ millions, as at December 31
2024
2023
Accounts receivable from Moa Joint Venture
$
37.6 $
44.7
Accounts payable to Moa Joint Venture
82.7
72.2
Advances and loans receivable from Moa Joint Venture
-
30.3
Goods and services provided to Moa Joint Venture primarily relate to services provided by Fort Site to the Moa Joint Venture.
KEY MANAGEMENT PERSONNEL
Key management personnel are composed of the Board of Directors, Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, Chief Commercial Officer, Chief Human Resources Officer and Senior Vice Presidents of the Corporation.
The following is a summary of key management personnel compensation:
Canadian $ millions, for the years ended December 31
2024
2023
Short-term benefits
$
5.6 $
5.0
Post-employment benefits(1)
0.3
0.3
Termination benefits
0.8
-
Share-based compensation
4.3
4.6
$
11.0 $
9.9
(1)
Post-employment benefits include a non-registered defined contribution executive supplemental pension plan. The total cash pension contribution for key management
personnel was nil for the year ended December 31, 2024 (nil for the year ended December 31, 2023). The total pension expense that is attributable to key management
personnel was nil for the year ended December 31, 2024 (nil for the year ended December 31, 2023).
Sherritt International Corporation
57
Controls and procedures
DISCLOSURE CONTROLS AND PROCEDURES
Management is responsible for establishing and maintaining adequate internal control over disclosure controls and procedures,
as defined in National Instrument 52-109 of the Ontario Securities Commission (“NI 52-109”). Disclosure controls and procedures
are designed to provide reasonable assurance that all relevant information is gathered and reported to management, including
the CEO and CFO, on a timely basis so that appropriate decisions can be made regarding public disclosure. Management, with
the participation of the certifying officers, has evaluated the effectiveness of the design and operation, as of December 31, 2024,
of the Corporation’s disclosure controls and procedures. Based on that evaluation, the certifying officers have concluded that
such disclosure controls and procedures are effective and designed to ensure that material information known by others relating
to the Corporation and its subsidiaries is provided to them.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in NI
52-109. Internal control over financial reporting means a process designed by or under the supervision of the CEO and CFO,
management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with IFRS Accounting Standards.
The internal controls are not expected to prevent and detect all misstatements due to error or fraud. Management advises that
there have been no changes in the Corporation’s internal controls over financial reporting during 2024 that have materially
affected or are reasonably likely to materially affect the Corporation’s internal control over financial reporting.
Management, with the participation of the certifying officers, conducted an evaluation of the effectiveness of the Corporation’s
internal controls over financial reporting, as of December 31, 2024, using the Internal Control-Integrated Framework published
in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013 Framework). Based on this
evaluation, the CEO and CFO have concluded that the internal controls over financial reporting were effective as of December
31, 2024.
Supplementary information
SENSITIVITY ANALYSIS
The following table shows the approximate impact on the Corporation’s net earnings and earnings per share from continuing
operations for the year ended December 31, 2024 from a change in selected key variables. The impact is measured changing
one variable at a time and may not necessarily be indicative of sensitivities on future results.
Approximate
Approximate
change in annual
change in annual
net earnings
basic earnings
(CAD$ millions)
per share (EPS)
Factor
Increase
Increase/
(decrease)
Increase/
(decrease)
Prices
Nickel - LME price per pound(1)
US$
1.00 $
35 $
0.09
Cobalt - Argus price per pound(1)
US$
5.00
19
0.05
Fertilizers - price per tonne(1)
$
50.00
8
0.02
Exchange rate
Strengthening of the Canadian dollar relative
to the U.S. dollar
$
0.05
(6)
(0.02)
Operating costs(1)
Natural gas - cost per gigajoule (Moa JV and Fort Site)
$
1.00
(4)
(0.01)
Fuel oil - cost per tonne (Moa JV and Fort Site)
US$
50.00
(3)
(0.01)
Sulphur - cost per tonne (Moa JV and Fort Site)
US$
25.00
(4)
(0.01)
(1)
Changes are applied at the operating level with the approximate change in net earnings and basic EPS representing the Corporation’s 50% interest in the Moa JV.
Management’s discussion and analysis
58 Sherritt International Corporation
INVESTMENT IN MOA JOINT VENTURE
Explanations for the significant changes in the statements of financial position and statements of comprehensive (loss) income
line items to the respective comparative period for the Moa JV are included below.
Statements of financial position
2024
2023
Canadian $ millions, 100% basis, as at
December 31
December 31
Variance
Assets
Cash and cash equivalents
$
11.3
$
11.8
(0.5) Decrease is primarily due to cash distributions to
the Corporation pursuant to the Cobalt Swap, full
repayment of the credit facility to the Corporation
and spending on capital, partially offset by cash
provided by operating activities.
Income taxes receivable
7.0
6.4
0.6
Other current assets
40.9
20.9
20.0
Increase is primarily due to a receivable for cash
and cobalt distributions to the Corporation pursuant
to the Cobalt Swap not yet declared as dividends.
The receivable will be extinguished upon
declaration as dividends.
Trade accounts receivable, net
90.3
82.6
7.7
Inventories
382.3
424.7
(42.4) Decrease is primarily due to nickel sales volumes
exceeding production volumes during the year,
coupled with lower cost of nickel and cobalt
inventories.
Other non-current assets
17.9
23.3
(5.4)
Property, plant and equipment
1,136.6
1,089.1
47.5
Increase is primarily due to spending on sustaining
and growth capital as well as an increase in the U.S
dollar relative to the Canadian dollar, partially offset
by amortization.
Deferred income taxes
10.3
-
10.3
Increase is primarily due to higher taxable losses in
2024 as compared to 2023 at one of the operating
companies of the Moa JV.
Total assets
1,696.6
1,658.8
37.8
Liabilities
Trade accounts payable and accrued
liabilities
111.9
117.4
(5.5)
Income taxes payable
1.0
2.8
(1.8)
Other current financial liabilities
0.2
30.4
(30.2)
Decrease is primarily due to the full repayment of
the credit facility with the Corporation.
Deferred revenue
21.0
-
21.0
Increase is primarily due to a prepayment received
from a customer for deliveries of nickel in 2025.
Loans and borrowings
40.5
23.5
17.0
Increase is primarily due to financing received from
a Cuban financial institution for expansion.
Environmental rehabilitation provisions
86.9
84.9
2.0
Other non-current financial liabilities
2.9
3.7
(0.8)
Deferred income taxes
11.2
18.3
(7.1) Decrease is primarily due to the reclassification of
deferred income tax liabilities to deferred income
tax assets noted above.
Total liabilities
275.6
281.0
(5.4)
Net assets of Moa Joint Venture
$
1,421.0
$
1,377.8
43.2
Proportion of Sherritt's ownership interest
50%
50%
Total
710.5
688.9
Intercompany capitalized interest elimination
(45.1)
(42.2)
Investment in Moa Joint Venture
$
665.4
$
646.7
Foreign currency translation differences are included in the financial information of the Moa JV presented in the financial
statements and MD&A, as the Corporation’s presentation currency is the Canadian dollar, while certain of the operating companies
within the Moa JV’s functional currency is the U.S. dollar. As at December 31, 2024, the U.S. dollar increased in value relative to
the Canadian dollar, resulting in higher assets and liabilities reported in Canadian dollars as compared to December 31, 2023.
Sherritt International Corporation
59
Statements of comprehensive (loss) income
For the year ended
2024
2023
Canadian $ millions, 100% basis
December 31
December 31
Variance
Revenue
$
868.9
$
884.3
(15.4) Decrease is primarily due to a decrease in
nickel revenue, as a result of lower average-
realized nickel price, partially offset by higher
nickel sales volume, and higher cobalt revenue.
Cobalt revenue increased in the current year
primarily due to cobalt sold by the Moa JV. In
the prior year, cobalt revenue was primarily
recognized by the Corporation pursuant to the
Cobalt Swap.
Cost of sales
(902.8)
(832.7)
(70.1) Increase is primarily due to an increase in cobalt
cost of sales due to lower cobalt sales
recognized by the Moa JV in the current year. In
the prior year, cobalt cost of sales was primarily
recognized by the Corporation pursuant to the
Cobalt Swap. The increase in cobalt cost of
sales was partially offset by lower sulphur,
natural gas and diesel prices, as well as lower
purchases of sulphuric acid, operational
improvements and lower maintenance costs.
Cobalt (loss) gain
(0.7)
5.5
(6.2) Cobalt (loss) gain represent the difference
between the Moa JV's cost to produce finished
cobalt internally and the in-kind value of cobalt
distributed under the Cobalt Swap. In the prior
year, higher volumes of finished cobalt were
distributed to the Corporation as compared to
the current year.
Impairment of property, plant and equipment
(1.0)
(3.0)
2.0
Administrative expenses
(10.8)
(9.9)
(0.9)
(Loss) earnings from operations
(46.4)
44.2
(90.6)
Financing income
0.7
2.3
(1.6)
Financing expense
(16.3)
(11.5)
(4.8)
Net finance expense
(15.6)
(9.2)
(6.4)
(Loss) earnings before income tax
(62.0)
35.0
(97.0)
Income tax recovery (expense)
10.5
(1.4)
11.9
Decrease is primarily due to higher taxable
losses in 2024 compared to 2023 at the
operating companies of the Moa Joint Venture.
Net (loss) earnings and comprehensive
(loss) income of Moa Joint Venture
$
(51.5)
$
33.6
(85.1)
Proportion of Sherritt's ownership interest
50%
50%
-
Total
(25.8)
16.8
(42.6)
Intercompany elimination
7.1
5.1
2.0
Share of (loss) earnings of Moa Joint
Venture, net of tax
$
(18.7)
$
21.9
(40.6)
For the year ended December 31, 2024, Moa JV’s revenue was positively impacted and cost of sales and other expenses were
negatively impacted by a stronger average U.S. dollar relative to the Canadian dollar compared to the same periods in the prior
year.
Moa JV commitments
The Moa JV’s significant undiscounted commitments, which are non-recourse to the Corporation, are presented below on a 50%
basis:
Environmental rehabilitation commitments of $144.6 million, with no significant payments due in the next five years;
Trade accounts payable and accrued liabilities of $56.0 million;
Loans and borrowings of $20.3 million; and
Property, plant and equipment commitments of $46.5 million, which includes $19.7 million of commitments for tailings
and $4.7 million of commitments for growth capital for the ordering of long-lead materials and equipment, and civil and
mechanical construction.
Management’s discussion and analysis
60 Sherritt International Corporation
Property, plant and equipment commitments also include normal course expenditures and those associated with tailings
management facilities.
NON-GAAP AND OTHER FINANCIAL MEASURES
Management uses the measures below 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/or evaluate the results of its underlying business. These measures are intended to provide additional information, not to
replace IFRS Accounting Standards measures, and do not have a standard definition under IFRS Accounting Standards and
should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS
Accounting Standards. As these measures do not have a standardized meaning, they may not be comparable to similar
measures provided by other companies.
The non-GAAP and other financial measures are reconciled to the most directly comparable IFRS Accounting Standards
measure in the sections below.
Combined revenue
The Corporation uses combined revenue as a measure to help management assess the Corporation’s financial performance
across its core operations. Combined revenue includes the Corporation’s consolidated revenue, less Oil and Gas revenue, and
includes the revenue of the Moa JV within the Metals reportable segment on a 50% basis. Revenue of the Moa JV is included
in share of earnings of Moa Joint Venture, net of tax, as a result of the equity method of accounting and excluded from the
Corporation’s consolidated revenue.
Revenue at Oil and Gas is excluded from Combined revenue as the segment is not currently exploring for or producing oil and
gas and its revenue relate to ancillary drilling services, provided to a customer and agencies of the Government of Cuba, which
is not reflective of the Corporation’s core operating activities or revenue generation potential. The exclusion of revenue at Oil and
Gas from Combined revenue represented a change in the composition of Combined revenue during the three months ended
December 31, 2023 to better reflect the Corporation’s core operating activities and revenue generation potential and the prior year
measure has been restated for comparative purposes.
Management uses this measure to reflect the Corporation’s economic interest in its operations prior to the application of equity
accounting to help allocate financial resources and provide investors with information that it believes is useful in understanding
the scope of Sherritt’s business, based on its economic interest, irrespective of the accounting treatment.
The table below reconciles combined revenue to revenue per the financial statements:
For the three months ended
For the year ended
2023
2023
2024
December 31
Change
2024
December 31
$ millions
December 31
(Restated)
December 31
(Restated)
Change
Revenue by reportable segment
Metals(1)
$
148.3
$
125.9
18%
$
526.6
$
603.7
(13%)
Power
11.1
14.0
(21%)
47.8
47.1
1%
Corporate and Other
0.9
0.6
50%
3.2
2.1
52%
Combined revenue
$
160.3
$
140.5
14%
$
577.6
$
652.9
(12%)
Adjustment for Moa Joint Venture
(115.6)
(107.7)
(434.5)
(442.2)
Adjustment for Oil and Gas
1.0
2.0
15.7
12.6
Financial statement revenue
$
45.7
$
34.8
31%
$
158.8
$
223.3
(29%)
(1)
Revenue of Metals for the three months ended December 31, 2024 is composed of revenue recognized by the Moa JV of $115.6 million (50% basis), which is equity-
accounted and included in share of earnings of Moa JV, net of tax, coupled with revenue recognized by Fort Site of $30.1 million and Metals Marketing of $2.6 million,
both of which are included in consolidated revenue (for the three months ended December 31, 2023 - $107.7 million, $15.3 million and $2.9 million, respectively).
Revenue of Metals for the year ended December 31, 2024 is composed of revenue recognized by the Moa JV of $434.5 million (50% basis), coupled with revenue
recognized by Fort Site of $85.6 million and Metals Marketing of $6.5 million (for the year ended December 31, 2023 - $442.2 million, $77.9 million and $83.6 million,
respectively).
Sherritt International Corporation
61
Adjusted EBITDA
The Corporation defines Adjusted EBITDA as (loss) earnings from operations and joint venture, which excludes net finance
expense, income tax expense and loss from discontinued operations, net of tax, as reported in the financial statements for the
period, adjusted for: depletion, depreciation and amortization; impairment losses on non-current non-financial assets and
investments; and gains or losses on disposal of property, plant and equipment of the Corporation and the Moa JV. The exclusion
of impairment losses eliminates the non-cash impact of the losses.
Earnings/loss from operations at Oil and Gas (net of depletion, depreciation and amortization and impairment, if applicable) is
deducted from/added back to Adjusted EBITDA as the segment is not currently exploring for or producing oil and gas and its
financial results relate to ancillary drilling services, provided to a customer and agencies of the Government of Cuba, and
environmental rehabilitation costs for legacy assets, which are not reflective of the Corporation’s core operating activities or cash
generation potential. The adjustment for earnings/loss from operations at Oil and Gas (net of depletion, depreciation and
amortization and impairment, if applicable) represented a change in the composition of Adjusted EBITDA during the three months
ended December 31, 2023 to better reflect the Corporation’s core operating activities and cash generation potential and the prior
year measure has been restated for comparative purposes.
Management uses Adjusted EBITDA internally to evaluate the cash generation potential of Sherritt’s operating divisions on a
combined and segment basis as an indicator of ability to fund working capital needs, meet covenant obligations, service debt and
fund capital expenditures, as well as provide a level of comparability to similar entities. Management believes that Adjusted
EBITDA provides useful information to investors in evaluating the Corporation’s operating results in the same manner as
management and the Board of Directors.
The tables below reconcile (loss) earnings from operations and joint venture per the financial statements to Adjusted EBITDA:
$ millions, for the three months ended December 31
2024
Adjustment
Corporate
for Moa
Oil and
and
Joint
Metals(1)
Power
Gas
Other
Venture
Total
(Loss) earnings from operations and joint venture
per financial statements
$
(1.0)
$
4.8
$
(18.8)
$
(4.8)
$
2.9
$
(16.9)
Add (deduct):
Depletion, depreciation and amortization
2.8
0.7
0.1
0.1
-
3.7
Impairment of intangible assets
-
-
8.4
-
-
8.4
Oil and Gas earnings from operations, net of
depletion, depreciation and amortization
and impairment of intangible assets
-
-
10.3
-
-
10.3
Adjustments for share of earnings of Moa Joint Venture:
Depletion, depreciation and amortization
12.8
-
-
-
-
12.8
Impairment of property, plant and equipment
-
-
-
-
-
-
Net finance expense
-
-
-
-
0.7
0.7
Income tax recovery
-
-
-
-
(3.6)
(3.6)
Adjusted EBITDA
$
14.6
$
5.5
$
-
$
(4.7)
$
-
$
15.4
$ millions, for the three months ended December 31
2023
(Restated)
Adjustment
Corporate
for Moa
Oil and
and
Joint
Metals(1)
Power
Gas
Other
Venture
Total
(Loss) earnings from operations and joint venture
per financial statements
$
(22.0)
$
5.9
$
(23.3)
$
(5.1)
$
1.1
$
(43.4)
Add (deduct):
Depletion, depreciation and amortization
2.8
0.7
-
0.2
-
3.7
Oil and Gas earnings from operations, net of
depletion, depreciation and amortization
-
-
23.3
-
-
23.3
Adjustments for share of earnings of Moa Joint Venture:
Depletion, depreciation and amortization
10.5
-
-
-
-
10.5
Net finance income
-
-
-
-
1.9
1.9
Income tax recovery
-
-
-
-
(3.0)
(3.0)
Adjusted EBITDA
$
(8.7)
$
6.6
$
-
$
(4.9)
$
-
$
(7.0)
Management’s discussion and analysis
62 Sherritt International Corporation
$ millions, for the year ended December 31
2024
Adjustment
Corporate
for Moa
Oil and
and
Joint
Metals(2)
Power
Gas
Other
Venture
Total
(Loss) earnings from operations and joint venture
per financial statements
$
(18.5)
$
13.5
$
(18.3)
$
(24.4)
$
4.2
$
(43.5)
Add:
Depletion, depreciation and amortization
10.5
2.5
0.2
0.8
-
14.0
Impairment of intangible assets
-
-
8.4
-
-
8.4
Oil and Gas loss from operations, net of
depletion, depreciation and amortization
and impairment of intangible assets
-
-
9.7
-
-
9.7
Adjustments for share of earnings of Moa Joint Venture:
Depletion, depreciation and amortization
47.5
-
-
-
-
47.5
Impairment of property, plant and equipment
0.5
-
-
-
-
0.5
Net finance income
-
-
-
-
1.0
1.0
Income tax recovery
-
-
-
-
(5.2)
(5.2)
Adjusted EBITDA
$
40.0
$
16.0
$
-
$
(23.6)
$
-
$
32.4
$ millions, for the year ended December 31
2023
(Restated)
Adjustment
Corporate
for Moa
Oil and
and
Joint
Metals(2)
Power
Gas
Other
Venture
Total
(Loss) earnings from operations and joint venture
per financial statements
$
(2.1)
$
20.7
$
(30.2)
$
(31.6)
$
(0.2)
$
(43.4)
Add (deduct):
Depletion, depreciation and amortization
10.6
2.5
0.2
1.0
-
14.3
Oil and Gas earnings from operations, net of
depletion, depreciation and amortization
-
-
30.0
-
-
30.0
Adjustments for share of earnings of Moa Joint Venture:
Depletion, depreciation and amortization
43.6
-
-
-
-
43.6
Impairment of property, plant and equipment
1.5
-
-
-
-
1.5
Net finance income
-
-
-
-
(0.5)
(0.5)
Income tax expense
-
-
-
-
0.7
0.7
Adjusted EBITDA
$
53.6
$
23.2
$
-
$
(30.6)
$
-
$
46.2
(1)
Adjusted EBITDA of Metals for the three months ended December 31, 2024 is composed of Adjusted EBITDA at Moa JV of $6.7 million (50% basis), Adjusted EBITDA
at Fort Site of $8.9 million and Adjusted EBITDA at Metals Marketing of $(1.0) million (for the three months ended December 31, 2023 - $(5.0) million, $(2.9) million
and $(0.8) million, respectively).
(2)
Adjusted EBITDA of Metals for the year ended December 31, 2024 is composed of Adjusted EBITDA at Moa JV of $25.2 million (50% basis), Adjusted EBITDA at
Fort Site of $17.8 million and Adjusted EBITDA at Metals Marketing of $(3.0) million (for the year ended December 31, 2023 - $67.2 million, $(2.6) million and $(11.0)
million, respectively).
Sherritt International Corporation
63
Average-realized price
Average-realized price is generally calculated by dividing revenue by sales volume for the given product in a given segment. The
average-realized price for power excludes frequency control, by-product and other revenue, as this revenue is not earned directly
for power generation. Refer to the Power Review of operations section for further details on frequency control revenue, which
Energas receives in compensation for lost sales of electricity as a result of frequency control. Transactions by a Moa JV marketing
company, included in other revenue, are excluded.
During the year ended December 31, 2024, the Corporation purchased put options on 3,876 tonnes of nickel at an exercise price
of US$8.16/lb at a cost of $2.2 million for a six-month period from June 1, 2024 to November 30, 2024 to protect against downward
changes in nickel prices. $5.9 million of net proceeds was received during the year ended December 31, 2024 upon settlement
of the nickel put options, which is not reflected in the average-realized price of nickel below.
Management uses this measure, and believes investors use this measure, to compare the relationship between the revenue per
unit and direct costs on a per unit basis in each reporting period for nickel, cobalt, fertilizer and power and provide comparability
with other similar external operations.
Average-realized price for fertilizer is the weighted-average realized price of ammonia and various ammonium sulphate products.
Average-realized price for nickel and cobalt are expressed in Canadian dollars per pound sold, while fertilizer is expressed in
Canadian dollars per tonne sold and electricity is expressed in Canadian dollars per megawatt hour sold.
The tables below reconcile revenue per the financial statements to average-realized price:
$ millions, except average-realized price and sales volume, for the three months ended December 31
2024
Metals
Adjustment
for Moa Joint
Nickel
Cobalt
Fertilizer
Power
Other(1)
Venture
Total
Revenue per financial statements
$
95.3 $
12.6 $
31.8 $
11.1 $
10.5 $
(115.6) $
45.7
Adjustments to revenue:
Frequency control, by-product and other revenue
-
-
-
(1.9)
Revenue for purposes of average-realized price calculation
95.3
12.6
31.8
9.2
Sales volume for the period
9.6
1.0
63.3
171
Volume units
Millions of
Millions of
Thousands
Gigawatt
pounds
pounds
of tonnes
hours
Average-realized price(2)(3)(4)
$
9.98 $
12.30 $
502.93 $
53.19
$ millions, except average-realized price and sales volume, for the three months ended December 31
2023
Metals
Adjustment
for Moa Joint
Nickel
Cobalt
Fertilizer
Power
Other(1)
Venture
Total
Revenue per financial statements
$
84.1 $
15.2 $
23.1 $
14.0 $
4.1 $
(107.7) $
32.8
Adjustments to revenue:
By-product and other revenue
-
-
-
(1.0)
Revenue for purposes of average-realized price calculation
84.1
15.2
23.1
13.0
Sales volume for the period
7.7
0.9
55.5
225
Volume units
Millions of
Millions of
Thousands
Gigawatt
pounds
pounds
of tonnes
hours
Average-realized price(2)(3)(4)
$
10.87 $
17.23 $
414.80 $
57.96
Management’s discussion and analysis
64 Sherritt International Corporation
$ millions, except average-realized price and sales volume, for the year ended December 31
2024
Metals
Adjustment
for Moa Joint
Nickel
Cobalt
Fertilizer
Power
Other(1)
Venture
Total
Revenue per financial statements
$
355.9 $
48.0 $
90.1 $
47.8 $
51.5 $
(434.5) $
158.8
Adjustments to revenue:
Frequency control, by-product and other revenue
-
-
-
(5.3)
Revenue for purposes of average-realized price calculation
355.9
48.0
90.1
42.5
Sales volume for the period
34.6
3.6
179.1
816
Volume units
Millions of
Millions of
Thousands
Gigawatt
pounds
pounds
of tonnes
hours
Average-realized price(2)(3)(4)
$
10.30 $
13.30 $
503.19 $
52.01
$ millions, except average-realized price and sales volume, for the year ended December 31
2023
Metals
Adjustment
for Moa Joint
Nickel
Cobalt
Fertilizer
Power
Other(1)
Venture
Total
Revenue per financial statements
$
379.6 $
104.8 $
93.3 $
47.1 $
28.1 $
(442.2) $
210.7
Adjustments to revenue:
By-product and other revenue
-
-
-
(4.3)
Revenue for purposes of average-realized price calculation
379.6
104.8
93.3
42.8
Sales volume for the period
28.4
6.0
170.2
745
Volume units
Millions of
Millions of
Thousands
Gigawatt
pounds
pounds
of tonnes
hours
Average-realized price(2)(3)(4)
$
13.36 $
17.47 $
548.16 $
57.45
(1)
Other revenue includes other revenue from the Metals reportable segment, revenue from the Oil and Gas reportable segment, a non-core reportable segment, and
revenue from the Corporate and Other reportable segment.
(2)
Average-realized price may not calculate exactly based on amounts presented due to foreign exchange and rounding.
(3)
Power, average-realized price per MWh.
(4)
Fertilizer, average-realized price per tonne.
Sherritt International Corporation
65
Unit operating cost/NDCC
With the exception of Metals, which uses NDCC, unit operating cost is generally calculated by dividing cost of sales as reported
in the financial statements, less depreciation, depletion and amortization in cost of sales, the impact of impairment losses, gains
and losses on disposal of property, plant, and equipment and exploration and evaluation assets and certain other non-production
related costs, by the number of units sold.
Metals’ NDCC is calculated by dividing cost of sales, as reported in the financial statements, adjusted for the following:
depreciation, depletion, amortization and impairment losses in cost of sales; cobalt by-product, fertilizer and other revenue; cobalt
gain/loss; and other costs primarily related to the impact of opening and closing inventory values, by the number of finished nickel
pounds sold in the period.
Power’s unit operating costs for the three months and year ended December 31, 2024 was unfavourably impacted by lower sales
volumes as a result of frequency control, for which Energas is being compensated. Refer to the Power Review of operations
section for further details on frequency control.
Unit operating costs for nickel and electricity are key measures that management and investors uses to monitor performance.
NDCC of nickel is a widely-used performance measure for nickel producers. Management uses unit operating costs/NDCC to
assess how well the Corporation’s producing mine and power facilities are performing and to assess overall production efficiency
and effectiveness internally across periods and compared to its competitors.
Unit operating cost (NDCC) for nickel is expressed in U.S. dollars per pound sold, while electricity is expressed in Canadian dollars
per megawatt hour sold.
The tables below reconcile cost of sales per the financial statements to unit operating cost/NDCC:
$ millions, except unit cost and sales volume, for the three months ended December 31
2024
Adjustment
for Moa
Metals
Power
Other(1)
Joint Venture
Total
Cost of sales per financial statements
$
146.6 $
5.9 $
11.8 $
(120.5) $
43.8
Less:
Depletion, depreciation and amortization in cost of sales
(15.6)
(0.6)
131.0
5.3
Adjustments to cost of sales:
Cobalt by-product, fertilizer and other revenue
(53.0)
-
Cobalt loss
0.1
-
Impact of opening/closing inventory and other(2)
(4.3)
-
Cost of sales for purposes of unit cost calculation
73.8
5.3
Sales volume for the period
9.6
171
Volume units
Millions of
Gigawatt
pounds
hours
Unit operating cost(3)(4)
$
7.66 $
30.64
Unit operating cost (US$ per pound) (NDCC)(5)
$
5.44
Management’s discussion and analysis
66 Sherritt International Corporation
$ millions, except unit cost and sales volume, for the three months ended December 31
2023
Adjustment
for Moa
Metals
Power
Other(1)
Joint Venture
Total
Cost of sales per financial statements
$
146.6 $
7.1 $
28.6 $
(122.2) $
60.1
Less:
Depletion, depreciation and amortization in cost of sales
(13.3)
(0.5)
133.3
6.6
Adjustments to cost of sales:
Cobalt by-product, fertilizer and other revenue
(41.8)
-
Impact of opening/closing inventory and other(2)
(7.8)
-
Cost of sales for purposes of unit cost calculation
83.7
6.6
Sales volume for the period
7.7
225
Volume units
Millions of
Gigawatt
pounds
hours
Unit operating cost(3)(4)
$
10.81 $
29.16
Unit operating cost (US$ per pound) (NDCC)(5)
$
7.87
$ millions, except unit cost and sales volume, for the year ended December 31
2024
Adjustment
for Moa
Metals
Power
Other(1)
Joint Venture
Total
Cost of sales per financial statements
$
532.3 $
30.1 $
27.5 $
(451.4) $
138.5
Less:
Depletion, depreciation and amortization in cost of sales
(58.0)
(2.1)
474.3
28.0
Adjustments to cost of sales:
Cobalt by-product, fertilizer and other revenue
(170.7)
-
Cobalt loss
0.1
-
Impact of opening/closing inventory and other(2)
(22.1)
-
Cost of sales for purposes of unit cost calculation
281.6
28.0
Sales volume for the period
34.6
816
Volume units
Millions of
Gigawatt
pounds
hours
Unit operating cost(3)(4)
$
8.15 $
34.29
Unit operating cost (US$ per pound) (NDCC)(5)
$
5.94
$ millions, except unit cost and sales volume, for the year ended December 31
2023
Adjustment
for Moa
Metals
Power
Other(1)
Joint Venture
Total
Cost of sales per financial statements
$
601.4 $
22.7 $
57.8 $
(416.4) $
265.5
Less:
Depletion, depreciation and amortization in cost of sales
(54.2)
(2.0)
547.2
20.7
Adjustments to cost of sales:
Cobalt by-product, fertilizer and other revenue
(224.1)
-
Cobalt gain
(2.7)
-
Impact of opening/closing inventory and other(2)
(43.5)
-
Cost of sales for purposes of unit cost calculation
276.9
20.7
Sales volume for the period
28.4
745
Volume units
Millions of
Gigawatt
pounds
hours
Unit operating cost(3)(4)
$
9.75 $
27.70
Unit operating cost (US$ per pound) (NDCC)(5)
$
7.22
(1)
Other is composed of the cost of sales of the Oil and Gas, a non-core reportable segment, and cost of sales of the Corporate and Other reportable segment.
(2)
Other is primarily composed of royalties and other contributions, sales discounts, effect of average exchange rate changes and other non-cash items.
(3)
Unit operating cost/NDCC may not calculate exactly based on amounts presented due to foreign exchange and rounding.
(4)
Power, unit operating cost price per MWh.
(5)
Unit operating costs in US$ are converted at the average exchange rate for the period.
Sherritt International Corporation
67
Adjusted net earnings/loss from continuing operations and adjusted net earnings/loss from continuing
operations per share
The Corporation defines adjusted net earnings/loss from continuing operations as net earnings/loss from continuing operations
less items not reflective of the Corporation’s current or future operational performance. These adjusting items include, but are not
limited to, inventory write-downs/obsolescence, impairment of assets, gains and losses on the acquisition or disposal of assets,
unrealized foreign exchange gains and losses, gains and losses on financial assets and liabilities and other one-time adjustments
that have not occurred in the past two years and are not expected to recur in the next two years. While some adjustments are
recurring (such as unrealized foreign exchange (gain) loss and revaluations of allowances for expected credit losses (ACL)),
management believes that they do not reflect the Corporation’s current or future operational performance.
Net earnings/loss from continuing operations at Oil and Gas is deducted from/added back to adjusted earnings/loss from
continuing operations as the segment is not currently exploring for or producing oil and gas and its financial results relate to
ancillary drilling services, provided to a customer and agencies of the Government of Cuba, and environmental rehabilitation costs
for legacy assets, which are not reflective of the Corporation’s core operating activities or future operational performance. The
adjustment for net earnings/loss from continuing operations at Oil and Gas represented a change in the composition of adjusted
net earnings/loss from continuing operations during the three months ended December 31, 2023 to better reflect the Corporation’s
core operating activities and future operational performance and the prior year measure has been restated for comparative
purposes.
Adjusted net earnings/loss from continuing operations per share is defined consistent with the definition above and divided by the
Corporation’s weighted-average number of common shares outstanding.
Management uses these measures internally and believes that they provide investors with performance measures with which to
assess the Corporation’s current or future operational performance by adjusting for items or transactions that are not reflective of
its current or future operational performance.
The tables below reconcile net loss from continuing operations and net loss from continuing operations per share, both per the
financial statements, to adjusted net loss from continuing operations and adjusted net loss from continuing operations per share,
respectively:
2024
2023
For the three months ended December 31
$ millions
$/share
$ millions
$/share
Net loss from continuing operations
$
(22.5) $
(0.06) $
(53.4) $
(0.13)
Adjusting items:
Sherritt - Unrealized foreign exchange loss - continuing operations
1.4
-
0.9
-
Corporate and Other - Realized gain on nickel put options
(2.5)
(0.01)
-
-
Corporate and Other - Unrealized loss on nickel put options
0.8
-
-
-
Metals - Moa JV - Inventory write-down/obsolescence
0.4
-
1.6
-
Metals - Fort Site - Unrealized gain on natural gas swaps
(0.8)
-
-
-
Metals - Fort Site - Inventory write-down
-
-
0.7
-
Metals - Metals Marketing - Cobalt loss
(0.1)
-
-
-
Power - (Gain) loss on revaluation of GNC receivable
(3.3)
(0.01)
3.5
0.01
Power - Gain on revaluation of Energas payable
(0.2)
-
(1.3)
-
Oil and Gas - Impairment of intangible assets
8.4
0.02
-
-
Oil and Gas - Net loss from continuing operations, net of
unrealized foreign exchange gain/loss and impairment of intangible
assets
10.4
0.03
20.1
0.05
Total adjustments, before tax
$
14.5 $
0.03 $
25.5 $
0.06
Tax adjustments
(2.2)
-
-
-
Adjusted net loss from continuing operations
$
(10.2) $
(0.03) $
(27.9) $
(0.07)
Management’s discussion and analysis
68 Sherritt International Corporation
2024
2023
For the year ended December 31
$ millions
$/share
$ millions
$/share
Net loss from continuing operations
$
(73.1) $
(0.18) $
(64.3) $
(0.16)
Adjusting items:
Sherritt - Unrealized foreign exchange loss - continuing operations
1.7
-
1.1
-
Sherritt's share - Severance related to restructuring and
workforce reductions
3.5
0.01
-
-
Corporate and Other - Realized gain on nickel put options
(5.9)
(0.02)
-
-
Corporate and Other - Gain on repurchase of notes
(1.8)
-
(3.5)
(0.01)
Metals - Moa JV - Impairment of property, plant and equipment
0.5
-
1.5
-
Metals - Moa JV - Inventory write-down/obsolescence
2.9
0.01
4.6
0.01
Metals - Fort Site - Inventory write-down
0.9
-
8.9
0.03
Metals - Fort Site - Unrealized gain on natural gas swaps
(0.8)
-
-
-
Metals - Metals Marketing - Inventory write-down
-
-
1.1
-
Metals - Metals Marketing - Cobalt (loss) gain
(0.1)
-
2.7
0.01
Power - Gain on revaluation of GNC receivable
(0.4)
-
(14.7)
(0.04)
Power - (Gain) loss on revaluation of Energas payable
(0.2)
-
7.6
0.02
Oil and Gas - Impairment of intangible assets
8.4
0.02
-
-
Oil and Gas - Net loss from continuing operations, net of
unrealized foreign exchange gain/loss and impairment of intangible
assets
9.7
0.02
26.6
0.07
Total adjustments, before tax
$
18.4 $
0.04 $
35.9 $
0.09
Tax adjustments
(1.6)
-
0.3
-
Adjusted net loss from continuing operations
$
(56.3) $
(0.14) $
(28.1) $
(0.07)
Combined spending on capital
The Corporation defines spending on capital for each segment as property, plant and equipment and intangible asset expenditures
on a cash basis adjusted to the accrual basis in order to account for assets that are available for use by the Corporation and the
Moa JV prior to payment and includes adjustments to accruals. The Metals segment’s spending on capital includes the Fort Site’s
expenditures, plus the Corporation’s 50% share of the Moa JV’s expenditures, which is accounted for using the equity method for
accounting purposes.
Combined spending on capital is the aggregate of each segment’s spending on capital or the Corporation’s consolidated property,
plant and equipment and intangible asset expenditures and the property, plant and equipment and intangible asset expenditures
of the Moa JV on a 50% basis, all adjusted to the accrual basis.
Combined spending on capital is used by management, and management believes this information is used by investors, to analyze
the Corporation and the Moa JV’s investments in non-current assets that are held for use in the production of nickel, cobalt,
fertilizers and power generation.
The tables below reconcile property, plant and equipment and intangible asset expenditures per the financial statements to
combined spending on capital, expressed in Canadian dollars:
$ millions, for the three months ended December 31
2024
Total
Adjustment
derived from
Combined
for Moa
financial
Metals
Power
Other(1)
total
Joint Venture
statements
Property, plant and equipment expenditures(2)
$
6.2 $
0.5 $
- $
6.7 $
(4.5) $
2.2
Intangible asset expenditures(2)
-
-
-
-
-
-
6.2
0.5
-
6.7 $
(4.5) $
2.2
Adjustments:
Accrual adjustment
5.1
(0.2)
0.1
5.0
Spending on capital
$
11.3 $
0.3 $
0.1 $
11.7
Sherritt International Corporation
69
$ millions, for the three months ended December 31
2023
Total
Adjustment
derived from
Combined
for Moa
financial
Metals
Power
Other(1)
total
Joint Venture
statements
Property, plant and equipment expenditures(2)
$
17.6 $
1.3 $
- $
18.9 $
(13.4) $
5.5
Intangible asset expenditures(2)
-
-
-
-
-
-
17.6
1.3
-
18.9 $
(13.4) $
5.5
Adjustments:
Accrual adjustment
3.7
-
(0.1)
3.6
Spending on capital
$
21.3 $
1.3 $
(0.1) $
22.5
$ millions, for the year ended December 31
2024
Total
Adjustment
derived from
Combined
for Moa
financial
Metals
Power
Other(1)
total
Joint Venture
statements
Property, plant and equipment expenditures(2)
$
34.0 $
2.9 $
- $
36.9 $
(30.3) $
6.6
Intangible asset expenditures(2)
-
-
0.2
0.2
-
0.2
34.0
2.9
0.2
37.1 $
(30.3) $
6.8
Adjustments:
Accrual adjustment
5.7
-
(0.1)
5.6
Spending on capital
$
39.7 $
2.9 $
0.1 $
42.7
$ millions, for the year ended December 31
2023
Total
Adjustment
derived from
Combined
for Moa
financial
Metals
Power
Other(1)
total
Joint Venture
statements
Property, plant and equipment expenditures(2)
$
57.0 $
3.2 $
0.2 $
60.4 $
(40.3) $
20.1
Intangible asset expenditures(2)
-
-
1.2
1.2
-
1.2
57.0
3.2
1.4
61.6 $
(40.3) $
21.3
Adjustments:
Accrual adjustment
5.7
-
(0.8)
4.9
Spending on capital
$
62.7 $
3.2 $
0.6 $
66.5
(1)
Includes property, plant and equipment and intangible asset expenditures of the Oil and Gas reportable segment, which is non-core, and the Corporate and Other
reportable segment.
(2)
Total property, plant and equipment expenditures and total intangible asset expenditures as presented in the Corporation’s consolidated statements of cash flow.
Combined cash provided (used) by continuing operations for operating activities and combined free cash
flow
The Corporation defines cash provided (used) by continuing operations for operating activities by segment as cash provided
(used) by continuing operations for operating activities for each segment calculated in accordance with IFRS Accounting
Standards and adjusted to remove the impact of cash provided (used) by wholly-owned subsidiaries. Combined cash provided
(used) by continuing operations for operating activities is the aggregate of each segment’s cash provided (used) by continuing
operations for operating activities including the Corporation’s 50% share of the Moa JV’s cash provided (used) by continuing
operations for operating activities, which is accounted for using the equity method of accounting and excluded from consolidated
cash provided (used) by continuing operations for operating activities.
The Corporation defines free cash flow for each segment as cash provided (used) by continuing operations for operating activities
by segment, less cash expenditures on property, plant and equipment and intangible assets, including exploration and evaluation
assets. Combined free cash flow is the aggregate of each segment’s free cash flow or the Corporation’s consolidated cash
provided (used) by continuing operations for operating activities, less consolidated cash expenditures on property, plant and
equipment and intangible assets, including exploration and evaluation assets, less distributions received from Moa JV, plus cash
provided (used) by continuing operations for operating activities for the Corporation’s 50% share of the Moa JV, less cash
expenditures on property, plant and equipment and intangible assets for the Corporation’s 50% share of the Moa JV.
Management’s discussion and analysis
70 Sherritt International Corporation
The Corporate and Other segment’s cash used by continuing operations for operating activities is adjusted to exclude distributions
received from Moa JV. Distributions from the Moa JV excluded from Corporate and Other are included in the Adjustment for Moa
Joint Venture to arrive at total cash provided (used) by continuing operations for operating activities per the financial statements.
The Metals segment’s free cash flow includes the Fort Site and Metals Marketing’s free cash flow, plus the Corporation’s 50%
share of the Moa JV’s free cash flow, which is accounted for using the equity method for accounting purposes.
Combined cash provided (used) by continuing operations for operating activities and combined free cash flow are used by
management, and management believes this information is used by investors, to analyze cash flows generated from operations
and assess its operations’ ability to provide cash or its use of cash, and in the case of combined free cash flow, after funding cash
capital requirements, to service current and future working capital needs and service debt.
The tables below reconcile combined cash provided (used) by continuing operations for operating activities to cash provided
(used) by continuing operations per the financial statements to combined free cash flow:
$ millions, for the three months ended December 31
2024
Total
Adjustment
derived
Corporate
for Moa
from
Oil and
and
Combined
Joint
financial
Metals(1)(2)
Power
Gas
Other
total
Venture
statements
Cash provided (used) by continuing operations
for operating activities
$
5.9 $
(1.1) $
(3.2) $
(15.1) $
(13.5) $
(8.0) $
(21.5)
Less:
Property, plant and equipment expenditures
(6.2)
(0.5)
-
-
(6.7)
4.5
(2.2)
Intangible expenditures
-
-
-
-
-
-
-
Free cash flow
$
(0.3) $
(1.6) $
(3.2) $
(15.1) $
(20.2) $
(3.5) $
(23.7)
$ millions, for the three months ended December 31
2023
(Restated)
Total
Adjustment
derived
Corporate
for Moa
from
Oil and
and
Combined
Joint
financial
Metals(1)(2)
Power
Gas
Other
total
Venture
statements
Cash provided (used) by continuing operations
for operating activities
$
3.4 $
7.4 $
(14.9) $
(16.1) $
(20.2) $
2.1 $
(18.1)
Less:
Property, plant and equipment expenditures
(17.6)
(1.3)
-
-
(18.9)
13.4
(5.5)
Intangible expenditures
-
-
-
-
-
-
-
Free cash flow
$
(14.2) $
6.1 $
(14.9) $
(16.1) $
(39.1) $
15.5 $
(23.6)
$ millions, for the year ended December 31
2024
Total
Adjustment
derived
Corporate
for Moa
from
Oil and
and
Combined
Joint
financial
Metals(3)(4)
Power
Gas
Other
total
Venture
statements
Cash provided (used) by continuing operations
for operating activities
$
93.1 $
(9.8) $
(23.9) $
(41.5) $
17.9 $
(43.8) $
(25.9)
Less:
Property, plant and equipment expenditures
(34.0)
(2.9)
-
-
(36.9)
30.3
(6.6)
Intangible expenditures
-
-
(0.2)
-
(0.2)
-
(0.2)
Free cash flow
$
59.1 $
(12.7) $
(24.1) $
(41.5) $
(19.2) $
(13.5) $
(32.7)
Sherritt International Corporation
71
$ millions, for the year ended December 31
2023
(Restated)
Total
Adjustment
derived
Corporate
for Moa
from
Oil and
and
Combined
Joint
financial
Metals(3)(4)
Power
Gas
Other
total
Venture
statements
Cash provided (used) by continuing operations
for operating activities
$
115.9 $
16.9 $
(11.1) $
(76.0) $
45.7 $
(17.5) $
28.2
Less:
Property, plant and equipment expenditures
(57.0)
(3.2)
(0.2)
-
(60.4)
40.3
(20.1)
Intangible expenditures
-
-
(1.2)
-
(1.2)
-
(1.2)
Free cash flow
$
58.9 $
13.7 $
(12.5) $
(76.0) $
(15.9) $
22.8 $
6.9
(1)
Cash provided by continuing operations for operating activities for the Moa JV, Fort Site and Metals Marketing was $19.9 million, $(12.1) million and $(1.9) million,
respectively, for the three months ended December 31, 2024 (December 31, 2023 - $(2.2) million, $4.0 million and $1.6 million, respectively).
(2)
Property, plant and equipment expenditures and intangible expenditures for the Moa JV, Fort Site and Metals Marketing was $4.3 million, $1.9 million and nil,
respectively, for the three months ended December 31, 2024 (December 31, 2023 - $13.5 million, $4.1 million and nil, respectively).
(3)
Cash provided by continuing operations for operating activities for the Moa JV, Fort Site and Metals Marketing was $55.7 million, $35.8 million and $1.6 million,
respectively, for the year ended December 31, 2024 (December 31, 2023 - $49.4 million, $(13.4) million and $79.9 million, respectively).
(4)
Property, plant and equipment expenditures and intangible expenditures for the Moa JV, Fort Site and Metals Marketing was $30.2 million, $3.8 million and nil,
respectively, for the year ended December 31, 2024 (December 31, 2023 - $40.3 million, $16.7 million and nil, respectively).
Management’s discussion and analysis
72 Sherritt International Corporation
FORWARD-LOOKING STATEMENTS
This MD&A 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”,
“potential”, “projected”, “continue” or other similar words or phrases. Specifically, forward-looking statements in this document include, but are
not limited to, statements regarding strategies, plans and estimated production amounts resulting from expansion of mining operations at the
Moa Joint Venture; growing and increasing nickel and cobalt production; the Moa Joint Venture expansion program update as it relates to the
Processing Plant; statements set out in the “Outlook” section of this MD&A; certain expectations regarding production volumes and increases,
inventory levels, operating costs, capital spending and intensity, including amount and timing of spending on tailings management, sales
volumes; revenue, costs and earnings; the availability of additional gas supplies to be used for power generation; the amount and timing of
dividend distributions from the Moa JV, including in the form of finished cobalt or cash under the Cobalt Swap; associated receipts related to
cobalt received pursuant to the Cobalt Swap; the amount and timing of dividend distributions from Energas; growing shareholder value; expected
annualized employee and other Corporate office-related cost savings; sufficiency of working capital management and capital project funding;
strengthening the Corporation’s capital structure and amounts of certain other commitments.
Forward-looking statements are not based on historical facts, but rather on current expectations, assumptions and projections about future
events, including commodity and product prices and demand; the level of liquidity and access to funding; share price volatility; production results;
realized prices for production; earnings and revenues; global demand for EVs and the anticipated corresponding demand for cobalt and nickel;
the commercialization of certain proprietary technologies and services; advancements in environmental and GHG reduction technology; GHG
emissions reduction goals and the anticipated timing of achieving such goals, if at all; statistics and metrics relating to ESG matters which are
based on assumptions or developing standards; environmental rehabilitation provisions; environmental risks and liabilities; compliance with
applicable environmental laws and regulations; risks related to the U.S. government policy toward Cuba; and certain corporate objectives, goals
and plans for 2025. 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 the
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 MD&A 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. These risks, uncertainties and other factors include, but are not limited to, security market fluctuations and price
volatility; level of liquidity and the related ability of the Moa Joint Venture to pay dividends; access to capital; access to financing; the risk to
Sherritt’s entitlements to future distributions (including pursuant to the Cobalt Swap) from the Moa Joint Venture, the impact of global conflicts;
changes in the global price for nickel, cobalt, fertilizers or certain other commodities; risks related to Sherritt’s operations in Cuba; risks related
to the U.S. government policy toward Cuba, including the U.S. embargo on Cuba and the Helms-Burton legislation; political, economic and other
risks of foreign operations; 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; risk of future non-compliance with debt restrictions and covenants;
risks related to environmental liabilities including liability for reclamation costs, tailings facility failures and toxic gas releases; compliance with
applicable environment, health and safety legislation and other associated matters; risks associated with governmental regulations regarding
climate change and greenhouse gas emissions; risks relating to community relations; maintaining social license to grow and operate; uncertainty
about the pace of technological advancements required in relation to achieving ESG targets; risks to information technologies systems and
cybersecurity; risks associated with the operation of large projects generally; risks related to the accuracy of capital and operating cost estimates;
the possibility of equipment and other failure; potential interruptions in transportation; identification and management of growth opportunities;
the ability to replace depleted mineral reserves; risks associated with the Corporation’s joint venture partners; variability in production at Sherritt’s
operations in Cuba; risks associated with mining, processing and refining activities; uncertainty of gas supply for electrical generation; reliance
on key personnel and skilled workers; growth opportunity risks; uncertainty of resources and reserve estimates; the potential for shortages of
equipment and supplies, including diesel; supplies quality issues; risks related to the Corporation’s corporate structure; foreign exchange and
pricing risks; credit risks; shortage of equipment and supplies; competition in product markets; future market access; interest rate changes; risks
in obtaining insurance; uncertainties in labour relations; legal contingencies; risks related to the Corporation’s accounting policies; uncertainty
in the ability of the Corporation to obtain government permits; failure to comply with, or changes to, applicable government regulations; bribery
and corruption risks, including failure to comply with the Corruption of Foreign Public Officials Act or applicable local anti-corruption law; the
ability to accomplish corporate objectives, goals and plans for 2025; and the ability to meet other factors listed from time to time in the
Corporation’s continuous disclosure documents.
Sherritt International Corporation
73
The Corporation, together with its Moa Joint Venture is pursuing a range of growth and expansion opportunities, including without limitation,
process technology solutions, development projects, commercial implementation opportunities, life of mine extension opportunities and the
conversion of mineral resources to reserves. In addition to the risks noted above, factors that could, alone or in combination, prevent the
Corporation from successfully achieving these opportunities may include, without limitation: identifying suitable commercialization and other
partners; successfully advancing discussions and successfully concluding applicable agreements with external parties and/or partners;
successfully attracting required financing; successfully developing and proving technology required for the potential opportunity; successfully
overcoming technical and technological challenges; successful environmental assessment and stakeholder engagement; successfully obtaining
intellectual property protection; successfully completing test work and engineering studies, prefeasibility and feasibility studies, piloting, scaling
from small scale to large scale production, procurement, construction, commissioning, ramp-up to commercial scale production and completion;
and securing regulatory and government approvals. There can be no assurance that any opportunity will be successful, commercially viable,
completed on time or on budget, or will generate any meaningful revenues, savings or earnings, as the case may be, for the Corporation. In
addition, the Corporation will incur costs in pursuing any particular opportunity, which may be significant. 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, including without limitation the Annual Information Form of the Corporation dated March
21, 2024 for the period ending December 31, 2023, which is available on SEDAR+ at www.sedarplus.ca.
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 MD&A and in the Corporation’s other documents filed with the Canadian securities authorities 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 MD&A 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.
74 Sherritt International Corporation
CONSOLIDATED FINANCIAL
STATEMENTS
As at and for the years ended December 31, 2024 and 2023
CONSOLIDATED FINANCIAL STATEMENTS
Management’s report
75
Independent auditor’s report
76
Consolidated statements of comprehensive loss
80
Consolidated statements of financial position
81
Consolidated statements of cash flow
82
Consolidated statements of changes in shareholders’ equity
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Nature of operations and corporate information
84
Note 2 – Basis of presentation and material accounting policies
84
Note 3 – Critical accounting estimates and judgments
96
Note 4 – Accounting pronouncements
98
Note 5 – Segmented information
99
Note 6 – Expenses
103
Note 7 – Joint arrangements
104
Note 8 – Net finance expense
106
Note 9 – Income taxes
106
Note 10 – Loss per share
108
Note 11 – Financial instruments
108
Note 12 – Advances, loans receivable and other financial assets
111
Note 13 – Inventories
112
Note 14 – Non-financial assets
113
Note 15 – Loans, borrowings and other financial liabilities
115
Note 16 – Provisions, guarantees and contingencies
118
Note 17 – Share-based compensation plans
119
Note 18 – Commitments for expenditures
122
Note 19 – Supplemental cash flow information
123
Note 20 – Shareholders’ equity
123
Note 21 – Financial risk and capital risk management
124
Note 22 – Related party transactions
128
Sherritt International Corporation 75
Management’s report
The accompanying consolidated financial statements are the responsibility of Sherritt International Corporation’s (“Sherritt” or
the “Corporation”) management. They have been prepared in accordance with IFRS® Accounting Standards as issued by the
International Accounting Standards Board (“IASB”) and include amounts based on estimates and judgments. Management has
determined such amounts on a reasonable basis in order to ensure that the consolidated financial statements are presented
fairly, in all material respects.
Management has developed and maintains a system of internal control to provide reasonable assurance that the Corporation’s
assets are safeguarded, transactions are authorized and the consolidated financial statements are complete and accurate.
The consolidated financial statements are approved by the Board of Directors on the recommendation of the Audit Committee.
The Audit Committee of the Board of Directors is composed entirely of independent directors. Sherritt’s consolidated financial
statements are reviewed by the Audit Committee with management before the consolidated financial statements are approved
by the Board of Directors. In addition, the Audit Committee has the duty to review the accounting principles and practices applied
and followed by the Corporation during the fiscal year, including critical accounting policies and significant estimates and
judgments underlying the consolidated financial statements as presented by management.
Deloitte LLP (“Deloitte”) performs an audit of the consolidated financial statements, the results of which are reflected in their
independent auditor’s report for 2024 included on the next page. Deloitte has full and independent access to the Audit Committee
to discuss their audit and related matters. In addition, Sherritt has an internal audit function that evaluates and formally reports
to management and the Audit Committee on the adequacy and effectiveness of internal controls specified in the approved annual
internal audit plan.
/s/ Leon Binedell
/s/ Yasmin Gabriel
Leon Binedell
President and Chief Executive Officer
Yasmin Gabriel
Chief Financial Officer
February 5, 2025
Independent Auditor's Report
To the Shareholders and the Board of Directors of Sherritt International Corporation
Opinion
We have audited the consolidated financial statements of Sherritt International Corporation
(the "Corporation"), which comprise the consolidated statements of financial position as at December 31,
2024 and December 31, 2023, and the consolidated statements of comprehensive loss, changes in
shareholders’ equity and cash flow for the years then ended, and notes to the consolidated financial
statements, including material accounting policy information (collectively referred to as the
"financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial
position of the Corporation as at December 31, 2024, and December 31, 2023, and its financial
performance and its cash flows for the years then ended in accordance with IFRS Accounting Standards as
issued by the International Accounting Standards Board (“IASB”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards
("Canadian GAAS"). Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are
independent of the Corporation in accordance with the ethical requirements that are relevant to our
audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2024. These matters
were addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
Measurement of the Recoverable Amount of the Metals Cash-Generating Unit (“CGU”) – Refer to
Notes 2, 3 and 14 of the Financial Statements
Key Audit Matter Description
The Corporation determined that an impairment loss indicator existed as at December 31, 2024 at the
Metals CGU. As a result, the Corporation estimated the recoverable amount which is determined based
on the higher of value in use and fair value less costs of disposal using a discounted cash flow model. The
recoverable amount for the Metals CGU exceeded its carrying value as of the measurement date and,
therefore, no impairment loss was recognized.
Deloitte LLP
Bay Adelaide East
8 Adelaide Street West
Suite 200
Toronto ON M5H 0A9
Canada
Tel: 416-601-6150
Fax: 416-601-6151
www.deloitte.ca
While there are several inputs that are required to determine the recoverable amount for the Metals
CGU, the estimates and assumptions with the highest degree of subjectivity and judgment are future
commodity prices (nickel and cobalt) and the discount rate. Auditing these estimates and assumptions
required a high degree of subjectivity in applying audit procedures and in evaluating the results of those
procedures. This resulted in an increased extent of audit effort, including the involvement of valuation
specialists.
How the Key Audit Matter Was Addressed in the Audit
With the assistance of valuation specialists, our audit procedures related to future commodity price
(nickel and cobalt) and the discount rate used to determine the recoverable amount of the Metals CGU
included the following, among others:
•
Evaluated the reasonableness of future commodity prices by comparing management’s forecasts to
third-party forecasts;
•
Assessed the discount rate used, by testing the source information underlying the determination of
the discount rate and developing a range of independent estimates and compared it to the discount
rate selected by management.
Measurement of the GNC Receivable and Energas Payable – Refer to Notes 2, 8, 11, 12 and 15 of
the Financial Statements
Key Audit Matter Description
In 2023, the Corporation entered into an agreement to settle its total outstanding Cuban receivables and
as a result of the transaction the Corporation recorded a financial asset (“GNC receivable”) and a financial
liability (“Energas payable”) which are classified at fair value through profit or loss and measured at fair
value. The fair value of the financial asset and the financial liability are estimated at each reporting date
using a Monte Carlo simulation model which requires management to make significant estimates and
assumptions related to forecasted in-kind cobalt prices and discount rates.
While there are several inputs required to determine the fair value of the financial asset and the financial
liability, the estimates and assumptions with the highest degree of subjectivity and judgment uncertainty
relate to the forecasted in-kind cobalt prices and discount rates. Auditing these assumptions and
estimates resulted in an increased extent of audit effort, including the involvement of our valuation
specialists.
How the Key Audit Matter Was Addressed in the Audit
With the assistance of our valuation specialists, our audit procedures related to the forecasted in-kind
cobalt prices and discount rates, included the following, among others:
•
Evaluated the reasonableness of the forecasted in-kind cobalt prices by comparing management’s
forecasts to third-party information and testing the source information underlying the determination
of the forecasted in-kind cobalt prices;
•
Evaluated the reasonableness of the discount rates by testing the source information underlying the
determination of the discount rates and developing a range of independent estimates for the
discount rates and comparing those to the discount rates selected by management.
Other Information
Management is responsible for the other information. The other information comprises:
•
Management's Discussion and Analysis
•
The information, other than the financial statements and our auditor’s report thereon, in the Annual
Report.
Our opinion on the financial statements does not cover the other information and we do not and will not
express any form of assurance conclusion thereon. In connection with our audit of the financial
statements, our responsibility is to read the other information identified above and, in doing so, consider
whether the other information is materially inconsistent with the financial statements, or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
We obtained Management’s Discussion and Analysis prior to the date of this auditor’s report. If, based on
the work we have performed on this other information, we conclude that there is a material
misstatement of this other information, we are required to report that fact in this auditor’s report. We
have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor's report. If, based
on the work we will perform on this other information, we conclude that there is a material misstatement
of this other information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the
Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with IFRS Accounting Standards as issued by the IASB, and for such internal control as
management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Corporation’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless management either intends to liquidate the Corporation or to
cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Corporation's financial reporting
process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Corporation’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
•
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Corporation’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Corporation to cease to
continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in
a manner that achieves fair presentation.
•
Plan and perform the group audit to obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business units within the Corporation as a basis for forming an
opinion on the financial statements. We are responsible for the direction, supervision and review of
the audit work performed for purposes of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor's report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
The engagement partner on the audit resulting in this independent auditor’s report is Antonio Ciciretto.
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
February 5, 2025
Toronto, Ontario
Consolidated financial statements
80 Sherritt International Corporation
Consolidated statements of comprehensive loss
Canadian $ millions, except per share amounts, for the years ended December 31
Note
2024
2023
Revenue
5 $
158.8 $
223.3
Cost of sales
6
(138.5)
(265.5)
Administrative expenses
6
(36.7)
(23.1)
Impairment of intangible assets
14
(8.4)
-
Share of (loss) earnings of Moa Joint Venture, net of tax
7
(18.7)
21.9
Loss from operations and joint venture
(43.5)
(43.4)
Interest income on financial assets measured at amortized cost
8
1.7
0.8
Other financing items
8
11.8
17.0
Financing expense
8
(40.5)
(36.5)
Net finance expense
(27.0)
(18.7)
Loss before income tax
(70.5)
(62.1)
Income tax expense
9
(2.6)
(2.2)
Net loss from continuing operations
(73.1)
(64.3)
Earnings (loss) from discontinued operations, net of tax
0.3
(0.3)
Net loss for the year
$
(72.8) $
(64.6)
Other comprehensive income (loss)
Items that may be subsequently reclassified to profit or loss:
Foreign currency translation differences on foreign operations, net of
tax (nil and nil, respectively)
20
56.0
(17.2)
Items that will not be subsequently reclassified to profit or loss:
Actuarial losses on pension plans, net of tax (nil and nil,
respectively)
20
(0.2)
(0.2)
Other comprehensive income (loss)
55.8
(17.4)
Total comprehensive loss
$
(17.0) $
(82.0)
Net loss from continuing operations per common share:
Basic and diluted
10 $
(0.18) $
(0.16)
Net loss per common share:
Basic and diluted
10 $
(0.18) $
(0.16)
The accompanying notes are an integral part of these consolidated financial statements.
Sherritt International Corporation 81
Consolidated statements of financial position
2024
2023
Canadian $ millions, as at
Note
December 31
December 31
ASSETS
Current assets
Cash and cash equivalents
11
$
145.7
$
119.1
Restricted cash
1.4
1.4
Advances, loans receivable and other financial assets
12
33.6
79.8
Trade accounts receivable, net
11
151.4
151.1
Inventories
13
43.3
39.8
Prepaid expenses
9.4
7.8
384.8
399.0
Non-current assets
Investment in Moa Joint Venture
7
665.4
646.7
Advances, loans receivable and other financial assets
12
171.6
170.2
Property, plant and equipment
14
152.1
159.2
Intangible assets
14
7.1
14.5
Other non-financial assets
0.7
0.6
Deferred income taxes
9
1.1
0.4
998.0
991.6
Total assets
$
1,382.8
$
1,390.6
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Loans and borrowings
15
$
67.2
$
56.8
Trade accounts payable and accrued liabilities
172.5
169.2
Other financial liabilities
15
34.9
22.5
Deferred revenue
11.9
12.2
Provisions
16
4.8
24.4
Income taxes payable
1.7
2.2
293.0
287.3
Non-current liabilities
Loans and borrowings
15
305.3
298.8
Other financial liabilities
15
72.3
74.6
Other non-financial liabilities
9.2
12.1
Provisions
16
104.7
103.6
Deferred income taxes
9
0.9
0.6
492.4
489.7
Total liabilities
785.4
777.0
Shareholders’ equity
Capital stock
20
2,894.9
2,894.9
Deficit
(2,972.4)
(2,899.6)
Reserves
20
234.9
234.1
Accumulated other comprehensive income
20
440.0
384.2
597.4
613.6
Total liabilities and shareholders’ equity
$
1,382.8
$
1,390.6
Commitments for expenditures (note 18)
The accompanying notes are an integral part of these consolidated financial statements.
Approved by the Board of Directors on February 5, 2025,
/s/ Shelley Brown
/s/ Sir Richard Lapthorne
Shelley Brown
Sir Richard Lapthorne
Director
Director
Consolidated financial statements
82 Sherritt International Corporation
Consolidated statements of cash flow
Canadian $ millions, for the years ended December 31
Note
2024
2023
Operating activities
Net loss from continuing operations
$
(73.1) $
(64.3)
Add (deduct) non-cash items:
Finished cobalt cost of sales
6
2.2
86.1
Depletion, depreciation and amortization
5, 6
14.0
14.3
Share-based compensation expense (recovery)
17, 6
0.3
(1.5)
Share of loss (earnings) of Moa Joint Venture, net of tax
7
18.7
(21.9)
Impairment of intangible assets
14
8.4
-
Inventory write-down/obsolescence
6
1.0
9.8
Net finance expense
8
27.0
18.7
Income tax expense
9
2.6
2.2
Loss on environmental rehabilitation provisions
6
8.2
22.9
Net change in non-cash working capital
19
1.4
(93.6)
Interest received
5.0
2.8
Interest paid
19
(25.9)
(28.3)
Income taxes paid
(3.8)
(1.1)
Proceeds from Cobalt Swap
5
1.1
80.3
Distributions received from Moa Joint Venture – Cobalt Swap
7, 19
11.9
32.0
Share-based compensation payments
17
(3.0)
(24.9)
Liabilities settled for environmental rehabilitation provisions
16
(27.2)
(5.9)
Net proceeds from nickel put options
12
5.9
-
Other operating items
(0.6)
0.6
Cash (used) provided by continuing operations
(25.9)
28.2
Cash used by discontinued operations
(0.2)
(0.9)
Cash (used) provided by operating activities
(26.1)
27.3
Investing activities
Property, plant and equipment expenditures
5
(6.6)
(20.1)
Intangible asset expenditures
5
(0.2)
(1.2)
Receipts of (increase in) Moa JV revolving-term credit facility
12
30.0
(30.0)
Receipts of GNC receivable
11.9
32.0
Receipts of other advances, loans receivable and other financial assets
1.0
0.9
Cash provided (used) by investing activities
36.1
(18.4)
Financing activities
Repurchase of notes
15
(1.9)
(7.8)
Increase in loans and borrowings
15
11.0
13.0
Repayment of other financial liabilities
(2.0)
(16.8)
Fees paid on repurchase of notes
-
(0.1)
Cash provided (used) by financing activities
7.1
(11.7)
Effect of exchange rate changes on cash and cash equivalents
9.5
(2.0)
Increase (decrease) in cash and cash equivalents
26.6
(4.8)
Cash and cash equivalents at beginning of the year
119.1
123.9
Cash and cash equivalents at end of the year
11 $
145.7 $
119.1
The accompanying notes are an integral part of these consolidated financial statements.
Sherritt International Corporation 83
Consolidated statements of changes in
shareholders’ equity
Canadian $ millions
Accumulated
other
Capital
comprehensive
Note
stock
Deficit
Reserves
income
Total
Balance as at December 31, 2022
$
2,894.9 $
(2,835.0) $
233.4 $
401.6 $
694.9
Total comprehensive loss:
Net loss for the year
-
(64.6)
-
-
(64.6)
Foreign currency translation differences on foreign operations,
net of tax
20
-
-
-
(17.2)
(17.2)
Actuarial losses on pension plans, net of tax
20
-
-
-
(0.2)
(0.2)
-
(64.6)
-
(17.4)
(82.0)
Stock option plan expense
20, 17
-
-
0.7
-
0.7
Balance as at December 31, 2023
2,894.9
(2,899.6)
234.1
384.2
613.6
Total comprehensive loss:
Net loss for the year
-
(72.8)
-
-
(72.8)
Foreign currency translation differences on foreign operations,
net of tax
20
-
-
-
56.0
56.0
Actuarial losses on pension plans, net of tax
20
-
-
-
(0.2)
(0.2)
-
(72.8)
-
55.8
(17.0)
Stock option plan expense
20, 17
-
-
0.8
-
0.8
Balance as at December 31, 2024
$
2,894.9 $
(2,972.4) $
234.9 $
440.0 $
597.4
The accompanying notes are an integral part of these consolidated financial statements.
Notes to the consolidated financial statements
84 Sherritt International Corporation
Notes to the consolidated financial statements
(All dollar amounts presented in tables are expressed in millions of Canadian dollars except share and per share amounts)
1. NATURE OF OPERATIONS AND CORPORATE INFORMATION
Sherritt International Corporation (“Sherritt” or “the Corporation”) is a world leader in using hydrometallurgical processes to mine
and refine nickel and cobalt – metals deemed critical for the energy transition. Sherritt’s Moa Joint Venture has an estimated
mine life of approximately 25 years and is advancing an expansion program focused on increasing annual mixed sulphide
precipitate production by 20% of contained nickel and cobalt. The Corporation’s Power division, through its ownership in Energas
S.A. (“Energas”), is the largest independent energy producer in Cuba with installed electrical generating capacity of 506 MW,
representing approximately 10% of the national electrical generating capacity in Cuba. The Energas facilities are comprised of
two combined cycle plants that produce low-cost electricity from one of the lowest carbon emitting sources of power in Cuba.
The Corporation is domiciled in Ontario, Canada and its registered office is 22 Adelaide Street West, Toronto, Ontario, M5H
4E3. These consolidated financial statements were approved and authorized for issuance by the Board of Directors of Sherritt
on February 5, 2025. The Corporation is listed on the Toronto Stock Exchange under the symbol “S”.
2. BASIS OF PRESENTATION AND MATERIAL ACCOUNTING POLICIES
2.1 Basis of presentation
The consolidated financial statements of the Corporation are prepared in accordance with IFRS Accounting Standards, as issued
by the IASB. All financial information is presented in millions of Canadian dollars rounded to the nearest hundred thousand,
except as otherwise noted. References to “US$” are to United States (U.S.) dollars and to “€” are to euro.
The consolidated financial statements are prepared on a going concern basis, under the historical cost convention, except for
certain financial assets and liabilities and cash-settled share-based payments, which have been measured at fair value. The
going concern basis assumes that the Corporation will continue in operation for the foreseeable future and will be able to realize
its assets and discharge its liabilities and commitments in the normal course of business.
The Corporation has consistently applied the same accounting policies and methods of computation to all periods presented.
2.2 Principles of consolidation
These consolidated financial statements include the financial position, financial performance and cash flows of the Corporation,
its subsidiaries, its interest in a joint venture and its share of assets, liabilities, revenues and expenses related to its interest in a
joint operation. Intercompany balances, transactions, income and expenses, profits and losses, including gains and losses
relating to subsidiaries and a joint operation have been eliminated on consolidation.
Sherritt International Corporation
85
The Corporation’s significant subsidiaries and joint arrangements are as follows:
Economic
Basis of
Relationship
interest
accounting
Moa Joint Venture ("Moa JV")
Joint venture
50%
Equity method
Composed of the following operating companies:
Moa Nickel S.A.
The Cobalt Refinery Company Inc.
International Cobalt Company Inc.
Power
Energas
Joint operation
33⅓%
Share of assets, liabilities,
revenues and expenses
Oil and Gas
Composed of the following operating companies:
SICOG Oil and Gas Ltd.
Subsidiary
100%
Consolidation
Sherritt International Oil and Gas Ltd.
Subsidiary
100%
Consolidation
The Fort Site operations (“Fort Site”) and Corporate head office and technical support (“Corporate and Other”) are a part of
Sherritt International Corporation, the parent company, and are not separate legal entities.
Subsidiaries
Subsidiaries are entities over which the Corporation has control. Control is defined as when the Corporation has power over
the investee, is exposed or has rights to the variable returns from the investee and has the ability to use power over the investee
to affect the amount of those returns. Power is defined as existing rights that give the Corporation the ability to direct the relevant
activities of the subsidiary. Subsidiaries are fully consolidated from the date control is transferred to the Corporation and are de-
consolidated from the date control ceases.
Joint arrangements
A joint arrangement is an arrangement whereby two or more parties have joint control. Joint control is considered to be when
all parties to the joint arrangement, which share control, are required to reach unanimous consent over decisions about relevant
business activities pertaining to the contractual arrangement. The Corporation has two types of joint arrangements: a joint
venture and a joint operation.
2.3 Foreign currency translation
The consolidated financial statements are presented in Canadian dollars, the Corporation’s functional and presentation currency.
The functional currency of Moa Nickel S.A., International Cobalt Company Inc., SICOG Oil and Gas Ltd. and Energas is U.S.
dollars, while the functional currency of The Cobalt Refinery Company Inc. and Sherritt International Oil and Gas Ltd. is Canadian
dollars.
Translation of foreign entities
The functional currency for each of the Corporation’s subsidiaries and joint arrangements is the currency of the primary economic
environment in which it operates. Operations with foreign functional currencies are translated into the Corporation’s presentation
currency in the following manner:
Monetary and non-monetary assets and liabilities are translated at the spot exchange rate in effect at the reporting
date;
Revenue and expense items (including depletion, depreciation and amortization) are translated at the average rates of
exchange prevailing during the period, which approximate the exchange rates on the transaction dates;
Impairment of assets are translated at the prevailing rate of exchange on the date of the impairment recognition; and
Exchange gains and losses that result from translation are recognized as foreign currency translation differences on
foreign operations in accumulated other comprehensive income.
Notes to the consolidated financial statements
86 Sherritt International Corporation
Translation of transactions and balances
Operations with transactions in currencies other than the entity’s functional currency are recognized at the rates of exchange
prevailing at the date of the transaction as follows:
Monetary assets and liabilities are translated at current rates of exchange with the resulting gains or losses recognized
within financing expense in the consolidated statements of comprehensive income/loss;
Non-monetary items are translated at historical exchange rates; and
Revenue and expense items are translated at the average rates of exchange prevailing during the period, except
depletion, depreciation and amortization, which are translated at the rates of exchange applicable to the related assets,
with any gains or losses recognized within financing expense in the consolidated statements of comprehensive
income/loss.
2.4 Consolidated statements of cash flow
The Corporation presents the consolidated statements of cash flow using the indirect method. The Corporation presents interest
received and interest paid as operating activities in the consolidated statements of cash flow. Dividends paid are presented as
a financing activity, while distributions received from the Moa JV are presented as an operating activity in the consolidated
statements of cash flow.
2.5 Segmented information
The accounting policies of the segments are the same as those described throughout the notes to the financial statements and
are measured in a manner consistent with that of the consolidated financial statements.
Reportable segments
The Corporation has determined the following to be reportable segments based on qualitative and quantitative considerations
discussed within the critical accounting estimates and judgments section below:
The Metals segment is composed of mining, processing and refining activities of nickel and cobalt for the Corporation’s
50% interest in the Moa JV in Cuba and Canada, which is accounted for using the equity method of accounting; the
production and sale of agricultural fertilizers for its 100% interest in the utility and fertilizer operations of the Fort Site in
Fort Saskatchewan; and the Corporation’s wholly-owned subsidiaries established to buy, market and sell certain of the
Moa JV’s nickel and cobalt production and the Corporation’s cobalt inventories received under the Cobalt Swap
agreement (the “Cobalt Swap”). Costs incurred to support and enhance Metals’ operations and business development
were recognized within the Metals reportable segment during the year ended December 31, 2024. In the comparative
period, those costs were recognized within the former Technologies reportable segment;
The Power segment represents the power operations in Cuba, including the Corporation’s one-third interest in Energas,
which operate power generation facilities that provide electricity in Cuba;
The Oil and Gas segment is not currently producing or exploring for oil and gas in Cuba and its financial results relate
to ancillary drilling services, provided to a customer and agencies of the Government of Cuba, and environmental
rehabilitation costs for legacy assets in Spain, which are non-core operating activities of the Corporation. The wells
drilled for agencies of the Government of Cuba provide gas to Energas for power generation; and
The Corporate and Other segment represents the Corporate head office, which provides overall management of the
Corporation’s joint operations and subsidiaries and general corporate activities related to public companies, including
business development, management of cash, publicly-traded debt and government relations, external technical
services to third parties and growth and market development activities including early-stage test work and engineering
expenses.
Sherritt International Corporation
87
2.6 Revenue recognition
Revenue from the sale of goods and services is recognized when the Corporation transfers control of the good or service to the
customer, reflecting the amount of consideration to which the Corporation expects to be entitled in exchange for those goods or
services. Control generally transfers to the customer upon shipment or delivery to the destination, as specified in the sales
contract.
Metals
Consolidated revenue excludes the revenue of the equity-accounted investment in the Moa JV. The Corporation recognizes its
share of revenue of the Moa JV within the share of earnings/loss of Moa Joint Venture, net of tax in the consolidated statements
of comprehensive income/loss.
Certain nickel and cobalt sales in the Metals reportable segment are provisionally priced, with the selling price subject to final
adjustment at the end of a quotation period, in accordance with the terms of the sale. The quotation period is normally within 90
days after shipment to the customer, and final pricing is based on a reference price established at the end of the quotation
period. Payment terms for nickel and cobalt are typically 30 to 60 days from the date of invoice.
Revenue from provisionally priced sales is initially recorded at the estimated fair value of the consideration that is expected to
be ultimately received based on forecast reference prices. At each reporting date, all outstanding receivables originating from
provisionally priced sales are revalued based on forecast reference prices at that time. The adjustment to trade accounts
receivable, net, is recorded as an adjustment to revenue. Provisional pricing is only used in the pricing of nickel and cobalt sales
for which reference prices are established in a freely traded and active market.
Payment for fertilizer sales at Fort Site is generally received before shipment and recognized as deferred revenue until shipment.
Power
All of Power’s revenue is from agencies of the Government of Cuba.
The power generation facilities located in Boca de Jaruco and Puerto Escondido, Cuba operate under a service concession
arrangement. Revenue from Power on operational facilities is recognized at the time electricity is delivered or services are
performed. The consideration to be received is subject to variability as the quantity of power to be generated is not fixed and
the rate for the power generated declines once construction costs are repaid. Management estimates the transaction price
based on expected power generation and the forecast repayment schedule for construction costs and reassesses this estimate
each reporting period.
Payment terms for electricity and by-product sales to agencies of the Government of Cuba are 60 days from the date of invoice.
Oil and Gas
Oil and Gas service revenue is recognized at the time that drilling services and equipment are provided to the customer and the
payment terms are 30 days from the date of invoice.
2.7 Joint arrangements
Investment in Moa JV
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint
control and whereby each party has rights to the net assets of the arrangement. The Moa JV is recognized as an investment in
a joint venture and accounted for using the equity method of accounting as follows:
The Corporation recognizes its share of earnings/loss, net of tax in the consolidated statements of comprehensive
income/loss, which is adjusted against the carrying amount of its interest in a joint venture;
If the Corporation’s share of losses equals or exceeds the carrying amount of its investment in joint venture in the
future, the Corporation does not recognize further losses, unless it has incurred obligations or made payments on behalf
of the entity;
Revenue/expenses and gains/losses on transactions between the Corporation and its joint venture are eliminated to
the extent of the Corporation’s interest in this entity. Losses are eliminated only to the extent that there is no evidence
of impairment; and
Interest income on a loan receivable from a joint venture is recognized to the extent of Sherritt’s economic interest.
Notes to the consolidated financial statements
88 Sherritt International Corporation
Joint operation
A joint operation is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint
control and whereby each party has rights to the assets and obligations for liabilities relating to the arrangement. Energas is
recognized as a joint operation and is accounted for by recognizing the Corporation’s share of its assets, liabilities, revenues
and expenses.
Assessment for impairment of the investment in Moa Joint Venture
At each reporting date, the Corporation assesses whether there is any indication that the carrying amount of the Corporation’s
investment in Moa Joint Venture may be impaired. The Moa Joint Venture is included in the Metals cash-generating unit (“CGU”),
which is assessed for impairment as detailed within the Assessment for impairment of non-financial assets section of note 2.11
– Non-financial assets, below.
The investment is impaired if, and only if, there is objective evidence of impairment as a result of one or more loss events and
that loss event (or events) has an impact on the estimated future cash flows from the investment that can be reliably estimated.
Objective evidence that the investment is impaired includes observable data that comes to the attention of the entity about the
following loss events: (a) significant financial difficulty of the joint venture; (b) a breach of contract, such as a default or
delinquency in payments by the joint venture; (c) the entity, for economic or legal reasons relating to its joint venture’s financial
difficulty, granting to the joint venture a concession that the entity would not otherwise consider; (d) it becoming probable that
the joint venture will enter bankruptcy or other financial reorganization; or (e) the disappearance of an active market for the
investment because of financial difficulties of the joint venture.
In addition to the loss events noted above, objective evidence of impairment for the investment in Moa Joint Venture includes
information about significant changes with an adverse effect that have taken place in the technological, market, economic or
legal environment in which the Moa Joint Venture operates and indicates that the cost of the investment may not be recovered.
A significant or prolonged decline in the fair value of the Moa Joint Venture below its cost is also objective evidence of impairment.
If there is objective evidence of impairment, then the impairment test applied follows the principles of impairment for non-financial
assets described in note 2.11 by comparing its recoverable amount (higher of value in use and fair value less costs of disposal)
with its carrying amount. In determining the value in use of the investment in Moa Joint Venture, the Corporation estimates: (a)
its share of the present value of the estimated future cash flows expected to be generated by the Moa Joint Venture, including
the cash flows from the operations of the Moa Joint Venture and the proceeds from the ultimate disposal of the investment; or
(b) the present value of the estimated future cash flows expected to arise from dividends to be received from the investment and
from its ultimate disposal.
2.8 Income taxes
The income tax expense or recovery for the reporting period consists of two components: current and deferred taxes.
The current income tax payable or recoverable is calculated using the tax rates and legislation that have been enacted or
substantively enacted at each reporting date in each of the jurisdictions and includes any adjustments for taxes payable or
recoverable in respect of prior periods.
Current tax assets and liabilities are offset when they relate to the same jurisdiction, the entity has a legally enforceable right to
offset and intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously.
Deferred tax assets and liabilities are determined using the statement of financial position liability method based on temporary
differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. In
calculating the deferred tax assets and liabilities, the tax rates used are those that have been enacted or substantively enacted
at each reporting date in each of the jurisdictions and that are expected to apply when the assets are recovered or the liabilities
are settled. Deferred income tax assets and liabilities are presented as non-current.
Deferred tax liabilities are recognized on all taxable temporary differences, and deferred tax assets are recognized on all
deductible temporary differences, carryforward of unused tax losses and carryforward of unused tax credits, with the exception
of the following items:
Temporary differences associated with investments in subsidiaries and interests in joint ventures where the Corporation
is able to control the timing of the reversal of temporary differences and such reversals are not probable in the
foreseeable future;
Sherritt International Corporation
89
Temporary differences that arise on the initial recognition of assets and liabilities in a transaction that is not a business
combination and has no impact on either accounting profit or taxable profit; and
Deferred tax assets are only recognized to the extent that it is probable that sufficient taxable profits exist in future
periods against which the deductible temporary differences can be utilized. The probability that sufficient taxable profits
exist in future periods against which the deferred tax assets can be utilized is reassessed at each reporting date. The
amount of deferred tax assets recognized is adjusted accordingly.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities when they relate to income taxes levied by the same taxation authority on the same taxable entity and when the
Corporation has the legal right to offset them.
Current and deferred taxes that relate to items recognized directly in equity are also recognized in equity. All other taxes are
recognized in income tax expense in the consolidated statements of comprehensive income/loss.
2.9 Financial instruments
Classification and measurement of financial instruments
Management determines the classification of financial assets and financial liabilities at initial recognition and, except in limited
circumstances, the classification is not changed subsequent to initial recognition. The classification of financial assets is based
on the Corporation’s business models for managing these financial assets and their contractual cash flow characteristics.
Transaction costs with respect to financial instruments not classified as fair value through profit or loss are recognized as an
adjustment to the cost of the underlying instruments and amortized using the effective interest method.
The Corporation’s financial assets are classified into one of the following three measurement categories:
Financial assets held within a business model for the purpose of collecting contractual cash flows (“held to collect”)
that represent solely payments of principal and interest (“SPPI”) are measured at amortized cost.
Financial assets held within a business model where assets are both held for the purpose of collecting contractual
cash flows or sold prior to maturity and the contractual cash flows represent SPPI are measured at fair value through
other comprehensive income/loss (“FVOCI”).
Financial assets held within another business model or assets that do not have contractual cash flow characteristics
that are SPPI will be measured at fair value through profit or loss (“FVTPL”).
The Corporation’s financial liabilities are measured at amortized cost, except for financial liabilities subsequently measured or
designated at FVTPL.
Financial assets measured at amortized cost:
Cash held in banks; restricted cash; advances, loans receivable and other financial assets, except for the General
Nickel Company (“GNC”) receivable, noted below; trade accounts receivable, net
Financial assets measured at FVOCI:
Cash equivalents
Financial assets measured at FVTPL:
GNC receivable, nickel put options and natural gas swap receivable
Financial liabilities designated at FVTPL:
Energas payable
Financial liabilities measured at amortized cost:
Trade accounts payable and accrued liabilities; loans and borrowings
Financial assets and liabilities, measured at amortized cost
Financial assets and liabilities included in this category are initially recognized at fair value (net of transaction costs, if applicable)
and are subsequently measured at amortized cost using the effective interest method less allowances for expected credit losses
(“ACL”).
Notes to the consolidated financial statements
90 Sherritt International Corporation
Financial assets measured at fair value through other comprehensive income/loss
Financial assets included in this category are initially recognized at fair value and transaction costs are recognized in net
earnings/loss. Subsequent to initial recognition, unrealized gains and losses on these instruments are recognized in other
comprehensive income/loss. Upon derecognition, realized gains and losses are reclassified from other comprehensive
income/loss and recognized in net earnings/loss. Interest income and dividends from these instruments are recognized in net
earnings/loss.
Financial assets and liabilities measured at fair value through profit or loss
Financial instruments included in this category are initially recognized at fair value and transaction costs are recognized in net
earnings/loss, along with gains and losses arising from changes in fair value.
Derivative instruments are recorded at fair value unless exempted from derivative treatment and treated as an executory contract
under the own use exemption. All changes in their fair value are recognized in net earnings/loss within net finance expense.
Financial liabilities designated at fair value through profit or loss upon initial recognition
Financial liabilities included in this category form part of a contract containing one or more embedded derivatives and are initially
recognized at fair value and transaction costs are recognized in net earnings/loss, along with gains and losses arising from
changes in fair value. For such financial liabilities, the amount of change in the fair value that is attributable to changes in the
credit risk of that liability is recognized in other comprehensive income and the remaining amount of change in the fair value of
the liability is recognized in net earnings/loss within net finance expense.
Derecognition of financial assets and liabilities
A financial asset is derecognized when its contractual rights to the cash flows that compose the financial asset expire or
substantially all the risks and rewards of the asset are transferred. A financial liability is derecognized when the obligation
under the liability is discharged, cancelled or expired. Gains and losses on derecognition are recognized in net earnings/loss
within net finance expense, respectively.
Modifications of financial instruments
An exchange of a financial instrument with substantially different terms is accounted for as an extinguishment of the original
financial instrument and the recognition of a new financial instrument. The terms are substantially different if the discounted
present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the
original effective interest rate, is at least 10 per cent different from the discounted present value of the remaining cash flows of
the original financial instrument. If an exchange of debt instruments or modification of terms is accounted for as an
extinguishment, any costs or fees incurred are recognized as part of the gain or loss on the extinguishment. If the exchange or
modification is not accounted for as an extinguishment, any costs or fees incurred adjust the carrying amount of the instrument
and are amortized over the remaining term of the modified instrument.
When the Corporation modifies a financial instrument and that modification results in derecognition, the Corporation
derecognizes the original financial instrument and recognizes a new financial instrument. The difference between the carrying
amount of the financial instrument extinguished and the consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognized as a gain or loss in net earnings/loss within net finance expense.
When the Corporation modifies a financial instrument and that modification does not result in derecognition, the Corporation
revises the gross carrying value of the financial instrument, discounted using the original effective interest rate, and recognizes
a modification gain or loss in net earnings/loss within net finance expense.
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Assessment for impairment of financial assets
The Corporation applies a three-stage approach to measure an ACL, using an expected credit loss (“ECL”) approach as required
under IFRS 9, “Financial Instruments” (“IFRS 9”) for financial assets measured at amortized cost.
The ECL approach reflects the present value of all cash shortfalls related to default events either (i) over the following twelve
months or (ii) over the expected life of a financial instrument depending on the credit deterioration from inception. The ACL
reflects an unbiased, probability-weighted outcome which considers multiple scenarios based on reasonable and supportable
forecasts.
Stage 1 – Where there has not been a significant increase in credit risk since initial recognition of a financial instrument,
an amount equal to twelve months expected credit loss is recorded. The ECL is computed using a probability of default
occurring over the next twelve months. For instruments with a remaining maturity of less than twelve months, a
probability of default corresponding to the remaining term to maturity is used.
Stage 2 – When a financial instrument experiences a significant increase in credit risk subsequent to origination but is
not considered to be in default, it is included in Stage 2. The lifetime ECL is computed using a probability of default
occurring over the remaining life of the financial instrument. When contractual payments are more than 30 days past
due, it is presumed that credit risk has increased significantly subsequent to origination unless the Corporation has
reasonable and supportable information that demonstrates that the credit risk has not increased significantly since
origination.
Stage 3 – Financial instruments that are considered to be in default are included in this stage. The Corporation
considers a financial instrument to be in default as a result of one or more loss events that occurred after the date of
initial recognition of the instrument and the loss event has a negative impact on the estimated future cash flows of the
instrument that can be reliably estimated. Similar to Stage 2, the ACL captures the lifetime ECL. When contractual
payments are more than 90 days past due, it is presumed that default has occurred unless the Corporation has
reasonable and supportable information that demonstrates that a more lagging default criterion is more appropriate.
The Corporation assesses whether there has been a significant increase in credit risk since initial recognition of a financial
instrument and its ACL measurement at each reporting date. Increases or decreases in the ACL are recognized as impairment
gains or losses within net finance expense in net earnings/loss.
For trade receivables and contract assets that result from transactions that are within the scope of IFRS 15. “Revenue from
Contracts with Customers” (“IFRS 15”), and finance lease receivables that result from transactions that are within the scope of
IFRS 16 “Leases” (“IFRS 16”), IFRS 9 allows the Corporation to take a simplified approach where the ACL is always measured
at the lifetime ECL.
The Corporation’s financial assets measured at amortized cost are presented net of the ACL in the consolidated statements of
financial position.
The Corporation recognizes lifetime expected credit losses for trade receivables using a provision matrix based on historical
credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of
the current and future economic conditions as at the reporting date, including time value of money where appropriate.
Financial instrument measurement hierarchy
All financial instruments are required to be measured at fair value on initial recognition. For those financial assets or liabilities
subsequently measured at fair value at each reporting date, financial instruments and liquidity risk disclosures require a three-
level hierarchy that reflects the significance of the inputs used in making the fair value measurements. These levels are defined
below:
Level 1: Determined by reference to unadjusted quoted prices in active markets for identical assets and liabilities that the entity
can access at the measurement date;
Level 2: Valuations using inputs other than the quoted prices for which all significant inputs are based on observable market
data, either directly or indirectly; and
Level 3: Valuations using inputs that are not based on observable market data.
Notes to the consolidated financial statements
92 Sherritt International Corporation
2.10 Inventories
Raw materials, materials in process and finished products are valued at the lower of average production cost and net realizable
value, with cost determined on a moving weighted-average basis. Spare parts and operating materials within inventory are
valued at the lower of average cost and net realizable value, and recognized as cost of sales when used.
The cost of inventory includes all costs related to bringing the inventory to its current condition, including processing costs, labour
costs, supplies, direct and allocated indirect operating overhead and depreciation expense, where applicable, including
allocation of fixed and variable costs.
Write-downs to net realizable value may be reversed, up to the amount previously written down, when circumstances support
an increased inventory value.
2.11 Non-financial assets
Property, plant and equipment
Property, plant and equipment include acquisition costs, capitalized development costs and pre-production expenditures that
are recorded at cost less accumulated depreciation and accumulated impairment losses. Costs of property, plant and equipment
are incurred while construction is in progress and before the commencement of commercial production. Once the construction
of an asset is substantially complete, and the asset is ready for its intended use, these costs are depreciated.
Plant and equipment
Plant and equipment include assets under construction; machinery and equipment; processing, refining, power generation and
other manufacturing facilities; office equipment; and fixtures and fittings.
The Corporation recognizes major long-term spare parts and standby equipment as plant and equipment when the parts and
equipment are significant and are expected to be used over a period greater than a year. Major inspections and overhauls
required at regular intervals over the useful life of an item of plant and equipment are recognized in the carrying amount of the
related item if the inspection or overhaul provides benefit exceeding one year.
Plant and equipment are depreciated using the straight-line method based on estimated useful lives, once the assets are
available for use. Plant and equipment may have components with different useful lives. Depreciation is calculated based on
each individual component’s useful life. New components are capitalized to the extent that they meet the recognition criteria of
an asset. The carrying amount of the replaced component is derecognized, and any gain/loss is included in net earnings/loss.
If the carrying amount of the replaced component is not known, it is estimated based on the cost of the new component less
estimated depreciation. The useful lives of the Corporation’s plant and equipment are as follows:
Buildings and refineries
5 to 40 years
Machinery and equipment
3 to 50 years
Office equipment
3 to 35 years
Fixtures and fittings
3 to 35 years
Assets under construction
not depreciated during development period
Right-of-use assets – Plant and equipment
The Corporation recognizes a right-of-use asset if a contract is or contains a lease based on the definition of a lease. Right-of-
use assets – plant and equipment include the underlying assets in leases for office space; machinery and equipment; and
computer and telecommunications hardware.
Derecognition
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to
arise from the continued use or disposal of the asset. Any gain or loss arising on derecognition of the asset (measured as the
difference between the net disposal proceeds and the carrying amount of the asset) is included in net earnings/loss in the period
when the asset is derecognized.
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93
Intangible assets
Intangible assets are developed internally or acquired as part of a business combination. Internally generated assets are
recognized at cost and primarily arise as a result of exploration and evaluation activity and service concession arrangements.
Intangible assets acquired as part of a business combination are recognized separately from goodwill, if the asset is separable
or arises from contractual or legal rights, and are initially recorded at their acquisition date fair value.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with a finite life are amortized over their useful economic lives on a straight-line or units-of-production basis,
as appropriate. The amortization expense is included in cost of sales unless otherwise noted. Intangible assets that are not yet
ready for use are not amortized until put into use.
Intangible assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at
the CGU level. The Corporation has no identifiable intangible assets for which the expected useful life is indefinite.
Exploration and evaluation
Exploration and evaluation (“E&E”) expenditures are measured using the cost model and generally include the costs of licenses,
technical services and studies, seismic studies, exploration drilling and testing, and directly attributable overhead and
administration expenses including remuneration of operating personnel and supervisory management. These costs do not
include general prospecting or evaluation costs incurred prior to having obtained the rights to explore an area, which are
expensed as they are incurred.
E&E expenditures related to Oil and Gas properties are capitalized and carried forward until technical feasibility and commercial
viability of extracting the resource is established. The technical feasibility and commercial viability is established when economic
quantities of proven and/or probable reserves are determined to exist, at which point the E&E assets attributable to those
reserves are reviewed for impairment before being transferred to property, plant and equipment.
Service concession arrangements
Service concession arrangements are contracts between private sector and government entities and can involve the
construction, operation or upgrading of public infrastructure. Service concession arrangements can be classified as financial
assets (where the operator has an unconditional right to receive a specified amount of cash or other financial asset over the life
of the arrangement) or intangible assets (where the operator’s future cash flows are not specified).
Through its interest in Energas, the Corporation has been contracted to design, construct and operate electrical generating
facilities at Boca de Jaruco and Puerto Escondido, Cuba, on behalf of the Cuban government. The sale price of electricity is
contractually fixed, but decreases after loans provided by the Corporation to fund the construction are fully repaid. Ownership
of these facilities will be transferred to the Cuban government for nil consideration at the end of the contract term which ends in
2043, unless the contract is extended. Energas bears the demand risk on revenues related to assets covered under service
concession arrangements as receipts are based on usage rather than an unconditional right to receive cash. As a result, the
Boca de Jaruco and Puerto Escondido assets have been classified as intangible assets and represent the Corporation’s right to
charge the Government of Cuba for future electricity and by-products delivered.
During periods of new construction, enhancement or upgrade activities, the Corporation records a new intangible asset and a
corresponding construction revenue amount to reflect the right to charge the Cuban government for an incremental future supply
of electricity. The construction expenses relating to the new construction activity are expensed as incurred. The net result of
the construction activity is a nil impact to net earnings/loss. Once operational, the carrying amount of the new service concession
intangible asset, including capitalized interest, is amortized on a straight-line basis over the remaining contract term.
Repair, maintenance and replacement costs incurred in relation to service concession intangible assets are expensed as
incurred.
Amortization
The following intangible assets are amortized on a straight-line basis over the following estimated useful lives:
Service concession arrangements
20 years
Exploration and evaluation
not amortized during development period
Notes to the consolidated financial statements
94 Sherritt International Corporation
Assessment for impairment of non-financial assets
The Corporation assesses the carrying amount of non-financial assets, including property, plant and equipment and intangible
assets and excluding inventories and deferred tax assets, at each reporting date to determine whether there is any indication of
impairment. Internal factors, such as estimated reserves, budgets and forecasts, as well as external factors, such as expected
future prices, costs, market capitalization and other market factors, are also monitored to determine if indications of impairment
exist.
An impairment loss is the amount equal to the excess of the carrying amount over the recoverable amount. The recoverable
amount takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best
use. To achieve this, the recoverable amount is the higher of value in use (being the net present value of expected pre-tax
future cash flows of the relevant asset) and fair value less costs of disposal of the asset.
Impairment is assessed at the CGU level. A CGU is the smallest identifiable group of assets that generates cash inflows largely
independent of the cash inflows from other assets or group of assets. The assets of the Corporate and Other segment,
representing the Corporate head office and technical support, are allocated on a reasonable and consistent basis to CGUs or
groups of CGUs.
If, after the Corporation has previously recognized an impairment loss, circumstances indicate that the recoverable amount of
the impaired assets is greater than the carrying amount, the Corporation reverses the impairment loss by the amount the revised
recoverable amount exceeds its carrying amount, to a maximum of the previous impairment loss. In no case shall the revised
carrying amount exceed the original carrying amount, after depreciation or amortization, that would have been determined if no
impairment loss had been recognized. An impairment loss or a reversal of an impairment loss is recognized in the consolidated
statements of comprehensive income/loss.
Impairment of exploration and evaluation expenditures at Oil and Gas
Upon determination of proven and probable reserves, the related E&E assets attributable to those reserves are tested for
impairment prior to being transferred to property, plant and equipment. Capitalized E&E costs are reviewed and evaluated for
impairment at each reporting date for events or changes in circumstances that indicate the carrying amount may not be
recoverable from future cash flows of the property.
2.12 Provisions
Provisions are recognized when the Corporation has a present obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made of the amount
of the obligation. Where appropriate, the future cash flow estimates are adjusted to reflect risks specific to the obligation. Where
the Corporation expects some or all of a provision to be reimbursed, for example, under an insurance contract, the
reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating
to any provision is presented in cost of sales or administrative expenses, depending on the nature of the provision. If the effect
of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate
that reflects current market assessments of the time value of money. Where discounting is used, the increase in the provision
due to the passage of time is recognized as financing expense. A contingent liability is disclosed where the existence of an
obligation will only be confirmed by future events or where the amount of the obligation cannot be measured with reasonable
reliability. Contingent assets are not recognized, but are disclosed where an inflow of economic benefits is probable.
Environmental rehabilitation
Provisions for environmental rehabilitation include decommissioning and restoration costs when the Corporation has an
obligation to dismantle and remove infrastructure and residual materials as well as to restore the disturbed area. Estimated
decommissioning and restoration costs are provided for in the accounting period when the obligation arising from the disturbance
occurs, whether this occurs during mine development or during the production phase, based on the net present value of
estimated future costs. The provision for environmental rehabilitation is reviewed and adjusted each period to reflect
developments which could include changes in closure dates, legislation, discount rate or estimated future costs.
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95
The amount recognized as a liability for environmental rehabilitation is calculated as the present value of the estimated future
costs determined in accordance with local conditions and requirements. An amount corresponding to the provision is capitalized
as part of property, plant and equipment and is depreciated over the life of the corresponding asset. The impact of amortization
or unwinding of the discount rate applied in establishing the net present value of the provision is recognized in net finance
expense. The applicable discount rate is a pre-tax rate that reflects the current market assessment of the time value of money
which is determined based on government bond interest rates and inflation rates.
Changes to estimated future costs are recognized in the consolidated statements of financial position by either increasing or
decreasing the rehabilitation liability and rehabilitation asset if the initial estimate was originally recognized as part of an asset
measured in accordance with IAS 16, “Property, Plant and Equipment”. Any reduction in the rehabilitation liability and therefore
any deduction from the rehabilitation asset may not exceed the carrying amount of that asset. If it does, any excess over the
carrying amount is recognized immediately in cost of sales.
If the change in estimate results in an increase in the rehabilitation provision and therefore an addition to the carrying amount of
the asset, the entity is required to consider whether the new carrying amount is recoverable, and whether this is an indication of
impairment of the asset as a whole. If indication of impairment of the asset as a whole exists, the Corporation tests for impairment
in accordance with IAS 36, “Impairment of Assets”. If the carrying amount of the revised assets, net of rehabilitation provisions,
exceeds the recoverable value, that portion of the increase is charged directly to cost of sales. For closed sites, changes to
estimated costs are recognized immediately in cost of sales. Also, rehabilitation obligations that arise as a result of the production
phase are expensed as incurred.
Where rehabilitation is conducted systematically over the life of the operation, rather than at the time of closure, provision is
made for the estimated cost of outstanding rehabilitation work at each reporting date and any increase in overall cost is
expensed.
2.13 Share-based compensation plans
The Corporation operates cash-settled and equity-settled share-based compensation plans under which it makes cash payments
based on the value of the Corporation’s shares, or issues shares of the Corporation, to directors, officers and employees in
exchange for services.
The Corporation’s cash-settled share plans, including Restricted Share Units (“RSUs”), Performance Share Units (“PSUs”) and
Deferred Share Units (“DSUs”) are recognized as liabilities at the date of grant. A liability is accrued related to the units awarded
and a compensation expense is recognized in the consolidated statements of comprehensive income/loss over the service
period required for employees to become fully entitled to the award.
The fair value of the RSU liability at the date of grant and at each subsequent reporting date until settlement is based on the
market value of the Corporation’s shares. If the Corporation’s share price changes between reporting dates, then the fair value
of the RSU liability is adjusted and an offsetting expense or recovery is recognized in the consolidated statements of
comprehensive income/loss. The adjusted fair value of the RSU liability is then amortized over the remaining vesting period.
The fair value of the PSU liability at the date of grant and at each subsequent reporting date until settlement is based on
performance metrics which are defined at the time of issuance and on the market value of the Corporation’s shares with the
liability expensed over the vesting period. If the Corporation’s share price or the expected achievement of the performance
conditions changes between reporting dates, then the fair value of the PSU liability is adjusted and an offsetting expense or
recovery is recognized in the consolidated statements of comprehensive income/loss. Adjustments recorded are amortized over
the remaining vesting period.
The fair value of DSUs at the date of grant and at each subsequent reporting date until settlement is based on the market value
of the Corporation’s shares with the liability expensed over the vesting period. If the Corporation’s share price changes between
reporting dates, then the fair value of the DSU liability is adjusted and an offsetting expense or recovery is recognized in the
consolidated statements of comprehensive income/loss. Adjustments recorded are amortized over the remaining vesting period.
The Corporation has one equity-settled compensation plan that is composed of its stock option plan. Stock option obligations
are settled by the issuance of shares from treasury. The fair value of grants issued under the stock option plan are determined
at the date of grant using the Black-Scholes option valuation model. They are only re-measured if there is a modification to the
terms of the option, such as a change in exercise price or legal life. The fair value of the stock option plan is recognized as an
expense over the expected vesting period with a corresponding entry to shareholders’ equity.
Notes to the consolidated financial statements
96 Sherritt International Corporation
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management
to exercise judgment in applying the Corporation’s accounting policies. These estimates and judgments are continuously
evaluated and are based on management’s experience and knowledge of relevant facts and circumstances. Actual results may
differ from estimates. The critical accounting estimates and judgments the Corporation has made, and how they affect the
amounts reported in the consolidated financial statements, are incorporated in this section.
Critical accounting estimates
Measurement of the recoverable amount of the Metals CGU
The recoverable amount of the Corporation’s Metals CGU is the higher of its fair value less costs of disposal (“FVLCD”) and its
value in use. The Corporation determined that the Metals CGU’s FVLCD exceeded its value in use. The Metals CGU’s fair
value is measured based on a forecast of future cash flows including estimated recoverable production, market or contracted
commodity prices, foreign exchange rates, an inflation rate, production levels, cash costs of production, capital expenditures,
reclamation costs and conversion of resources to reserves, discounted at an appropriate discount rate reflecting the time value
of money, uncertainty inherent in the cash flows and a risk premium. Forecasts inherently require assumptions and judgments
to be made about each of the factors affecting future cash flows.
Measurement of the recoverable amount of the investment in Moa Joint Venture
In determining the recoverable amount of the investment in Moa Joint Venture, the Corporation estimates: (a) its share of the
present value of the estimated future cash flows expected to be generated by the Moa Joint Venture, including the cash flows
from the operations of the Moa Joint Venture and the proceeds from the ultimate disposal of the investment; or (b) the present
value of the estimated future cash flows expected to arise from dividends to be received from the investment and from its ultimate
disposal, both of which are based on the same assumptions as the measurement of the recoverable amount of the Metals CGU,
noted above.
Measurement of the fair value of the GNC receivable and Energas payable
The Corporation estimates the fair value of the GNC receivable and Energas payable at each reporting period using discounted
cash flows in a Monte Carlo simulation model, which includes the use of in-kind forecast cobalt prices and discount rates, which
are significant unobservable inputs in the case of the GNC receivable, and changes in the fair value of these financial instruments
may have a significant impact on the Corporation’s financial results.
Environmental rehabilitation provision costs
The Corporation’s environmental rehabilitation provisions are subject to environmental regulations in Canada, Cuba and Spain.
Many factors such as future changes to environmental laws and regulations, life of mine estimates, the cost and time it will take
to rehabilitate the property and discount rates, all affect the carrying amount of environmental rehabilitation provisions. As a
result, the actual cost of environmental rehabilitation could be higher than the amounts the Corporation has estimated. For
certain operations, actual costs will ultimately be determined after site closure in agreement with predecessor companies.
Environmental rehabilitation provision discount rates
The Corporation’s environmental rehabilitation provisions are assessed quarterly and measured by discounting the expected
cash flows. The applicable discount rates are pre-tax rates that reflect the current market assessment of the time value of money
which is determined based on government bond interest rates and inflation rates. The actual rates depend on a number of
factors, including the timing of rehabilitation activities that can extend decades into the future and the location of the property.
Property, plant and equipment
The capitalization of costs, the determination of estimated recoverable amounts and the depletion and depreciation of these
assets have a significant impact on the Corporation’s financial results.
For those assets depreciated on a straight-line basis, management estimates the useful life of the assets and their components,
which in certain cases may be based on an estimate of the producing life of the property. These assessments require the use
of estimates and assumptions including market conditions at the end of the asset’s useful life, costs of decommissioning the
asset and the amount of recoverable reserves.
Asset useful lives and residual values are re-evaluated at each reporting date.
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Critical accounting judgments
Interests in other entities
The Corporation applies judgment in determining the classification of its interest in other entities, such as: (i) the determination
of the level of control or significant influence held by the Corporation; (ii) the legal structure and contractual terms of the
arrangement; (iii) concluding whether the Corporation has rights to assets and liabilities or to net assets of the arrangement; and
(iv) when relevant, other facts and circumstances. The Corporation has determined that Energas represents a joint operation,
while the Moa JV represents a joint venture as described in IFRS 11, “Joint Arrangements”. All other interests in other entities
have been determined to be subsidiaries as described in IFRS 10, “Consolidated Financial Statements”.
Assessment for impairment of non-financial assets and identification of CGUs
The Corporation assesses the carrying amount of non-financial assets, including property, plant and equipment, intangible assets
subject to depreciation and amortization and assets under construction, at each reporting date to determine whether there are
any indicators that the carrying amount of the assets may be impaired or require a reversal of impairment. Impairment is
assessed at the asset or CGU level and the determination of CGUs is an area of significant judgment, particularly with the
grouping of the Metals assets as a single CGU on the basis that it is a vertically integrated operation which generates largely
independent cash inflows. The Moa Joint Venture is a significant part of the vertically integrated assets within the Metals CGU.
There are a number of potential indicators that could trigger an impairment or impairment reversal, which may require critical
accounting judgments to determine the extent to which external and/or internal factors may impact the assets’ recoverable
amount. Such internal factors include changes to estimated recoverable production, contracted prices, production levels, cash
costs of production, capital expenditures and reclamation costs. External factors include commodity prices, foreign exchange
rates, the inflation rate and the Corporation’s market capitalization deficiency and other changes in economic conditions.
For purposes of determining recoverable amount, management uses the higher of value in use and fair value less costs of
disposal and an appropriate discount rate. Projections of future cash flows are based on factors relevant to the asset and
inherently require assumptions and judgments to be made about each of the factors affecting future cash flows. Changes in any
of these assumptions or judgments could result in a significant difference between the carrying amount and fair value of these
assets. In the event that management’s estimate of future cash flows is not representative of actual events, impairments may
be identified, which could have a material impact on the Corporation’s consolidated financial statements. Where necessary,
management engages qualified third-party professionals to assist in the determination of the recoverable amount.
Assessment for impairment of the Corporation’s investment in the Moa JV
The Corporation accounts for its investment in the Moa JV using the equity method. The Corporation assesses the carrying
amount of the investment in the Moa JV at each reporting date to determine whether there are any indicators that the carrying
amount may be impaired. The Corporation applies judgment in determining if there has been objective evidence of impairment
as a result of one or more loss events which has an impact on the estimated future cash flows from the investment that can be
reliably estimated.
Measurement of the fair value of the GNC receivable and Energas payable
The Corporation measures the GNC receivable and Energas payable at fair value. For purposes of determining fair value,
management uses discounted cash flows in a Monte Carlo simulation model, which includes the use of in-kind forecast cobalt
prices and discount rates, which are significant unobservable inputs in the case of the GNC receivable and requires assumptions
and judgments to be made. Management engages a third-party valuation specialist to assist in the valuation. Changes in these
assumptions or judgments may result in a significant change in fair value.
Service concession arrangements
The Corporation determined that the contract terms regarding the Boca de Jaruco and Puerto Escondido, Cuba, facilities
operated by Energas represent service concession arrangements as described in IFRIC 12, “Service concession arrangements”
(IFRIC 12). The Corporation uses judgment to determine whether the grantor sets elements of the services provided by the
operator, whether the grantor retains any significant ownership interest in the infrastructure at the end of the agreement, and to
determine the classification of the service concession asset as either a financial asset or intangible asset.
Notes to the consolidated financial statements
98 Sherritt International Corporation
4. ACCOUNTING PRONOUNCEMENTS
Adoption of new and amended accounting pronouncements
Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants (Amendments to IAS
1)
In October 2022, the IASB finalised issuance of Classification of Liabilities as Current or Non-current and Non-Current Liabilities
with Covenants, which made amendments to IAS 1, “Presentation of Financial Statements”. The amendments clarify that only
covenants with which an entity is required to comply on or before the reporting date affect the classification of a liability as current
or non-current. In addition, an entity has to disclose information in the notes that enables users of financial statements to
understand the risk that non-current liabilities with covenants could become repayable within twelve months.
The amendments are effective for annual periods beginning on or after January 1, 2024. Effective January 1, 2024, the Corporation
adopted these requirements. The application of these amendments did not have a material impact on the Corporation’s
consolidated financial statements.
International Tax Reform—Pillar Two Model Rules (Amendments to IAS 12)
In December 2021, the Organisation for Economic Co-operation and Development (“OECD”) issued model rules for a new global
minimum tax framework (“Pillar Two”) and on June 20, 2024, the Government of Canada enacted the Global Minimum Tax Act
(“GMTA”) for fiscal years beginning on or after December 31, 2023. Based on the currently applicable revenue thresholds, the
Corporation would not be in scope of the GMTA rules that implement the global minimum tax under Pillar Two into Canadian
domestic law.
Amendments to the IAS 12 standard apply to income taxes arising from the GMTA enacted to implement the Pillar Two model
rules including tax law that implements qualified domestic minimum top-up taxes described in those rules. The amendments
apply for annual periods beginning on or after January 1, 2023. Effective January 1, 2023, the Corporation adopted these
requirements. Following the amendments to IAS 12, the Corporation has applied the exception available under the amendments
to IAS 12 published by the IASB in May 2023. Given that the Corporation’s revenues are below the currently applicable thresholds
and hence not in scope of the GMTA rules, it is not recognizing or disclosing information about deferred tax assets and liabilities
related to Pillar Two income taxes.
On November 28, 2024, the Government of The Bahamas enacted the Domestic Minimum Top-Up Tax Act, 2024 (“the Act”),
which seeks to impose a Domestic Minimum Top-Up Tax (“DMTT”) and would result in an effective tax rate of 15% on the profits
of multinational entities (“MNE”) operating in The Bahamas with revenues of at least €750 million in two of the last four years. The
Act became effective January 1, 2024 and applies to fiscal years of an MNE group that begin after December 31, 2023 where any
Constituent Entities in The Bahamas would be subject to the Income Inclusion Rule (“IIR”) or the Undertaxed Profits Rules
(“UTPR”) in another jurisdiction. For all other MNE groups, the Constituent Entity would be subject to a DMTT for fiscal years
beginning January 1, 2025. The Corporation did not meet the revenue threshold of at least €750 million in any MNEs operating in
The Bahamas in any two years of the four years prior to January 1, 2024 and therefore is not in scope of the DMTT for the year
ended December 31, 2024 and deferred until fiscal year beginning January 1, 2025.
On May 15, 2024, the Government of Barbados enacted the Corporation Top-up Tax Act, 2024 for fiscal years commencing on
or after January 1, 2024, and every subsequent fiscal year, which will result in a DMTT of 15% being levied on Qualifying
Multinational Enterprises with annual revenue surpassing €750 million. Based on the currently applicable revenue thresholds, the
Corporation was not in scope of the rules for the year ended December 31, 2024.
Accounting pronouncements issued but not yet effective
The Corporation has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Lack of Exchangeability (Amendments to IAS 21)
In August 2023, the IASB finalised issuance of Lack of Exchangeability, which made amendments to IAS 21, “The Effects of
Changes in Foreign Exchange Rates”. The amendments require an entity to apply a consistent approach to assessing whether a
currency is exchangeable into another currency and, when it is not, to determining the exchange rate to use and the disclosures
to provide.
The amendments are effective for annual periods beginning on or after January 1, 2025. Earlier application was permitted, but
the amendments were not early adopted.
Sherritt International Corporation
99
The Corporation does not expect the application of these amendments to have a material impact on the Corporation’s consolidated
financial statements.
Presentation and Disclosure in Financial Statements (“IFRS 18”)
In April 2024, the IASB finalised issuance of Presentation and Disclosure in Financial Statements, which will replace IAS 1,
“Presentation of Financial Statements”. The objective of IFRS 18 is to set out requirements for the presentation and disclosure of
information in general purpose financial statements to help ensure they provide relevant information that faithfully represents an
entity’s assets, liabilities, equity, income and expenses and provide disclosures on management-defined performance measures
in the notes to the financial statements.
The standard is effective for annual periods beginning on or after January 1, 2027. The Corporation is currently evaluating the
impact of this standard on its consolidated financial statements.
5. SEGMENTED INFORMATION
Canadian $ millions, for the year ended December 31
2024
Corporate
Adjustments
Metals(1)
Power
Oil and Gas
and Other
for Moa JV(1)
Total
Revenue
$
526.6 $
47.8 $
15.7 $
3.2 $
(434.5) $
158.8
Cost of sales
(532.3)
(30.1)
(25.6)
(1.9)
451.4
(138.5)
Cobalt loss
(0.1)
-
-
-
0.1
-
Impairment of intangible assets
-
-
(8.4)
-
-
(8.4)
Impairment of property, plant and equipment
(0.5)
-
-
-
0.5
-
Administrative expenses
(12.2)
(4.2)
-
(25.7)
5.4
(36.7)
Share of loss of Moa Joint Venture, net
of tax
-
-
-
-
(18.7)
(18.7)
(Loss) earnings from operations and joint
venture
(18.5)
13.5
(18.3)
(24.4)
4.2
(43.5)
Interest income on financial assets measured at
amortized cost
1.7
Other financing items
11.8
Financing expense
(40.5)
Net finance expense
(27.0)
Loss before income tax
(70.5)
Income tax expense
(2.6)
Net loss from continuing operations
(73.1)
Earnings from discontinued operations, net
of tax
0.3
Net loss
$
(72.8)
Supplementary information
Depletion, depreciation and amortization
$
58.0 $
2.5 $
0.2 $
0.8 $
(47.5) $
14.0
Property, plant and equipment expenditures
34.0
2.9
-
-
(30.3)
6.6
Intangible asset expenditures
-
-
0.2
-
-
0.2
Canadian $ millions, as at December 31
2024
Non-current assets(2)
$
658.0 $
18.8 $
0.5 $
5.1 $
(523.2) $
159.2
Total assets
1,097.0
375.8
10.2
37.4
(137.6)
1,382.8
Notes to the consolidated financial statements
100 Sherritt International Corporation
2023
Canadian $ millions, for the year ended December 31
(Restated)
Corporate
Adjustments
Metals(1)
Power
Oil and Gas
and Other
for Moa JV(1)
Total
Revenue
$
603.7 $
47.1 $
12.6 $
2.1
$
(442.2) $
223.3
Cost of sales
(601.4)
(22.7)
(41.1)
(16.7)
416.4
(265.5)
Cobalt gain
2.7
-
-
-
(2.7)
-
Impairment of property, plant and equipment
(1.5)
-
-
-
1.5
-
Administrative expenses
(5.6)
(3.7)
(1.7)
(17.0)
4.9
(23.1)
Share of earnings of Moa Joint Venture,
net of tax
-
-
-
-
21.9
21.9
(Loss) earnings from operations and
joint venture
(2.1)
20.7
(30.2)
(31.6)
(0.2)
(43.4)
Interest income on financial assets
measured at amortized cost
0.8
Other financing items
17.0
Financing expense
(36.5)
Net finance expense
(18.7)
Loss before income tax
(62.1)
Income tax expense
(2.2)
Net loss from continuing operations
(64.3)
Loss from discontinued operations,
net of tax
(0.3)
Net loss
$
(64.6)
Supplementary information
Depletion, depreciation and amortization
$
54.2 $
2.5 $
0.2 $
1.0
$
(43.6) $
14.3
Property, plant and equipment expenditures
57.0
3.2
0.2
-
(40.3)
20.1
Intangible asset expenditures
-
-
1.2
-
-
1.2
2023
Canadian $ millions, as at December 31
(Restated)
Non-current assets(2)
$
644.6 $
17.3 $
8.2 $
6.0
$
(502.4) $
173.7
Total assets
1,089.1
362.3
22.0
57.5
(140.3)
1,390.6
(1)
Included in the Metals reportable segment is the financial performance and certain items of financial position and cash flows on a line-by-line item basis of the Corporation’s
50% interest in the Moa JV, its 100% interest in the utility and fertilizer operations in Fort Saskatchewan and its 100% interest in subsidiaries which buy, market and sell
certain of the Moa JV’s nickel and cobalt production and the Corporation’s cobalt inventories received under the Cobalt Swap. The Adjustments for Moa JV reflect the
adjustments required in order to reconcile to the Corporation’s consolidated statements of comprehensive (loss) income, consolidated statements of financial position and
consolidated statements of cash flows, wherein the financial performance, financial position and cash flows of the Moa JV are included in one line item in the share of
earnings of Moa Joint Venture, net of tax, investment in Moa Joint Venture and Distributions received from Moa Joint Venture, respectively, due to the equity method of
accounting.
(2)
Non-current assets are composed of property, plant and equipment and intangible assets and exclude the non-current assets of the Moa JV, an equity-accounted
investment, which are included in the Investment in Moa Joint Venture.
Geographic information
2024
2023
Canadian $ millions, as at
December 31
December 31
Non-current
Total
Non-current
Total
assets(1)
assets(2)
assets(1)
assets(2)
North America
$
142.6 $
333.9 $
151.3 $
386.3
Cuba
16.6
962.0
22.3
923.1
Europe
-
42.2
0.1
50.2
Asia
-
44.7
-
31.0
$
159.2 $
1,382.8 $
173.7 $
1,390.6
(1)
Non-current assets are composed of property, plant and equipment and intangible assets and exclude the non-current assets of the Moa JV, an equity-accounted
investment, which are included in the Investment in Moa Joint Venture.
(2)
For its geographic information, the Corporation has allocated assets based on their physical location or location of the customer/payer.
Sherritt International Corporation 101
Canadian $ millions, for the years ended December 31
2024
2023
Total
Total
revenue(1)
revenue(1)
North America
$
92.9 $
83.6
Cuba
47.8
49.2
Europe
1.2
17.8
Asia
1.2
60.9
Australia
15.7
10.5
Other
-
1.3
$
158.8 $
223.3
(1)
For its geographic information, the Corporation has allocated revenue based on the location of the customer. Revenue excludes the revenue of the Moa JV, an equity-
accounted investment, which is included in the Corporation’s share of earnings of Moa Joint Venture, net of tax.
Disaggregation of revenue by product and service type
Revenue in the below table excludes revenue recognized by the Moa JV, which is excluded from consolidated revenue and
included within the Corporation’s share of loss of Moa Joint Venture, net of tax, at the Corporation’s 50% interest due to the equity
method of accounting. Refer to the Moa JV’s statements of comprehensive (loss) income in note 7 for revenue recognized by the
Moa JV on a 100% basis.
Canadian $ millions, for the years ended December 31
2024
2023
Total
Total
revenue
revenue
Cobalt
2.4
80.1
Fertilizer
$
62.6 $
64.1
Power generation(1)
42.5
42.8
Sulphuric acid
21.4
12.7
Oil and gas service revenue
15.7
12.6
Other
14.2
11.0
$
158.8 $
223.3
(1)
Included in power generation revenue for the year ended December 31, 2024 is $32.9 million of revenue from service concession arrangements ($31.5 million for the year
ended December 31, 2023).
Deferred revenue primarily relates to payments for fertilizer sales received before shipment by the Fort Site in the Metals
reportable segment. All of the deferred revenue as at December 31, 2023 was recognized during the year ended December 31,
2024.
Cobalt revenue
Cobalt revenue relates to cobalt sold by the Corporation to customers from the cobalt volumes received through distributions
from the Moa JV under the Cobalt Swap (note 7). Refer to note 12 for further details on the Cobalt Swap. The Corporation
received $1.1 million of cash from cobalt sales during the year ended December 31, 2024 (December 31, 2023 - $80.3 million).
Significant customers
Fort Site in the Metals reportable segment derived $17.5 million of its revenue for the year ended December 31, 2024 ($29.0
million for the year ended December 31, 2023) from a customer that purchases and sells agriculture products.
The Power reportable segment derived $47.8 million of its revenue for the year ended December 31, 2024 ($47.1 million for the
year ended December 31, 2023) directly and indirectly from agencies of the Government of Cuba.
No other single customer contributed 10% or more to the Corporation’s revenue in 2024 or 2023.
Notes to the consolidated financial statements
102 Sherritt International Corporation
Changes in reportable segments
The Corporation revised the presentation of its segmented information commencing with the three months ended March 31, 2024
as a result of a change in the information reviewed by the chief operating decision maker (“CODM”). Following the Corporation’s
restructuring during the three months ended March 31, 2024, the former Corporate reportable segment and Technologies
reportable segment were combined into a single Corporate and Other reportable segment reviewed by the CODM, which includes
the Corporation’s management of its joint operations and subsidiaries and general corporate activities related to public companies,
including business and market development, and growth and external technical services activities as well as management of cash,
publicly-traded debt and government relations. Segmented information for the prior year was restated for comparative purposes
to reflect the new Corporate and Other reportable segment. In the current year period, expenses incurred to support and enhance
Metals’ operations and business development, formerly reported within Technologies, are recognized within the Metals reportable
segment.
In the comparative period, the Corporation revised the presentation of its segmented information commencing with the three
months ended March 31, 2023 as a result of a change in the information reviewed by the CODM due to the Cobalt Swap. Refer
to note 12 of the Corporation’s annual consolidated financial statements for the year ended December 31, 2023 for further details
on the Cobalt Swap. Following the signing of the Cobalt Swap, the former Moa JV and Fort Site reportable segment and Metals
Other reportable segment were combined into a single Metals reportable segment reviewed by the CODM, which includes all of
the Corporation’s mining, refining and sales of nickel and cobalt, including sales of the Corporation’s cobalt inventories received
under the Cobalt Swap.
Sherritt International Corporation 103
6. EXPENSES
Cost of sales includes the following:
Canadian $ millions, for the years ended December 31
2024
2023
Employee costs(1)
$
53.9 $
67.6
Severance
1.2
1.6
Depletion, depreciation and amortization of property,
12.8
12.9
plant and equipment and intangible assets
Raw materials and consumables
35.5
56.0
Finished cobalt(2)
2.2
86.1
Repairs and maintenance
55.2
81.5
Shipping and treatment costs
3.9
4.0
Inventory write-down/obsolescence
1.0
9.8
Loss on environmental rehabilitation provisions
8.2
22.9
Share-based compensation recovery
(0.1)
-
Changes in inventories and other
(35.3)
(76.9)
$
138.5 $
265.5
(1)
In the comparative period prior to Technologies’ restructuring, employee costs incurred by the former Technologies reportable segment were presented within cost of sales
given Technologies’ development and commercialization of proprietary technologies for customers. In the current year period, employee costs incurred by the former
Technologies reportable segment are presented within administrative expenses as discussed below.
(2)
Finished cobalt relates to the cost of finished cobalt distributed to the Corporation pursuant to the Cobalt Swap and sold to customers. The value is based on an in-kind
value of cobalt, calculated as a cobalt reference price from the month preceding distribution, modified mutually between the Corporation and General Nickel Company
(“GNC”) in consideration of selling costs incurred by the Corporation. Refer to note 12 for further details on the Cobalt Swap.
Administrative expenses include the following:
Canadian $ millions, for the years ended December 31
2024
2023
Employee costs(1)
$
26.3 $
18.4
Severance(2)
2.2
-
Depreciation
1.2
1.4
Share-based compensation expense (recovery)
0.4
(1.5)
Consulting services and audit fees
4.2
4.4
Other
2.4
0.4
$
36.7 $
23.1
(1)
During the year ended December 31, 2024, administrative employee costs include employee costs incurred by the former Technologies reportable segment to support and
enhance Metals’ operations and business development following Technologies’ restructuring. In the comparative period, employee costs incurred by the former
Technologies reportable segment were presented in cost of sales as discussed above.
(2)
Severance expense during the year ended December 31, 2024 relates to the Corporation’s restructuring and workforce reductions.
Notes to the consolidated financial statements
104 Sherritt International Corporation
7. JOINT ARRANGEMENTS
Investment in Moa Joint Venture
The Corporation indirectly holds a 50% interest in the Moa JV. The operations of the Moa JV are conducted among three
companies. Moa Nickel S.A. owns and operates the mining and processing facilities located in Moa, Cuba; The Cobalt Refinery
Company Inc. owns and operates the metals refinery located at Fort Saskatchewan, Canada; and International Cobalt Company
Inc., incorporated in Bahamas, acquires mixed sulphides from Moa Nickel S.A. and third parties, contracts the refining of such
purchased materials and then markets and sells finished nickel and cobalt.
During the year ended December 31, 2024, the Moa JV paid cash distributions of $23.7 million or US$16.5 million ($64.0 million
or US$48.5 million for the year ended December 31, 2023) (100% basis) to the Corporation of which $11.9 million ($32.0 million
for the year ended December 31, 2023) was paid to the Corporation representing its 50% ownership interest and of which $11.9
million ($32.0 million for the year ended December 31, 2023) was redirected by GNC to the Corporation to settle the GNC
receivable pursuant to the Cobalt Swap. Refer to note 12 for further details on the Cobalt Swap.
During the year ended December 31, 2024, the Moa JV distributed 223 tonnes (2,082 tonnes for the year ended December 31,
2023) of finished cobalt (100% basis) to the Corporation with an in-kind value of $6.1 million (US$4.2 million) ($88.1 million
(US$65.5 million) for the year ended December 31, 2023) (100% basis) pursuant to the Cobalt Swap.
All finished cobalt and cash distributions received in 2023 were declared as dividends during the year ended December 31,
2023. In addition, $74.5 million (US$55.0 million) of cash distributions received in 2022 were declared as dividends during the
year ended December 31, 2023.
The following provides additional information relating to the Corporation’s investment in the Moa Joint Venture on a 100% basis.
Foreign currency translation differences are included in the financial information of the Moa JV presented below as the
Corporation’s presentation currency is the Canadian dollar, while certain of the operating companies within the Moa JV’s
functional currency is the U.S. dollar. As at December 31, 2024, the U.S. dollar increased in value relative to the Canadian dollar,
resulting in higher assets and liabilities reported in Canadian dollars as compared to December 31, 2023. For the year ended
December 31, 2024, Moa JV’s revenue was positively impacted and cost of sales and other expenses were negatively impacted
by a stronger average U.S. dollar relative to the Canadian dollar compared to the prior year.
Statements of financial position
2024
2023
Canadian $ millions, 100% basis, as at
December 31
December 31
Assets
Cash and cash equivalents
$
11.3 $
11.8
Income taxes receivable
7.0
6.4
Other current assets(1)
40.9
20.9
Trade accounts receivable, net
90.3
82.6
Inventories
382.3
424.7
Other non-current assets
17.9
23.3
Property, plant and equipment
1,136.6
1,089.1
Deferred income taxes
10.3
-
Total assets
1,696.6
1,658.8
Liabilities
Trade accounts payable and accrued liabilities
111.9
117.4
Income taxes payable
1.0
2.8
Other current financial liabilities(2)
0.2
30.4
Deferred revenue
21.0
-
Loans and borrowings(3)
40.5
23.5
Environmental rehabilitation provisions
86.9
84.9
Other non-current financial liabilities
2.9
3.7
Deferred income taxes
11.2
18.3
Total liabilities
275.6
281.0
Net assets of Moa Joint Venture
$
1,421.0 $
1,377.8
Proportion of Sherritt’s ownership interest
50%
50%
Total
710.5
688.9
Intercompany capitalized interest elimination
(45.1)
(42.2)
Investment in Moa Joint Venture
$
665.4 $
646.7
(1)
Included in other current assets as at December 31, 2024 is $29.9 million from the Corporation for distributions received that had not yet been declared as dividends
(December 31, 2023 – nil). The asset will be extinguished upon declaration as dividends.
Sherritt International Corporation 105
(2)
Included in other current financial liabilities as at December 31, 2024 is a nil revolving-term credit facility with the Corporation (December 31, 2023 – $30.3 million), of which
nil is the principal balance (December 31, 2023 – $30.0 million) to fund working capital.
(3)
Included in loans and borrowings is $27.7 million of current financial liabilities (December 31, 2023 - $9.1 million) and $12.8 million of non-current financial liabilities
(December 31, 2023 – $14.4 million).
Statements of comprehensive (loss) income
Canadian $ millions, 100% basis, for the years ended December 31
2024
2023
Revenue
$
868.9 $
884.3
Cost of sales(1)
(902.8)
(832.7)
Cobalt (loss) gain
(0.7)
5.5
Impairment of property, plant and equipment
(1.0)
(3.0)
Administrative expenses
(10.8)
(9.9)
(Loss) earnings from operations
(46.4)
44.2
Financing income
0.7
2.3
Financing expense
(16.3)
(11.5)
Net finance expense
(15.6)
(9.2)
(Loss) earnings before income tax
(62.0)
35.0
Income tax recovery (expense)(2)
10.5
(1.4)
Net (loss) earnings and comprehensive (loss) income of Moa JV
$
(51.5) $
33.6
Proportion of Sherritt's ownership interest
50%
50%
Total
(25.8)
16.8
Intercompany elimination
7.1
5.1
Share of (loss) earnings of Moa Joint Venture, net of tax
$
(18.7) $
21.9
(1)
Included in cost of sales for the year ended December 31, 2024 is depreciation and amortization of $95.1 million ($87.3 million for the year ended December 31, 2023).
(2)
For the year ended December 31, 2024, the Moa JV recognized an income tax recovery due to a taxable loss of the operating companies in the Moa JV, while in the
comparative period, the Moa JV recognized an income tax expense due to taxable earnings of the operating companies in the Moa JV.
Joint operation
Sherritt’s primary power generating assets are located in Cuba at Varadero, Boca de Jaruco and Puerto Escondido. These
assets are held by Sherritt through its one-third interest in Energas, which is a Cuban joint arrangement established to process
raw natural gas and generate electricity for sale to the Cuban national electrical grid. Cuban government agencies Union
Electrica (UNE) and Union Cuba Petroleo (“CUPET”) hold the remaining two-thirds interest in Energas.
During the year ended December 31, 2024, Energas declared and paid dividends of $13.0 million to the Corporation in Canada
($1.4 million for the year ended December 31, 2023).
The following provides information relating to the Corporation’s interest in Energas on a 33⅓% basis:
2024
2023
Canadian $ millions, 33⅓% basis, as at
December 31
December 31
Current assets(1)
$
139.2 $
120.6
Non-current assets
15.6
13.5
Current liabilities
15.5
8.9
Non-current liabilities
61.5
60.8
Net assets
$
77.8 $
64.4
(1)
Included in current assets is $111.4 million of cash and cash equivalents (December 31, 2023 - $93.9 million).
Canadian $ millions, 33⅓% basis, for the years ended December 31
2024
2023
Revenue
$
47.8 $
47.1
Expenses
(27.6)
(32.4)
Net earnings
$
20.2 $
14.7
Notes to the consolidated financial statements
106 Sherritt International Corporation
8. NET FINANCE EXPENSE
Canadian $ millions, for the years ended December 31
Note
2024
2023
Interest income on advances and loans receivable
1.7
0.8
Interest income on financial assets measured at amortized cost
1.7
0.8
Gain on revaluation of GNC receivable
11
0.4
14.7
Gain (loss) on revaluation of Energas payable
11
0.2
(7.6)
Realized gain on nickel put options
12
5.9
-
Gain on repurchase of notes
15
1.8
3.5
Other interest income and gains on financial instruments
3.5
6.4
Other financing items
11.8
17.0
Interest expense and accretion on loans and borrowings
(37.3)
(35.1)
Unrealized foreign exchange loss
(1.7)
(1.1)
Realized foreign exchange (loss) gain
(0.7)
0.4
Other interest expense and finance charges
(0.6)
(0.4)
Accretion expense on environmental rehabilitation provisions
16
(0.2)
(0.3)
Financing expense
(40.5)
(36.5)
Net finance expense
$
(27.0) $
(18.7)
9. INCOME TAXES
Canadian $ millions, for the years ended December 31
2024
2023
Current income tax expense
Current period
$
3.2 $
2.4
3.2
2.4
Deferred income tax recovery
Origination and reversal of temporary differences
(13.2)
(25.3)
Non-recognition of tax assets
12.6
25.1
(0.6)
(0.2)
Income tax expense
$
2.6 $
2.2
Barbados
Effective January 1, 2024, the general corporate tax rate in Barbados increased to 9%. This change did not have a material
impact on the Corporation’s income tax liability during the year ended December 31, 2024.
The following table reconciles income taxes calculated at a combined Canadian federal/provincial income tax rate with the income
tax expense in the consolidated statements of comprehensive loss:
Canadian $ millions, for the years ended December 31
2024
2023
Loss before income tax from continuing operations
$
(70.5) $
(62.1)
Less: share of loss (earnings) of Moa Joint Venture, net of tax
18.7
(21.9)
Parent companies and subsidiaries loss before income tax
(51.8)
(84.0)
Income tax recoveries at the combined basic rate of 23.5% (2023 – 23.4%)
(12.2)
(19.7)
Increase (decrease) in taxes resulting from:
Difference between Canadian and foreign tax rates
(0.2)
(2.7)
Non-recognition of tax assets
12.6
25.2
Non-deductible losses and write-downs
3.2
-
Other items
(0.8)
(0.6)
$
2.6 $
2.2
Sherritt International Corporation 107
Deferred tax assets (liabilities) relate to the following temporary differences and loss carry forwards:
Canadian $ millions, for the year ended December 31, 2024
Recognized
in other
Recognized
comp-
Opening
in net
rehensive
Closing
balance
loss
loss
balance
Deferred tax assets
Property, plant and equipment
$
0.3 $
(0.2) $
- $
0.1
Other financial reserves
0.1
0.9
-
1.0
Deferred tax assets
0.4
0.7
-
1.1
Set off against deferred tax liabilities
-
-
$
0.4
$
1.1
Deferred tax liabilities
Property, plant and equipment and intangible assets
$
(0.3) $
0.7 $
- $
0.4
Cuban tax contingency reserve
(1.0)
(0.3)
-
(1.3)
Other financial reserves
0.7
(0.7)
-
-
Deferred tax liabilities
(0.6)
(0.3)
-
(0.9)
Set off against deferred tax assets
-
-
Net deferred tax (liabilities) assets
$
(0.2) $
0.4 $
- $
0.2
Canadian $ millions, for the year ended December 31, 2023
Recognized
in other
Recognized
comp-
Opening
in net
rehensive
Closing
balance
loss
loss
balance
Deferred tax assets
Property, plant and equipment
$
0.7 $
(0.4) $
- $
0.3
Other financial reserves
0.1
-
-
0.1
Deferred tax assets
0.8
(0.4)
-
0.4
Set off against deferred tax liabilities
(0.8)
-
$
-
$
0.4
Deferred tax liabilities
Property, plant and equipment and intangible assets
$
(0.3) $
- $
- $
(0.3)
Cuban tax contingency reserve
(1.0)
-
-
(1.0)
Other financial reserves
0.1
0.6
-
0.7
Deferred tax liabilities
(1.2)
0.6
-
(0.6)
Set off against deferred tax assets
0.8
-
Net deferred tax (liabilities) assets
$
(0.4) $
0.2 $
- $
(0.2)
As at December 31, 2024, the Corporation had taxable temporary differences of $521.4 million (December 31, 2023 - $409.9
million) associated with investments in subsidiaries and the Moa JV for which no deferred tax liabilities have been recognized,
as the Corporation is able to control the timing of the reversal of these temporary differences and it is not probable that these
temporary differences will reverse in the foreseeable future.
As at December 31, 2024, the Corporation had non-capital losses of $958.6 million (December 31, 2023 - $996.4 million) and
capital losses of $1,183.8 million (December 31, 2023 - $1,129.3 million) which may be used to reduce future taxable income.
The Corporation has not recognized a deferred tax asset on $958.6 million (December 31, 2023 - $996.4 million) of non-capital
losses, $1,183.8 million (December 31, 2023 - $1,129.3 million) of capital losses and $112.2 million (December 31, 2023 - $138.4
million) of other deductible temporary differences since the realization of any related tax benefit through future taxable profits is
not probable. Included in the other deductible temporary differences of $112.2 million is an amount of $27.8 million pertaining
to the Restricted Interest and Financing Expenses (“RIFE”) under the Excessive Interest and Financing Limitation (“EIFEL”)
regime which was enacted on June 20, 2024. The capital losses have no expiry dates and the other deductible temporary
differences do not expire under current tax legislation.
Notes to the consolidated financial statements
108 Sherritt International Corporation
The non-capital losses are located in the following countries and expire as follows:
Non-capital
Canadian $ millions, as at December 31, 2024
Expiry
losses
Canada
2026-2044 $
777.5
Other jurisdictions
Various
181.1
10. LOSS PER SHARE
Canadian $ millions, except share amounts in millions and per share amounts in dollars, for the years ended December 31
2024
2023
Net loss from continuing operations
$
(73.1)
$
(64.3)
Earnings (loss) from discontinued operations, net of tax
0.3
(0.3)
Net loss for the year – basic and diluted
$
(72.8)
$
(64.6)
Weighted-average number of common shares – basic and diluted(1)
397.3
397.3
Net loss from continuing operations per common share:
Basic and diluted
$
(0.18)
$
(0.16)
Earnings (loss) from discontinued operations, net of tax, per common share:
Basic and diluted
$
0.00
$
(0.00)
Net loss per common share:
Basic and diluted
$
(0.18)
$
(0.16)
(1)
The determination of the weighted-average number of common shares – diluted excludes 9.9 million shares related to stock options that were anti-dilutive for the year
ended December 31, 2024 (6.6 million shares that were anti-dilutive for the year ended December 31, 2023).
11. FINANCIAL INSTRUMENTS
Cash and cash equivalents
Cash and cash equivalents consist of:
2024
2023
Canadian $ millions, as at
December 31
December 31
Cash equivalents(1)
$
0.2 $
0.1
Cash held in banks
145.5
119.0
$
145.7 $
119.1
(1)
The financial instrument fair value measurement hierarchy for cash equivalents is level 1.
Cash and cash equivalents of the Corporation and its wholly-owned subsidiaries held in Canada was $32.0 million as at
December 31, 2024 (December 31, 2023 - $21.5 million) and is held in major currencies.
The Corporation’s cash balances are deposited with major financial institutions rated investment grade by independent rating
agencies, except for institutions located in Cuba that are not rated. The total cash held in Cuban bank deposit accounts was
$113.1 million as at December 31, 2024 (December 31, 2023 - $96.3 million).
As at December 31, 2024, $111.4 million of the Corporation’s cash and cash equivalents was held by Energas in Cuban bank
deposit accounts (December 31, 2023 - $93.9 million). These funds are for use locally by the joint operation, including repayment
of Energas’ payable to GNC (note 15) in Cuban pesos (“CUP”), and for payments under the Energas Payment Agreement (“Moa
Swap”). The Moa Swap facilitates the payment of Canadian dollars from the Moa JV to Energas for the foreign operating and
maintenance costs of Energas, as well as to cover future payments owed to Sherritt, including dividends to Sherritt in Canada
in return for CUP. Annually, the Moa Swap provides Energas with the equivalent of approximately US$50.0 million in Canadian
dollars.
Sherritt International Corporation 109
Trade accounts receivable, net
2024
2023
Canadian $ millions, as at
December 31
December 31
Trade accounts receivable
$
112.5 $
100.0
Allowance for expected credit losses
(20.3)
(18.9)
Accounts receivable from Moa Joint Venture
37.6
44.7
Other
21.6
25.3
$
151.4 $
151.1
Aging of trade accounts receivable, net
2024
2023
Canadian $ millions, as at
December 31
December 31
Not past due
$
132.6 $
118.3
Past due no more than 30 days
12.2
24.7
Past due for more than 30 days but no more than 60 days
1.3
1.5
Past due for more than 60 days
5.3
6.6
$
151.4 $
151.1
Allowance for expected credit losses
Financial assets measured at amortized cost are presented net of their allowances for expected credit losses within the
consolidated statements of financial position.
For the year ended December 31, 2024
Foreign exchange and other non-
cash items
As at
Revaluation(1)
As at
2023
2024
Canadian $ millions
December 31
December 31
Lifetime expected credit losses
Trade accounts receivable, net
$
(18.9) $
- $
(1.4) $
(20.3)
For the year ended December 31, 2023
Foreign exchange and other non-
cash items
As at
Revaluation(1)
As at
2022
2023
Canadian $ millions
December 31
December 31
Lifetime expected credit losses
Trade accounts receivable, net
$
(19.5) $
- $
0.6 $
(18.9)
(1)
Revaluation of allowances for expected credit losses are recognized within net finance expense (note 8).
Fair value measurement
As at December 31, 2024, the carrying amounts of cash and cash equivalents; restricted cash; trade accounts receivable, net;
current portion of advances, loans receivable and other financial assets; current portion of loans and borrowings; current portion
of other financial liabilities; and trade accounts payable and accrued liabilities are at fair value or approximate fair value due to
their immediate or short terms to maturity.
The fair values of non-current loans and borrowings and other non-current financial assets and liabilities approximate their
carrying amount except as indicated in the below table. Due to the use of judgment and uncertainties in the determination of the
estimated fair values, these values should not be interpreted as being realizable in the immediate term.
Notes to the consolidated financial statements
110 Sherritt International Corporation
The following table presents financial instruments with carrying values different from their fair values:
2024
2023
Canadian $ millions, as at
Note
December 31
December 31
Hierarchy
Carrying
Fair
Carrying
Fair
level
value
value
value
value
Liabilities:
8.50% second lien secured notes due 2026(1)
15
1 $
238.8 $
111.8 $
235.6 $
179.3
10.75% unsecured PIK option notes due 2029(1)
15
1
66.5
25.0
63.2
43.1
(1)
The fair values of the 8.50% second lien secured notes due 2026 and 10.75% unsecured PIK option notes due 2029 are based on market closing prices.
The following table presents financial instruments measured at fair value through profit or loss on a recurring basis:
Hierarchy
2024
2023
Canadian $ millions, as at
Note
level
December 31
December 31
Fair value through profit or loss
Assets:
GNC receivable
12
3 $
203.3 $
217.8
Nickel put options
12
2
-
-
Natural gas swap receivable
12
2
0.8
-
Liabilities:
Energas payable
15
3
75.2
75.4
Fair value hierarchy
The GNC receivable (note 12) is a financial instrument subsequently measured at FVTPL and the Energas payable (note 15) is
a financial instrument designated at FVTPL at initial recognition, as it contains an embedded derivative. Their fair values are
determined using discounted cash flows in a Monte Carlo simulation model, which uses inputs, some of which are not based on
observable market data and require significant judgment. As a result, the GNC receivable and Energas payable are included in
Level 3 of the fair value hierarchy. The Monte Carlo simulation model includes the following inputs: forecast in-kind nominal
cobalt prices, forecast cobalt price volatility, forecast cobalt volumes, forecast foreign exchange rates, nominal discount rates
and available amounts for cash payments. Forecast in-kind nominal cobalt prices and the discount rate are significant
unobservable inputs for the GNC receivable. The Corporation’s valuation process, including its valuation policy and procedures
for fair value measurements included in Level 3, is determined by the Corporation’s management and fair value is calculated
each reporting period with the assistance of a third-party valuation specialist. Fair value measurement, and changes in fair value
from period to period, are reviewed for reasonability by management each reporting period.
The following significant unobservable inputs were used to determine the fair value of the GNC receivable as at December 31,
2024:
Forecast in-kind nominal cobalt prices from US$9/lb to US$12/lb (December 31, 2023 - US$12/lb to US$17/lb). A $10
increase in forecast in-kind nominal cobalt prices would increase the fair value by $9.1 million (December 31, 2023 -
$12.5 million), while a $10 decrease in forecast in-kind nominal cobalt prices would decrease the fair value by $9.2
million (December 31, 2023 - $15.8 million). When the GNC receivable is settled with cobalt, settlement is based on an
in-kind value of cobalt, calculated as a cobalt reference price from the month preceding distribution, modified mutually
between the Corporation and GNC in consideration of selling costs incurred by the Corporation.
Discount rate of 12% (December 31, 2023 - 11%). A 5 percentage point increase in the discount rate would decrease
the fair value by $23.4 million (December 31, 2023 - $24.8 million), while a 5 percentage point decrease in the discount
rate would increase the fair value by $26.8 million (December 31, 2023 - $29.1 million).
Sherritt International Corporation 111
The following is a reconciliation of the fair value of the GNC receivable:
2024
2023
Canadian $ millions, for the years ended
Note
December 31
December 31
Balance, beginning of the year
$
217.8 $
279.1
Gain on revaluation of GNC receivable in net finance expense
8
0.4
14.7
Settlements
(14.9)
(76.0)
Balance, end of the year
12 $
203.3 $
217.8
The following is a reconciliation of the fair value of the Energas payable:
2024
2023
Canadian $ millions, for the years ended
Note
December 31
December 31
Balance, beginning of the year
$
75.4 $
82.6
(Gain) loss on revaluation of Energas payable in net finance expense
8
(0.2)
7.6
Settlements
-
(14.8)
Balance, end of the year
15 $
75.2 $
75.4
12. ADVANCES, LOANS RECEIVABLE AND OTHER FINANCIAL ASSETS
2024
2023
Canadian $ millions, as at
Note
December 31
December 31
Advances and loans receivable
GNC receivable(1)
11 $
203.3
$
217.8
Moa JV revolving-term credit facility
-
30.3
Other financial assets
Nickel put options
11
-
-
Natural gas swap receivable
11
0.8
-
Finance lease receivables
1.1
1.9
205.2
250.0
Current portion of advances, loans receivable and other financial assets(2)
(33.6)
(79.8)
Non-current portion of advances, loans receivable and other financial assets
$
171.6
$
170.2
(1)
As at December 31, 2024, the non-current portion of the GNC receivable agreement is $170.8 million (December 31, 2023 - $169.2 million).
(2)
Included in the current portion of advances, loans receivable and other financial assets as at December 31, 2024 is the current portion of the GNC receivable of $32.5
million (December 31, 2023 - $48.6 million) and the current portion of the Moa Joint Venture revolving-term credit facility of nil (December 31, 2023 - $30.3 million), of
which nil is the principal balance (December 31, 2023 - $30.0 million) to fund working capital.
GNC receivable
The principal balance of the GNC receivable as at December 31, 2024 was $277.1 million (December 31, 2023 - $292.0 million),
reflecting finished cobalt and cash settlements of $14.9 million during the year ended December 31, 2024.
No interest accrues on the Corporation’s GNC receivable over the five-year period of the Cobalt Swap. In the event that the
GNC receivable is not fully repaid by December 31, 2027, interest will accrue retroactively at 8.0% from January 1, 2023 on the
unpaid principal amount as at December 31, 2027, and the unpaid principal and interest amounts will become due and payable
by GNC to the Corporation.
Under the Cobalt Swap, over the five years beginning January 1, 2023, the Moa JV, at the discretion of its Board of Directors
and subject to available liquidity, will dividend a maximum of 2,082 tonnes of finished cobalt annually to the joint venture partners.
Accordingly, Sherritt will receive a maximum of 1,041 tonnes of finished cobalt dividends per year in respect of its 50% share of
the Moa JV. GNC will redirect its 50% share of the total Moa JV dividends, up to 1,041 tonnes of finished cobalt per year, to
Sherritt as repayment towards the outstanding receivables, provided that the total cobalt volume redirected has a value of at
least US$57.0 million, subject to the following:
if the total annual finished cobalt dividend redirected by GNC has a value of less than US$57.0 million, GNC’s share of
any cash distributions from the Moa JV in such year will be redirected to Sherritt until the value of finished cobalt and
cash distributions in the aggregate totals US$57.0 million;
if the maximum cobalt volume distributed (1,041 tonnes) is not met in a given year, the volume deficit will be added to
the threshold in the following year; and
Notes to the consolidated financial statements
112 Sherritt International Corporation
any shortfall in the annual minimum payment will also be added to the following year, such that the full repayment is
made within five years.
The settlement of the GNC receivable is based on an in-kind value of cobalt, calculated as a cobalt reference price from the
month preceding distribution, modified mutually between the Corporation and GNC in consideration of selling costs incurred by
the Corporation. Upon receipt of the finished cobalt dividends, the title to both Sherritt and GNC’s redirected share of the finished
cobalt will be transferred immediately to Sherritt and the physical product will be moved to a Sherritt warehouse in Fort
Saskatchewan, from which Sherritt will sell the finished cobalt in the open market.
Moa JV revolving-term credit facility
As at December 31, 2024, nil was drawn by the Moa JV (December 31, 2023 - $30.0 million to fund working capital).
The Moa JV revolving-term credit facility is provided by the Corporation to the two non-Cuban operating companies of the Moa
JV to fund working capital and capital expenditures. The maximum credit available is $75.0 million and borrowings on the facility
are available to fund working capital and capital expenditures of $45.0 million and $30.0 million, respectively.
During the year ended December 31, 2024, the Moa JV revolving-term credit facility was amended to extend its maturity for one
year from April 30, 2025 to April 30, 2026. The amendment included terms to transition the interest rate of bankers’ acceptance
plus 4.00% to Canadian Overnight Repo Rate Average (“CORRA”) plus 4.00%, consistent with the Corporation’s interest rates
on the syndicated revolving-term credit facility (“Credit Facility”). There were no other changes to the terms or restrictions above.
Nickel put options
During the year ended December 31, 2024, the Corporation purchased put options on 3,876 tonnes of nickel, or 646 tonnes per
month, at an exercise price of US$8.16/lb at a cost of $2.2 million for a six-month period from June 1, 2024 to November 30,
2024. All settlements were received in cash monthly based on the average monthly nickel price on the London Metal Exchange.
The economic hedging strategy provided Sherritt with full exposure to upward changes in nickel prices, while protecting against
downward changes in nickel prices by providing a minimum price of US$8.16/lb on approximately 25% of the 2024 nickel
production from the Moa JV during the six-month period. The nickel put options are derivatives measured at fair value through
profit or loss.
The nickel put options are measured at fair value using indicative mid-point prices based on the Black-Scholes model using
observable inputs as at each reporting date, as follows: average monthly London Metal Exchange nickel price, exercise price,
risk-free rate, volatility and time to expiry.
During the year ended December 31, 2024, $8.1 million of cash was received and $5.9 million of realized gains were recognized
within other financing items in net finance expense (note 8) upon settlement of nickel put options.
13. INVENTORIES
2024
2023
Canadian $ millions, as at
December 31
December 31
Raw materials
$
0.1 $
-
Materials in process
0.2
1.2
Finished products
10.8
9.7
11.1
10.9
Spare parts and operating materials
32.2
28.9
$
43.3 $
39.8
Finished products inventories includes $5.0 million of finished cobalt pursuant to the Cobalt Swap (December 31, 2023 - $0.8
million). For the year ended December 31, 2024, the cost of inventories included in cost of sales was $79.3 million, including
$2.2 million of finished cobalt inventories received pursuant to the Cobalt Swap and sold to customers ($177.0 million and $86.1
million for the year ended December 31, 2023, respectively).
Sherritt International Corporation 113
14. NON-FINANCIAL ASSETS
Property, plant and equipment
Canadian $ millions, for the year ended December 31
2024
Right-of-use
Plant,
assets - Plant,
Oil and Gas
equipment
equipment
properties
and land
and land
Total
Cost
Balance, beginning of the year
$
60.5 $
622.8 $
14.4 $
697.7
Reclassified from right-of-use assets - plant, equipment and land to plant,
equipment and land
-
0.8
(0.8)
-
Additions
-
6.7
0.7
7.4
Additions and changes in estimates to environmental rehabilitation provisions
-
(1.2)
-
(1.2)
Disposals and derecognition
(61.7)
(3.4)
-
(65.1)
Effect of movements in exchange rates
1.2
25.6
0.2
27.0
Balance, end of the year
$
- $
651.3 $
14.5 $
665.8
Depletion, depreciation and impairment losses
Balance, beginning of the year
$
60.5 $
471.7 $
6.3 $
538.5
Reclassified from right-of-use assets, plant - equipment and land to plant,
equipment and land
-
0.7
(0.7)
-
Depletion and depreciation
-
12.4
1.1
13.5
Disposals and derecognition
(61.7)
(2.9)
-
(64.6)
Effect of movements in exchange rates
1.2
25.0
0.1
26.3
Balance, end of the year
$
- $
506.9 $
6.8 $
513.7
Net book value
$
- $
144.4 $
7.7 $
152.1
Canadian $ millions, for the year ended December 31
2023
Right-of-use
Plant,
assets - Plant,
Oil and Gas
equipment
equipment
properties
and land
and land
Total
Cost
Balance, beginning of the year
$
59.8 $
608.2 $
13.9 $
681.9
Additions
-
20.1
0.5
20.6
Additions and changes in estimates to environmental rehabilitation provisions
-
4.3
-
4.3
Disposals and derecognition
-
(2.8)
-
(2.8)
Effect of movements in exchange rates
0.7
(7.0)
-
(6.3)
Balance, end of the year
$
60.5 $
622.8 $
14.4 $
697.7
Depletion, depreciation and impairment losses
Balance, beginning of the year
$
59.8 $
468.4 $
5.1 $
533.3
Depletion and depreciation
-
12.7
1.2
13.9
Disposals and derecognition
-
(2.6)
-
(2.6)
Effect of movements in exchange rates
0.7
(6.8)
-
(6.1)
Balance, end of the year
$
60.5 $
471.7 $
6.3 $
538.5
Net book value
$
- $
151.1 $
8.1 $
159.2
Plant,
equipment
Canadian $ millions
and land
Assets under construction, included in above
As at December 31, 2024
$
33.9
As at December 31, 2023
30.6
Notes to the consolidated financial statements
114 Sherritt International Corporation
Intangible assets
Canadian $ millions, for the year ended December 31
2024
Service
Contractual
Exploration
concession
arrange-
and
arrange-
ments
evaluation
ments
Other
Total
Cost
Balance, beginning of the year
$
27.0 $
116.1 $
230.7 $
9.1 $
382.9
Disposals
-
(108.8)
-
-
(108.8)
Effects of movements in exchange rates
-
0.6
19.7
-
20.3
Balance, end of the year
$
27.0 $
7.9 $
250.4 $
9.1 $
294.4
Amortization and impairment losses
Balance, beginning of the year
$
26.9 $
108.6 $
223.8 $
9.1 $
368.4
Amortization
-
-
0.5
-
0.5
Disposals
-
(109.1)
-
-
(109.1)
Impairment
-
8.4
-
-
8.4
Effect of movements in exchange rates
-
-
19.1
-
19.1
Balance, end of the year
$
26.9 $
7.9 $
243.4 $
9.1 $
287.3
Net book value
$
0.1 $
- $
7.0 $
- $
7.1
Canadian $ millions, for the year ended December 31
2023
Service
Contractual
Exploration
concession
arrange-
and
arrange-
ments
evaluation
ments
Other
Total
Cost
Balance, beginning of the year
$
27.0 $
115.9 $
235.1 $
9.1 $
387.1
Additions
-
0.4
1.0
-
1.4
Effect of movements in exchange rates
-
(0.2)
(5.4)
-
(5.6)
Balance, end of the year
$
27.0 $
116.1 $
230.7 $
9.1 $
382.9
Amortization and impairment losses
Balance, beginning of the year
$
26.9 $
108.6 $
228.7 $
9.1 $
373.3
Amortization
-
-
0.4
-
0.4
Effect of movements in exchange rates
-
-
(5.3)
-
(5.3)
Balance, end of the year
$
26.9 $
108.6 $
223.8 $
9.1 $
368.4
Net book value
$
0.1 $
7.5 $
6.9 $
- $
14.5
Exploration and evaluation
Exploration and evaluation assets include two oil production-sharing contracts (“PSCs”) with agencies of the Cuban government,
respectively referred to as Block 6A and Block 10, in the Oil and Gas segment. Exploration and evaluation assets include
capitalized expenditures on these two blocks, and primarily consist of geological, geophysical and engineering expenditures.
During the year ended December 31, 2024, the Corporation recognized an impairment loss of $8.4 million related to Blocks 6A
and 10 as substantive expenditures on further exploration in these blocks are neither budgeted nor planned in the short term.
The Corporation retains its contractual rights to explore Blocks 10 and 6A, with the Block 10 contract expiring in 2043 and the
Block 6A contract expiring in 2045, which provides the Corporation with optionality for future investment. The recoverable
amount of these blocks was measured based on value in use using the present value of expected future cash flows, which
resulted in a recoverable amount of nil. The impairment loss consists of all exploration and evaluation assets related to Blocks
6A and 10, including geological, geophysical and engineering expenditures.
Service concession arrangements
Service concession arrangements include the Puerto Escondido/Yumuri pipeline and the Energas Boca de Jaruco power
generation facility in the Power segment.
Sherritt International Corporation 115
15. LOANS, BORROWINGS AND OTHER FINANCIAL LIABILITIES
Loans and borrowings
For the year ended December 31, 2024
Cash flows
Non-cash
h
As at
As at
2023
Increase in other
loans and
borrowings
Repurchase
of notes
2024
Canadian $ millions
Note
December 31
Other
December 31
8.50% second lien secured notes due 2026
11 $
235.6 $
- $
- $
3.2 $
238.8
10.75% unsecured PIK option notes due 2029
11
63.2
-
(1.9)
5.2
66.5
Credit Facility
56.8
11.0
-
(0.6)
67.2
$
355.6 $
11.0 $
(1.9) $
7.8 $
372.5
Current portion of loans and borrowings
(56.8)
(67.2)
Non-current portion of loans and borrowings
$
298.8
$
305.3
For the year ended December 31, 2023
Cash flows
Non-cash changes
As at
As at
2022
Increase in
other loans and
borrowings
Repurchase
2023
Canadian $ millions
December 31
of notes
Other
December 31
8.50% second lien secured notes due 2026
$
233.6 $
-
- $
2.0 $
235.6
10.75% unsecured PIK option notes due 2029
70.8
-
(7.8)
0.2
63.2
Credit Facility
46.5
13.0
-
(2.7)
56.8
$
350.9 $
13.0 $
(7.8) $
(0.5) $
355.6
Current portion of loans and borrowings
(46.5)
(56.8)
Non-current portion of loans and borrowings
$
304.4
$
298.8
8.50% second lien secured notes due 2026 (“Second Lien Notes”)
As at December 31, 2024, the outstanding principal amount of the Second Lien Notes is $221.3 million (December 31, 2023 -
$221.3 million) and the notes mature on November 30, 2026. Interest is payable semi-annually in cash in April and October.
The indenture governing the Second Lien Notes (the “Second Lien Notes Indenture”) requires mandatory redemptions from
excess cash (subject to the minimum liquidity condition noted below and the other terms and conditions set forth in the Second
Lien Notes Indenture). The mandatory Excess Cash Flow redemption provision is in effect beginning with the two-quarter period
ending June 30, 2021 and mandatory redemptions are based on Excess Cash Flow in the first half and second half of each year
(a measure calculated based on cash provided (used) by operating activities excluding Energas, less sustaining property, plant
and equipment expenditures excluding Energas, plus all cash distributed by Energas to the Corporation held in Canada, including
cash distributions received by the Corporation from GNC pursuant to the Cobalt Swap and its assumption of the Energas CSA),
which mandatory redemption shall be required to be made only if the Corporation has minimum liquidity of $75.0 million before
and after the interest payment dates in April and October of each year calculated in accordance with the Second Lien Notes
Indenture. Expected mandatory Excess Cash Flow redemptions have been included in the calculation of the effective interest
rate of the Second Lien Notes.
For the two-quarter period ended December 31, 2024, Excess Cash Flow, as defined in the Second Lien Notes Indenture, was
$5.5 million. At the interest payment date in April 2025, the Corporation will be required to redeem, at par, total Second Lien
Notes up to an amount equal to 50% of Excess Cash Flow, or $2.8 million, subject to the minimum liquidity of $75.0 million being
maintained before and after such payment is made, as defined in the indenture agreement.
Notes to the consolidated financial statements
116 Sherritt International Corporation
The minimum liquidity amount is defined in the Second Lien Notes Indenture as all unrestricted cash, cash equivalents and
short-term investments measured in accordance with IFRS Accounting Standards, held by the Corporation and its restricted
subsidiaries in bank accounts located in Canada, less the principal amount drawn on the Credit Facility, plus the total amount of
cash used on all repurchases of Second Lien Notes and 10.75% unsecured PIK option notes due 2029 during the relevant two-
fiscal quarter period. As a result, the $0.4 million of cash used to repurchase unsecured PIK option notes during the six months
ended December 31, 2024 and any outstanding amounts drawn on the syndicated revolving-term credit facility as at the interest
payment date in April 2025 will be taken into account when calculating the minimum liquidity amount. The minimum liquidity
provision of the indenture agreement was not met as at October 30, 2024, the most recent interest payment date.
The Second Lien Notes also include an option for the Corporation to redeem all or part of the notes outstanding prior to maturity
at a price equal to 107% of the principal amount so redeemed, which was determined to be an embedded derivative. The fair
value of this embedded derivative was nominal at inception and has not been presented separately from the Second Lien Notes
within the Corporation’s consolidated statements of financial position.
The Second Lien Notes Indenture provides for a 7% premium on (i) any optional early redemptions made at the election of the
Corporation prior to maturity as mentioned above, and (ii) on repayment on the maturity date, provided that the aggregate amount
of all premium payments paid by Sherritt with respect to the foregoing shall collectively not be less than $25.0 million. Mandatory
redemptions do not incur a premium and ultimately do not affect the timing of when this 7% premium is paid. This premium is
due upon the earlier of optional redemption and maturity of the Second Lien Notes and is accreted over the life of the instrument.
Under the Second Lien Notes Indenture, the Corporation is subject to various restrictions, which limit, among other things, the
incurrence of indebtedness, liens, asset sales and payment of distributions and other restricted payments, unless certain financial
ratios are met and subject to certain customary carve-outs and permissions, often referred to as “baskets”. If the ratio of earnings
before interest, taxes, depreciation and amortization (“EBITDA”)-to-interest expense, both as defined in the agreement, is above
2.5:1, unsecured debt can be incurred without the use of a basket and restricted payments can be made to the extent the
Corporation has sufficient room in an applicable basket, including the “builder basket” as calculated under the Second Lien Notes
Indenture. As at December 31, 2024, the Corporation met the required financial ratio and has the capacity to make restricted
payments up to $122.2 million.
Other non-cash changes consists of gains on revision of cash flows and interest and accretion of a 7% premium.
10.75% unsecured PIK option notes due 2029 (“PIK Notes”)
As at December 31, 2024, the outstanding principal amount of the PIK Notes is $66.7 million (December 31, 2023 - $63.4 million)
and the notes mature on August 31, 2029. Interest is payable semi-annually in cash or in-kind, at Sherritt’s election, in January
and July. Expected payments of interest in-kind have been included in the calculation of the effective interest rate.
During the year ended December 31, 2024, the Corporation repurchased $3.7 million of principal of the PIK Notes at a cost of
$1.9 million, plus $0.1 million of accrued interest, resulting in a gain on repurchase of notes of $1.8 million (note 8). During the
year ended December 31, 2023, the Corporation repurchased $11.2 million of principal of the PIK Notes at a cost of $7.8 million,
plus $0.1 million of accrued interest, resulting in a gain on repurchase of notes of $3.5 million (note 8).
During the year ended December 31, 2024, in accordance with the terms of the PIK Notes Indenture, the Corporation elected
not to pay cash interest of $6.9 million and added the payment-in-kind interest to the principal amount owed to noteholders.
During the year ended December 31, 2023, the Corporation elected not to pay cash interest of $3.8 million in January 2023 and
added the payment-in-kind interest to the principal amount owed to noteholders and paid $3.4 million of interest in cash in July
2023.
Subsequent to period end, in accordance with the terms of the PIK Notes Indenture, the Corporation elected not to pay cash
interest due in January 2025 of $3.6 million and added the payment-in-kind interest to the principal amount owed to noteholders.
Other non-cash changes consist of the gain on repurchase of notes, net of capitalized interest and accretion. Accrued and
unpaid interest on these notes is capitalized to the principal balance semi-annually in January and July at the election of the
Corporation.
Sherritt International Corporation 117
As at December 31, 2024, the outstanding principal amount of the Credit Facility is $69.0 million (December 31, 2023 - $58.0
million) and the Credit Facility matures on April 30, 2026.
The maximum credit available is $100.0 million and the interest rate is CORRA plus 4.00%. Borrowings on the Credit Facility
are available to fund working capital and capital expenditures. Borrowings under the Credit Facility for spending on capital
expenditures cannot exceed $75.0 million in a fiscal year. This restriction does not apply to capital expenditures of Moa Nickel
S.A. The total available draw is based on eligible receivables and inventories, which are pledged as collateral. Certain cash held
in banks in Canada is also pledged as collateral.
The facility is subject to the following financial covenants and restrictions:
Net Available Cash covenant, as defined in the agreement, of $25.0 million. The amount compared against this
covenant is composed of cash and cash equivalents and short-term investments of the Corporation and its wholly-
owned subsidiaries held in Canada, plus undrawn amounts on the Credit Facility;
Senior Secured Net Debt-to-EBITDA covenant, as defined in the agreement, of less than 2:1. Senior Secured Net Debt
is calculated as first-lien debt, or amounts drawn on the Credit Facility, any derivative liability and any additional security
ranked equal to first-lien debt, less cash and cash equivalents and short-term investments of the Corporation and its
wholly-owned subsidiaries held in Canada up to $25.0 million. EBITDA is calculated on a trailing 12-month basis with
Energas included on a cash basis;
EBITDA-to-Interest Expense covenant, as defined in the agreement, of not less than 1:1 and 1.5:1 for the quarters
ended June 30, 2024 and September 30, 2024, respectively and not less than 2:1 thereafter. EBITDA is calculated on
a trailing 12-month basis with Energas included on a cash basis. Interest expense excludes the payment-in-kind (PIK)
interest on the Corporation’s PIK Notes; and
Minimum Tangible Net Worth covenant, as defined in the agreement, of $600.0 million plus 50% of positive net
earnings. Tangible Net Worth is calculated as total assets, less intangible assets, less amounts drawn on the Credit
Facility, less the principal amount of the Second Lien Notes, less the principal amount of the PIK Notes, less any
derivative liability and less any additional secured financing ranked equal to first-lien debt.
As at December 31, 2024, the Corporation has $0.6 million of letters of credit outstanding pursuant to this facility (December 31,
2023 - $0.5 million).
During the year ended December 31, 2024, the Credit Facility was amended to (i) extend its maturity for one year from April 30,
2025 to April 30, 2026 and (ii) change the EBITDA-to-Interest Expense covenant, as defined in the agreement, to not less than
1:1 and 1.5:1 for the quarters ended June 30, 2024 and September 30, 2024, respectively, and not less than 2:1 thereafter. The
amendment included terms to transition the interest rate of bankers’ acceptance plus 4.00% to CORRA plus 4.00%. There were
no other significant changes to the terms, financial covenants or restrictions.
During the year ended December 31, 2023, the Credit Facility was amended to (i) extend its maturity for one year from April 30,
2024 to April 30, 2025, (ii) add an accordion feature, which allows additional lenders to join the Credit Facility and increase the
maximum credit available by up to $25.0 million, subject to certain conditions and (iii) increase the permitted debt outside of the
Credit Facility from $25.0 million to $35.0 million, with no other significant changes to the terms, financial covenants or
restrictions.
Other non-cash changes consist of accretion and a gain due to revisions of cash flows.
Other financial liabilities
2024
2023
Canadian $ millions, as at
Note
December 31
December 31
Energas payable(1)
11 $
75.2 $
75.4
Lease liabilities
9.8
11.0
Share-based compensation liability
6, 17
3.2
6.7
Other financial liabilities
19.0
4.0
107.2
97.1
Current portion of other financial liabilities(2)
(34.9)
(22.5)
Non-current portion of other financial liabilities
$
72.3 $
74.6
(1)
As at December 31, 2024, the non-current portion of the Energas payable is $59.3 million (December 31, 2023 - $59.0 million).
Credit Facility
Notes to the consolidated financial statements
118 Sherritt International Corporation
(2)
As at December 31, 2024, the current portion of other financial liabilities includes the current portions of the Energas payable of $15.9 million (December 31, 2023 - $16.4
million), a share-based compensation liability of $2.0 million (December 31, 2023 - $4.2 million) and an other financial liability of $14.9 million (December 31, 2023 – nil) to
the Moa JV for distributions received that had not yet been declared as dividends. The other financial liability will be extinguished upon declaration as dividends.
Energas payable
During the year ended December 31, 2024, nil cash was paid by Energas to GNC in Cuban pesos (December 31, 2023 - $14.8
million (33⅓% basis)). The outstanding principal balance of the Energas payable as at December 31, 2024 is $97.3 million
(December 31, 2023 - $97.3 million) (33⅓% basis). Subsequent to period end, $5.0 million (33⅓% basis) of cash was paid by
Energas to GNC in Cuban pesos, reducing the principal amount outstanding to $92.3 million (33⅓% basis).
No interest accrues on Energas’ payable to GNC over the five-year period of the Cobalt Swap. In the event that the Energas
payable is not fully repaid to GNC by December 31, 2027, interest will accrue retroactively at 8.0% from January 1, 2023 on the
unpaid principal amount as at December 31, 2027, and the unpaid principal and interest amounts will become due and payable
by Energas to GNC.
16. PROVISIONS, GUARANTEES AND CONTINGENCIES
2024
2023
Canadian $ millions, as at
December 31
December 31
Environmental rehabilitation provisions
$
107.3 $
125.7
Other provisions
2.2
2.3
109.5
128.0
Current portion of provisions(1)
(4.8)
(24.4)
Non-current portion of provisions
$
104.7 $
103.6
(1)
As at December 31, 2024, the current portion of provisions includes a current environmental rehabilitation provision of $3.9 million related to the Corporation’s legacy
Spanish Oil and Gas operations (December 31, 2023 - $23.4 million).
Environmental rehabilitation provisions
Provisions for environmental rehabilitation obligations are recognized in respect of Fort Site in the Metals reportable segment
and the Oil and Gas reportable segment and include rehabilitation associated with infrastructure and buildings, including fertilizer
and utilities facilities at Fort Site, and legacy oil and gas facilities. The obligations normally take place at the end of the asset’s
useful life.
The following is a reconciliation of the environmental rehabilitation provisions:
Canadian $ millions, for the years ended December 31
Note
2024
2023
Balance, beginning of the year
$
125.7 $
103.6
Change in estimates
7.0
27.2
Gain on settlement of environmental rehabilitation provisions
-
(0.2)
Utilized during the year
(27.2)
(5.9)
Accretion
8
0.2
0.3
Effect of movement in exchange rates
1.6
0.7
Balance, end of the year
$
107.3 $
125.7
Change in estimates includes the impact of discount rates, which ranged from 3.3% to 8.5% as at December 31, 2024 (as at
December 31, 2023 – discount rates from 3.1% to 7.8%), and were applied to expected future cash flows to determine the
carrying value of the environmental rehabilitation provisions. During the year ended December 31, 2024, change in estimates
resulted in an increase to the Corporation’s environmental rehabilitation provisions primarily due to the devaluation of euro
compared to the U.S. dollar on a euro-denominated provision for the Corporation’s legacy Spanish Oil and Gas operations.
During the year ended December 31, 2023, change in estimates resulted in an increase in the environmental rehabilitation
provision for the Corporation’s legacy Spanish Oil and Gas operations of $25.8 million due to an increase in estimated
rehabilitation costs for specialized decommissioning work and additional decommissioning activities required by regulators which
were finalized during the fourth quarter of 2023.
The Corporation estimates that it will require approximately $192.4 million in undiscounted cash flows to settle these obligations.
The payments are expected to be funded by cash provided by operating activities.
Sherritt International Corporation 119
The environmental rehabilitation obligations held by the Corporation’s Spanish Oil and Gas operations are secured by a parent
company guarantee of €35.8 million until December 31, 2027. The parent company guarantee has no impact on the
Corporation’s available liquidity.
Contingencies
A number of the Corporation’s subsidiaries have operations located in Cuba. The United States of America has maintained a
general embargo against Cuba since the early 1960s, and the enactment in 1996 of the Cuban Liberty and Democratic Solidarity
(Libertad) Act (commonly known as the “Helms-Burton Act”) extended the reach of the U.S. embargo. Title III of the Helms-
Burton Act creates a private cause of action and authorizes U.S. nationals with claims to confiscated property in Cuba to file suit
in U.S. courts against persons that may be "trafficking" in that property. All Presidents of the United States in office since the
enactment of the Helms-Burton Act suspended Title III for successive six-month periods until the first administration of President
Trump ceased that practice and allowed Title III to come into effect on May 2, 2019. Since that time, a number of lawsuits have
been filed pursuant to Title III in the United States against companies in the U.S., Canada and elsewhere. On January 14, 2025,
President Biden issued a six-month suspension of Title III prior to leaving office, however, President Trump then revoked the
suspension before it took effect, allowing Title III to remain in force. The Corporation has received letters in the past from U.S.
nationals claiming ownership of certain Cuban properties or rights in which the Corporation has an indirect interest, including in
relation to claims certified by the U.S. Foreign Claims Settlement Commission. However, Sherritt has not been subjected to any
lawsuits in this regard. In the event that any such lawsuits were to be filed, Sherritt does not believe that its operations would be
materially affected because Sherritt’s current minimal contacts with the United States would likely deprive any U.S. court of
personal jurisdiction over Sherritt. Furthermore, even if personal jurisdiction were exercised, any successful U.S. claimant would
currently have to seek enforcement of the U.S. court judgment outside the U.S. in order to reach material Sherritt assets.
Management believes it unlikely that a court in Canada or in any country in which Sherritt has material assets would enforce a
Helms-Burton Act judgment against it.
In addition to the above matter, the Corporation and its subsidiaries are also subject to routine legal proceedings and tax audits.
The Corporation does not believe that the outcome of any of these matters, individually or in aggregate, would have a material
adverse effect on its consolidated net earnings (loss), financial position or cash flows.
17. SHARE-BASED COMPENSATION PLANS
Equity-settled stock option plan
The Corporation maintains a stock option plan, pursuant to which shares of the Corporation may be issued as compensation.
Eligible participants are those persons designated from time to time by the Human Resources Committee (“the Committee”) from
among the executive officers and certain senior employees of the Corporation or its subsidiaries who occupy responsible
managerial or professional positions and who have the capacity to contribute to the success of the Corporation.
The maximum number of stock options issuable is 17,500,000. The remaining number of options which may be issued under the
stock option plan is 1,235,891 as at December 31, 2024. Under the stock option plan, the exercise price of each option equals
the volume-weighted average trading price of the Corporation’s shares over the five days prior to the date the option is granted.
An option’s maximum term is 10 years. Options vest on such terms as the Committee determines, generally in three equal
instalments on the annual anniversary date of the grant of the options. When options are exercised, the related options are
cancelled and the shares underlying such options are issued and are no longer available for issuance under the stock option plan.
In February 2024, the Corporation’s Board of Directors approved the grant of stock options to executive officers with an exercise
price of $0.28 (February 2023 - $0.53) and a maximum life of 7 years. The options vest and become exercisable in three equal
amounts on the annual anniversary date of the grant of the options. The number of these options granted during the year ended
December 31, 2024 was 3,758,382 (3,982,732 stock options during the year ended December 31, 2023).
Guarantees
Notes to the consolidated financial statements
120 Sherritt International Corporation
Canadian $, except as noted, for the years ended December 31
2024
2023
Share price at grant date
$
0.28
$
0.53
Exercise price
0.28
0.53
Risk-free interest rate (based on 7-year Government of Canada bonds)
3.50%
3.42%
Expected volatility
68%
70%
Expected dividend yield
0%
0%
Expected life of options
7 years
7 years
Weighted-average fair value of options granted during the year
$
0.19
$
0.36
Expected volatility is estimated based on the average historical share price volatility for a period equal to the expected life of the
option. The expected life of the option is estimated to equal its legal life at the time of grant. The expected dividend yield is
determined by comparing the expected dividend payment to the share price at grant date.
The following is a summary of stock option activity:
Canadian $, except number of options, for the years ended December 31
2024
2023
Weighted-
Weighted-
average
average
Number of
exercise
Number of
exercise
options
price
options
price
Outstanding, beginning of the year
6,612,673 $
0.83
2,701,741 $
1.40
Granted
3,758,382
0.28
3,982,732
0.53
Forfeited
(207,628)
0.53
-
-
Expired
(308,114)
2.24
(71,800)
5.14
Outstanding, end of the year
9,855,313 $
0.58
6,612,673 $
0.83
Options exercisable, end of the year
3,649,405 $
0.94
2,629,941 $
1.29
The following table summarizes information on stock options outstanding and exercisable:
As at December 31
2024
Weighted-
Exercisable
average
Weighted-
weighted-
remaining
average
average
Number
contractual
exercise
Number
exercise
Range of exercise prices
outstanding
life (years)
price
exercisable
price
$0.28 - $0.53
7,429,670
5.7 $
0.40
1,223,762 $
0.53
$0.54 - $1.20
1,670,476
1.4
0.83
1,670,476
0.83
$1.21 - $2.11
645,467
1.8
1.63
645,467
1.63
$2.12 - $2.98
109,700
0.4
2.98
109,700
2.98
Total
9,855,313
4.6 $
0.58
3,649,405 $
0.94
As at December 31, 2024, 9,855,313 stock options (December 31, 2023 – 6,612,673) remained outstanding for which the
Corporation has recognized a share-based compensation expense of $0.8 million for the year ended December 31, 2024
(expense of $0.7 million for the year ended December 31, 2023).
Sherritt International Corporation 121
Cash-settled share-based compensation plans
On an annual basis, the Corporation’s Board of Directors approves the grant of cash-settled share-based units to certain
employees. The units are in the form of: i) RSUs with no performance conditions, which vest at the end of three years and ii)
PSUs subject to performance conditions, which vest at the end of three years.
Cash payments for share-based units are primarily made in the first quarter of each year and are dependent upon the market
value of the Corporation's shares on the settlement date, and in the case of PSUs, cash payments are also dependent upon the
achievement of the performance conditions described below. The market value of the Corporation’s shares as at December 31,
2024 and December 31, 2023 was $0.16 and $0.29, respectively.
RSUs
Under the terms of the Executive Share Unit Plan, the RSUs are available to be granted to executives and employees. The
RSUs represent a right to receive a cash amount payable by the Corporation to a participant at the end of the vesting period for
RSUs determined by reference to the market price of the shares multiplied by the number of RSUs held by the participant. RSUs
are issued subject to vesting conditions, which are set by the Committee of the Board of Directors. RSUs vest not later than the
earlier of (a) the earlier of: (i) December 31 of the third calendar year following the calendar year in respect of which the RSUs
were granted or (ii) the date set out in the RSU grant agreement; and (b) the date of death of a participant. The vesting date set
out in the grant agreement is typically the third anniversary of the grant date. The Corporation shall redeem all of a participant’s
vested RSUs on the vesting date and may, at the discretion of the Committee, redeem all or any part of a participant’s unvested
RSUs prior to the vesting date.
Under the plan, each RSU awarded is equivalent to a share. A liability is accrued related to the units awarded and a
compensation expense is recognized in the consolidated statements of comprehensive income (loss) over the service period
required for employees to become fully entitled to the award. At the maturity date, the participant receives cash representing the
value of the units. The number of RSUs subject to no performance conditions outstanding at December 31, 2024 was 16,240,215
(December 31, 2023 – 15,178,344).
PSUs
PSUs represent a right to receive a cash amount payable by the Corporation to a participant at the end of the vesting period
determined by reference to the market price of the shares multiplied by the number of PSUs held by the participant as adjusted
for dividend equivalents credited, if any. Under the plan, each PSU awarded is equivalent to a share. A liability is accrued
related to the units awarded and a compensation expense is recognized in the consolidated statements of comprehensive
income (loss) over the 3-year service period required for employees to become fully entitled to the award. The PSUs are issued
subject to vesting conditions, including performance conditions, which are set by the Committee. The vesting of PSUs granted
prior to 2023 will be subject to the achievement of two equally-weighted performance conditions measured over the 3-year
vesting period: (i) the Corporation’s total shareholder return relative to benchmark indices composed of mining companies for
grants made in 2022 (a market condition); and (ii) certain specified internal measures related to achieving strategic objectives
and unit cost of production compared to budget (non-market conditions) and a service condition. The value of PSUs that vest
will vary from 0% to 200% based on the achievement of the market and non-market performance conditions. The number of
PSUs subject to these performance conditions outstanding as at December 31, 2024 was 5,032,342 (December 31, 2023 –
11,192,177).
During the years ended December 31, 2024 and December 31, 2023, the Corporation’s Board of Directors approved the grant
of PSUs to certain employees, the vesting of which will be subject to the achievement of the Corporation’s total shareholder
return relative to individual constituents of a benchmark mining index (a market condition) (the “disaggregated RTSR
performance condition”) and a service condition. Performance will be based on the percentile return of the Corporation as
compared to the constituents within the index. The value of PSUs that vest will vary from 0% to 200% based on the achievement
of the market performance condition. The number of PSUs subject to this performance condition outstanding as at December
31, 2024 was 17,795,725 (December 31, 2023 – 5,750,554).
Notes to the consolidated financial statements
122 Sherritt International Corporation
DSUs
Under the terms of the Non-Executive Directors’ DSU Plan, DSUs are available to be granted to non-executive directors. The
DSUs represent a right to receive a cash amount payable by the Corporation to a participant following departure from the Board
of Directors. The value payable is determined by reference to the market price of the shares multiplied by the number of DSUs
held by the participant as adjusted for dividend equivalents credited. DSUs vest on the later of (a) the grant date or (b) the date
that any terms of vesting conditions attached to the DSUs are satisfied. DSUs generally vest on the grant date. DSUs are
redeemed by the Corporation at the election of the participant by filing a notice of redemption not earlier than the participant’s
termination date and not later than December 1st of the calendar year following the termination date.
A total of 6,005,497 DSUs are outstanding and vested as at December 31, 2024, granted between 2012 and 2024.
A summary of the RSUs, PSUs and DSUs outstanding as at December 31, 2024 and 2023 and changes during the year ended
is as follows:
For the year ended December 31
2024
RSUs
PSUs
DSUs
Outstanding, beginning of the year
15,178,344
16,942,731
6,334,403
Granted
7,348,729
12,172,194
3,017,409
Exercised
(6,129,458)
(2,390,476)
(3,346,315)
Forfeited
(157,400)
(3,896,382)
-
Outstanding, end of the year
16,240,215
22,828,067
6,005,497
Units exercisable, end of the year
n/a
n/a
6,005,497
For the year ended December 31
2023
RSUs
PSUs
DSUs
Outstanding, beginning of the year
31,424,431
31,424,431
5,695,560
Granted
4,172,489
5,936,876
1,478,906
Exercised
(20,061,555)
(20,061,555)
(840,063)
Forfeited
(357,021)
(357,021)
-
Outstanding, end of the year
15,178,344
16,942,731
6,334,403
Units exercisable, end of the year
n/a
n/a
6,334,403
During the year ended December 31, 2024, the Corporation recognized a share-based compensation recovery of $0.5 million for
cash-settled share-based units, during which time the market value of the Corporation’s shares decreased by $0.13 and additional
units vested. During the year ended December 31, 2023, the Corporation recognized a share-based compensation recovery of
$2.2 million for cash-settled share-based units, during which time the market value of the Corporation’s shares decreased by
$0.21 and additional units vested.
Measurement of fair values at grant date
The fair value of the RSUs, PSUs and DSUs are determined by reference to the market value and performance conditions, as
applicable, of the Corporation’s shares at the time of grant. The following summarizes the weighted-average grant date fair
values for the RSUs, PSUs and DSUs granted during the year:
Canadian $, for the years ended December 31
2024
2023
RSU
$
0.27 $
0.52
PSU
0.27
0.53
DSU
0.26
0.51
The intrinsic value of cash-settled share-based compensation awards vested and outstanding as at December 31, 2024 was
$3.1 million (December 31, 2023 - $6.7 million).
18. COMMITMENTS FOR EXPENDITURES
Canadian $ millions, as at December 31
2024
Property, plant and equipment commitments
$
4.0
Sherritt International Corporation 123
19. SUPPLEMENTAL CASH FLOW INFORMATION
Working capital is defined as the Corporation's current assets less current liabilities and was $91.8 million as at
December 31, 2024 ($111.7 million - December 31, 2023).
Net change in non-cash working capital
Net change in non-cash working capital includes the following:
Canadian $ millions, for the years ended December 31
2024
2023
Trade accounts receivable, net(1)
$
9.7 $
(45.2)
Inventories(2)
1.2
(10.5)
Prepaid expenses
(1.3)
(2.8)
Trade accounts payable and accrued liabilities
(4.9)
(37.0)
Deferred revenue
(3.3)
1.9
$
1.4 $
(93.6)
(1)
Trade accounts receivable, net includes adjustments of $1.1 million for the year ended December 31, 2024, for Proceeds from Cobalt Swap presented separately in the
consolidated statements of cash flow ($80.3 million for the year ended December 31, 2023).
(2)
Inventories include adjustments of $2.2 million for the year ended December 31, 2024, for non-cash finished cobalt cost of sales presented separately in the consolidated
statements of cash flow ($86.1 million for the year ended December 31, 2023).
Interest paid
Interest paid includes the following:
Canadian $ millions, for the years ended December 31
Note
2024
2023
Interest paid on Credit Facility
(6.1)
(5.2)
Interest paid on Second Lien Notes
(18.8)
(18.8)
Interest paid on PIK Notes
(0.1)
(3.5)
Other interest paid
(0.9)
(0.8)
$
(25.9) $
(28.3)
Non-cash transactions
Finished cobalt cost of sales expense is a non-cash expense added back to net loss from continuing operations in the
Corporation’s consolidated statements of cash flow prepared using the indirect method as the Corporation received finished
cobalt inventories for no consideration pursuant to the Cobalt Swap and for settlement of its GNC receivable.
During the year ended December 31, 2024, investing activities excluded $3.0 million of non-cash settlements of the GNC
receivable, which was partially settled through receipts of finished cobalt inventories pursuant to the Cobalt Swap (December
31, 2023 - $44.0 million). During the year ended December 31, 2024, an additional $11.9 million of the GNC receivable was
settled through receipts of cash, presented as Receipts of GNC receivable in the consolidated statements of cash flow
(December 31, 2023 - $32.0 million). Refer to note 12 for further details on the Cobalt Swap.
20. SHAREHOLDERS’ EQUITY
Capital stock
The Corporation’s common shares have no par value and the authorized share capital is composed of an unlimited number of
common shares. There were no changes in the Corporation’s outstanding common shares during the years ended December
31, 2024 and 2023.
Notes to the consolidated financial statements
124 Sherritt International Corporation
Reserves
Canadian $ millions, for the years ended December 31
2024
2023
Stated capital reserve
Balance, beginning of the year
$
222.2 $
222.2
Balance, end of the year
222.2
222.2
Share-based compensation reserve(1)
Balance, beginning of the year
$
11.9 $
11.2
Stock option plan expense
0.8
0.7
Balance, end of the year
12.7
11.9
Total reserves, end of the year
$
234.9 $
234.1
(1)
Share-based compensation reserve relates to equity-settled compensation plans issued by the Corporation to its directors, officers and employees.
Accumulated other comprehensive income
Canadian $ millions, for the years ended December 31
2024
2023
Foreign currency translation reserve
Balance, beginning of the year
$
389.0 $
406.2
Foreign currency translation differences on foreign operations, net of tax
56.0
(17.2)
Balance, end of the year
445.0
389.0
Actuarial losses on pension plans
Balance, beginning of the year
(4.8)
(4.6)
Actuarial losses on pension plans, net of tax
(0.2)
(0.2)
Balance, end of the year
(5.0)
(4.8)
Total accumulated other comprehensive income
$
440.0 $
384.2
21. FINANCIAL RISK AND CAPITAL RISK MANAGEMENT
Cuba risk
During the years ended December 31, 2024, and December 31, 2023, Cuba experienced continued U.S. sanctions, impacting
the country’s economy and hampering the country’s foreign currency liquidity. The foregoing may contribute to increased
economic risk to the Corporation.
As a result of the Cobalt Swap, the Corporation no longer has the responsibility for collection of receivable amounts solely from
Energas and CUPET, which are dependent upon Cuba’s economy, and instead will collect from GNC, the Corporation’s Moa JV
partner. GNC receives distributions from the Moa JV, which is less dependent upon Cuba’s economy as it earns foreign currency
from nickel and cobalt sales to customers outside of Cuba.
In addition, the Moa Swap (note 11) facilitates the payment of Canadian dollars from the Moa JV, which earns foreign currency
on its sales of nickel and cobalt, to Energas. The Canadian dollars received by Energas from the Moa JV are in part used to
pay dividends to Sherritt in Canada. Annually, the Moa Swap provides Energas with the equivalent of approximately US$50.0
million in Canada.
Risk management policies and hedging activities
The Corporation is sensitive to changes in commodity prices, foreign exchange rates and interest rates. The Corporation’s Board
of Directors has overall responsibility for the establishment and oversight of the Corporation’s risk management framework. The
Corporation reduces the business-cycle risks inherent in its commodity operations through industry diversification and limited
use of derivatives, discussed below in the commodity price risk section.
Credit risk
Sherritt’s credit sales of fertilizers and electricity, and of nickel and cobalt within the Moa JV, expose the Corporation to the risk
of non-payment by customers. Sherritt manages this risk by monitoring the creditworthiness of its customers, documentary credit
and seeking prepayment or other forms of payment security from customers with an unacceptable level of credit risk. In addition,
there are certain credit risks that arise due to the fact that all sales of electricity in Cuba are made to agencies of the Cuban
government. Although Sherritt seeks to manage its credit risk exposure, there can be no assurance that the Corporation will be
successful in eliminating the potential material adverse impacts of such risks.
Sherritt International Corporation 125
Cuba
The Corporation has credit risk exposure related to its cash, trade accounts receivable, net and advances and loans receivable
associated with its businesses located in Cuba as follows:
2024
2023
Canadian $ millions, as at
Note
December 31
December 31
Cash
$
113.1 $
96.4
Trade accounts receivable, net
9.3
10.0
Advances and loans receivable(1)
203.3
217.8
Total
$
325.7 $
324.2
(1)
Advances and loans receivable excludes the Moa JV revolving-term credit facility with the Corporation as the counterparty is an operating company within the Moa JV that
is located outside of Cuba. Advances and loans receivable includes the GNC receivable pursuant to the Cobalt Swap of $203.3 million (December 31, 2023 - $217.8
million) (note 12), which the Corporation recovers from GNC. Although GNC is located in Cuba, it is less dependent upon Cuba’s economy, as GNC earns foreign currency
from the Moa JV, whose nickel and cobalt sales are with customers outside of Cuba.
The table above reflects the Corporation’s maximum credit exposure to Cuban counterparties.
The Corporation is exposed to risk related to its cash in Cuba, which is denominated in Cuban pesos and not exchangeable into
other major currencies unless sufficient foreign currency reserves exist in Cuba. The Corporation has in place the Moa Swap
(note 11), which facilitates the payment of the equivalent of approximately US$50.0 million in Canadian dollars annually to
Energas, which Energas in part uses to pay dividends to the Corporation in Canada. The Moa JV is not exposed to significant
risk related to the Cuban peso, as it receives foreign currencies from the sale of nickel and cobalt to customers outside of Cuba.
Allowance for expected credit losses
The Corporation uses a three-stage approach to measure an ACL, using an ECL approach as required under IFRS 9 for financial
assets measured at amortized cost.
The following table presents the Corporation’s financial assets measured at amortized cost, the stage that they are in for ACL
measurement and the balance of the ACL as at December 31, 2024. The gross carrying value of the financial asset best
represents the maximum exposure to credit risk at the reporting date:
ECL stage(1)
Gross
carrying value
Net
carrying value
Canadian $ millions
Note
ACL
Trade accounts receivable, net(1)
11
2 $
171.7 $
(20.3) $
151.4
(1)
For trade accounts receivable, net, the Corporation has applied the simplified approach in IFRS 9 to measure the ACL at lifetime ECL. The Corporation determines the
ACL based on the past due status of the debtors, adjusted as appropriate to reflect current and estimated future economic conditions.
Liquidity risk
Liquidity risk is the risk that the Corporation will not be able to meet its obligations associated with financial liabilities. Liquidity
risk arises from the Corporation’s financial obligations and in the management of its assets, liabilities and capital structure. The
Corporation manages this risk by regularly evaluating its liquid financial resources to fund current and non-current obligations
and to meet its capital commitments in a cost-effective manner.
The main factors that affect liquidity include realized sales prices, timing of collection of receivables, timing of distributions from
the Moa JV (including pursuant to the Cobalt Swap), timing of cobalt sales and receipts, timing of dividends from Energas in
Canada, production and sales volumes, cash production costs, working capital requirements, capital and environmental
rehabilitation expenditure requirements, advances to/from the Moa JV, repayments of non-current loans and borrowings, credit
capacity and debt and equity capital market conditions.
The Corporation’s liquidity requirements are met through a variety of sources, including cash and cash equivalents, cash
provided by operating activities, distributions from the Moa JV (including pursuant to the Cobalt Swap), dividends from Energas
in Canada, the Credit Facility, leases, derivatives and debt and equity capital markets.
Based on management’s assessment of its financial position and liquidity profile as at December 31, 2024, the Corporation will
be able to satisfy its current and non-current obligations as they come due.
The agreements establishing certain jointly controlled entities require the unanimous consent of shareholders to pay dividends.
It is not expected that this restriction will have a material impact on the ability of the Corporation to meet its obligations.
Notes to the consolidated financial statements
126 Sherritt International Corporation
Market risk
Market risk is the potential for financial loss from adverse changes in underlying market factors, including foreign exchange rates,
commodity prices and interest rates.
Foreign exchange risk
Many of Sherritt’s businesses transact in currencies other than the Canadian dollar. The Corporation is sensitive to foreign
exchange exposure when commitments are made to deliver products quoted in foreign currencies or when the contract currency
is different from the product price currency. Derivative financial instruments are not used to reduce exposure to fluctuations in
foreign exchange rates. The Corporation is also sensitive to foreign exchange risk arising from the translation of the financial
statements of subsidiaries with a functional currency other than the Canadian dollar impacting other comprehensive (loss)
income.
Based on financial instrument balances as at December 31, 2024, a weakening or strengthening of $0.05 of the Canadian dollar
to the U.S. dollar with all other variables held constant could have a favourable or unfavourable impact of approximately $2.2
million, respectively, on the Corporation’s net loss.
Based on financial instrument balances as at December 31, 2024, a weakening or strengthening of $0.05 of the Canadian dollar
to the U.S. dollar with all other variables held constant could have a favourable or unfavourable impact of approximately $3.9
million, respectively, on the Corporation’s other comprehensive income.
Commodity price risk
The Corporation is exposed to fluctuations in certain commodity prices. Realized prices for finished products and costs for input
commodities are the most significant factors affecting the Corporation’s revenue and earnings. Revenue, earnings and cash
flows from the sale of fertilizers, and nickel and cobalt within the Moa JV, are sensitive to changes in market prices over which
the Corporation has little or no control. The sale price of electricity is contractually fixed and not market-based.
The Corporation has the ability to address its commodity price exposures through the limited use of options, future, swap and
forward contracts. During the year ended December 31, 2024, the Corporation entered into put options on nickel (note 12), all
of which were settled during the year, and a natural gas swap for 2025, which fixes the price of natural gas from a floating rate.
The Corporation did not enter into nickel put options or a natural gas swap during the year ended December 31, 2023. Sherritt
also reduces the business-cycle risks inherent in its commodity operations through industry diversification.
The Corporation has certain provisional pricing agreements on the sale of cobalt pursuant to the Cobalt Swap and within the
Moa JV on the sale of nickel and cobalt. These provisionally-priced transactions are periodically adjusted to actual prices as
prices are confirmed, as the settlement occurs within a short period of time. In periods of volatile price movements, adjustments
may be material to the Corporation or Moa JV.
Interest rate risk
The Corporation is exposed to interest rate risk based on its outstanding loans and borrowings, and investments. A change in
interest rates could affect future cash flows or the fair value of financial instruments.
Based on the balance of current and non-current loans and borrowings, cash equivalents, and current and non-current advances
and loans receivable as at December 31, 2024, a 1.0% decrease or increase in the market interest rate would not have a material
impact on the Corporation’s net earnings/loss. The Corporation does not engage in hedging activities to mitigate its interest rate
risk.
Capital risk management
In the definition of capital, the Corporation includes, as disclosed in its consolidated financial statements and notes: capital stock,
deficit, loans and borrowings, other financial liabilities and available credit facilities.
Sherritt International Corporation 127
2024
2023
Canadian $ millions, as at
December 31
December 31
Capital stock
$
2,894.9 $
2,894.9
Deficit
(2,972.4)
(2,899.6)
Loans and borrowings
372.5
355.6
Other financial liabilities
107.2
97.1
Available credit facilities
30.4
41.5
The Corporation’s objectives when managing capital are to maintain financial liquidity and flexibility in order to preserve its ability
to meet financial obligations throughout the various resource cycles with sufficient capital and capacity to manage unforeseen
operational and industry developments and to ensure the Corporation has the capital and capacity to allow for business growth
opportunities and/or to support the growth of its existing businesses.
Subject to the limitations within the Second Lien Notes Indenture and Credit Facility agreement, in order to maintain or adjust its
capital structure, the Corporation may purchase shares for cancellation pursuant to normal course issuer bids, issue new shares,
repay outstanding debt, issue new debt (unsecured, convertible and/or other types of available debt instruments), issue
subscription receipts exchangeable for common shares and/or other securities, issue warrants exercisable to acquire common
shares and/or other securities, issue units of securities comprised of more than one of equity securities, debt securities,
subscription receipts and/or warrants, refinance existing debt with different characteristics, acquire or dispose of assets or adjust
the amount of cash and short-term investment balances.
Certain of the Corporation’s loans and borrowings have financial tests and other covenants with which the Corporation and its
affiliates must comply. Non-compliance with such covenants could result in accelerated repayment of the related debt and
reclassification of the amounts to current liabilities. The Corporation monitors its covenants on an ongoing basis and reports on
its compliance with the covenants to its lenders on a periodic basis.
Financial obligation maturity analysis
The Corporation’s significant contractual commitments, obligations, and interest and principal repayments in respect of its
financial liabilities, income taxes payable and provisions are presented in the following table on an undiscounted basis. For
amounts payable that are not fixed, including mandatory redemptions of the Second Lien Notes (note 15), the amount disclosed
is determined by reference to the conditions existing as at December 31, 2024.
Falling
Falling
Falling
Falling
Falling
Falling
due
due
due
due
due in
due within
between
between
between
between
more than
Canadian $ millions, as at December 31, 2024
Total
1 year
1-2 years
2-3 years
3-4 years
4-5 years
5 years
Trade accounts payable and
accrued liabilities
$
172.5 $
172.5 $
- $
- $
- $
- $
-
Income taxes payable
1.7
1.7
-
-
-
-
-
Second Lien Notes
(includes principal, interest and premium)
285.5
18.8
266.7
-
-
-
-
PIK Notes
(includes principal and interest)
109.5
-
-
8.8
8.8
91.9
-
Credit Facility
76.0
5.3
70.7
-
-
-
-
Other non-current financial liabilities
1.3
-
0.1
-
0.3
-
0.9
Provisions
194.5
4.8
2.4
9.1
10.2
11.7
156.3
Energas payable(1)
97.3
16.6
7.5
73.2
-
-
-
Lease liabilities
11.6
2.8
1.5
1.4
1.3
1.2
3.4
Total
$
949.9 $
222.5 $
348.9 $
92.5 $
20.6 $
104.8 $
160.6
(1)
The Energas payable is paid in Cuban pesos in Cuba and does not impact the Corporation’s liquidity in Canada.
The Moa Joint Venture’s significant undiscounted commitments, which are non-recourse to the Corporation, are presented below
on a 50% basis:
Environmental rehabilitation commitments of $144.6 million, with no significant payments due in the next five years;
Trade accounts payable and accrued liabilities of $56.0 million;
Loans and borrowings of $20.3 million; and
Property, plant and equipment commitments of $46.5 million.
Property, plant and equipment commitments include normal course expenditures and those associated with tailings management
facilities.
Notes to the consolidated financial statements
128 Sherritt International Corporation
22. RELATED PARTY TRANSACTIONS
The Corporation and its subsidiaries provide goods, labour, advisory and other administrative services to jointly controlled entities
at fair value. The Corporation and its subsidiaries also market, pursuant to sales agreements, a portion of the nickel, cobalt and
certain by-products produced by and purchased from certain jointly controlled entities.
Balances and transactions between the Corporation and its subsidiaries, which are related parties of the Corporation, have been
eliminated and are not disclosed in this note. A listing of the Corporation’s subsidiaries is included in note 2.2.
A description of the Corporation’s interests in jointly controlled entities is included in notes 2.2 and 7.
Canadian $ millions, for the years ended December 31
2024
2023
Total value of goods and services:
Provided to Energas
$
48.7 $
46.6
Provided to Moa JV
262.8
372.8
Purchased from Moa JV
781.7
844.0
Net financing income from Moa JV
1.7
0.8
2024
2023
Canadian $ millions, as at
Note
December 31
December 31
Accounts receivable from Moa JV
11 $
37.6 $
44.7
Accounts payable to Moa JV
82.7
72.2
Advances and loans receivable from Moa JV
12
-
30.3
Transactions between related parties are generally based on standard commercial terms. All amounts outstanding are
unsecured and will be settled in cash. No guarantees have been given or received on the outstanding amounts. No expense
has been recognized in the current or prior periods for bad debts in respect of amounts owed by related parties.
Key management personnel
Key management personnel are composed of the Board of Directors, Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer, Chief Commercial Officer, Chief Human Resources Officer and Senior Vice Presidents of the Corporation.
The following is a summary of key management personnel compensation:
Canadian $ millions, for the years ended December 31
2024
2023
Short-term benefits
$
5.6 $
5.0
Post-employment benefits(1)
0.3
0.3
Termination benefits
0.8
-
Share-based compensation
4.3
4.6
$
11.0 $
9.9
(1)
Post-employment benefits include a non-registered defined contribution executive supplemental pension plan. The total cash pension contribution for key management
personnel was nil for the year ended December 31, 2024 (nil for the year ended December 31, 2023). The total pension expense that is attributable to key management
personnel was nil for the year ended December 31, 2024 (nil for the year ended December 31, 2023).
Sherritt International Corporation
Fighting Against Forced Labour and
Child Labour in Supply Chains
2024 Annual Report to the Minister of Public Safety
Sherritt International Corporation 129
Fighting Against Forced Labour and Child Labour in Supply Chains
2024 Annual Report
Table of Contents
About This Report ....................................................................................................................................................... 1
Requirement (a): Structure, activities, and supply chains.......................................................................................... 2
Requirement (b): Policies and due diligence processes ............................................................................................. 3
Requirement (c): Forced labour or child labour risks ................................................................................................. 4
Requirement (d): Remediation measures .................................................................................................................. 6
Requirement (e): Remediation of loss of income ...................................................................................................... 6
Requirement (f): Training ........................................................................................................................................... 6
Requirement (g): Assessing effectiveness .................................................................................................................. 6
Appendix 1: Report Approval and Attestation ........................................................................................................... 7
Fighting Against Forced Labour and Child Labour in Supply Chains
2024 Annual Report
1
About This Report
This is a joint report being filed in respect of Sherritt International Corporation (“Sherritt”), a corporation incorporated under
the Canada Business Corporations Act, and The Cobalt Refinery Company Inc. (“COREFCO”), a corporation incorporated under
the Alberta Business Corporations Act. This report was determined to be a joint report on behalf of Sherritt and COREFCO
because Sherritt has a 50/50 partnership with General Nickel Company S.A. (“GNC”) of Cuba (the “Moa Joint Venture” or the
“Moa JV”) and together, Sherritt and GNC each hold 50% of the issued and outstanding shares of three companies that
comprise the Moa JV (more details below). COREFCO is the only company of the three in the Moa JV that carries out business
in Canada, where it owns and operates the metals refinery in Fort Saskatchewan, Alberta. As COREFCO relies on Sherritt
policies, due diligence, and management systems, both entities will be reporting on the requirements under Bill S-211 An Act
to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff1 (the
“Act”) jointly in this report.
This is Sherritt and COREFCO’s second Annual Report on Fighting Against Forced Labour and Child Labour in Supply Chains as
a requirement of the Act.
The scope of this joint report includes the steps Sherritt and COREFCO have taken during 2024, and in previous years, where
relevant, to prevent and reduce the risk that forced labour or child labour is used at any step of the production of goods, in
Canada or elsewhere, by Sherritt, COREFCO and/or their subsidiaries and/or suppliers. This report has been written to meet
the annual report requirements listed below as stipulated in the Act.1
a) Describe the entity’s structure, activities, and supply chains;
b) Describe the entity’s policies and its due diligence processes in relation to forced labour and child labour;
c) Describe the parts of the entity’s business and supply chains that carry a risk of forced labour or child labour being
used and the steps it has taken to assess and manage that risk;
d) Describe any measures taken by the entity to remediate any forced labour or child labour;
e) Describe any measures taken by the entity to remediate the loss of income to the most vulnerable families that
results from any measure taken to eliminate the use of forced labour or child labour in its activities and supply
chain;
f)
Describe the training provided to employees on forced labour and child labour;
g) Describe how the entity assesses its effectiveness in ensuring that forced labour and child labour are not being
used in its business and supply chains; and
h) Report approval and attestation.
1 S-211 An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs
Tariff. January 2025. Available at: https://www.parl.ca/LegisInfo/en/bill/44-1/S-211
Fighting Against Forced Labour and Child Labour in Supply Chains
2024 Annual Report
2
Requirement (a): Structure, activities, and supply chains
Sherritt is a world leader in using hydrometallurgical processes to mine and refine nickel and cobalt – metals deemed critical
for the energy transition. Sherritt’s Moa JV has an estimated mine life of approximately 25 years and is advancing an
expansion program focused on increasing annual mixed sulphide precipitate production by 20% of contained nickel and
cobalt. The Corporation’s Power division, through its ownership in Energas S.A. (“Energas”), is the largest independent energy
producer in Cuba with installed electrical generating capacity of 506 MW, representing approximately 10% of the national
electrical generating capacity in Cuba. The Energas facilities are comprised of two combined cycle plants that produce low-
cost electricity from one of the lowest carbon emitting sources of power in Cuba. Sherritt’s common shares are listed on the
Toronto Stock Exchange under the symbol “S”.
Metals Enterprise - Moa Joint Venture and Fort Site
Sherritt has a 50/50 partnership with GNC of Cuba in the Moa JV. In addition, Sherritt has a wholly owned fertilizer business,
sulphuric acid, utilities and storage, and administrative facilities in Fort Saskatchewan, Alberta, Canada that provide additional
sources of income.
The Moa JV is a vertically integrated nickel and cobalt mining, processing, refining, and marketing joint venture between
subsidiaries of Sherritt and GNC. The operations of the Moa JV are carried on through three companies:
•
Moa Nickel S.A. (“Moa Nickel”) – owns and operates the mining and processing facility in Moa, Cuba;
•
COREFCO – owns and operates the metals refinery in Fort Saskatchewan, Alberta; and
•
International Cobalt Company Inc. (ICCI) – acquires mixed sulphides from Moa Nickel and other third-party feeds,
contracts with COREFCO for the refining of such purchased materials, and then markets the finished nickel and
cobalt; located in Nassau, Bahamas. Third-party feeds typically represent <5% of the total mineral provided to
COREFCO.
Within the report, the operations in Moa will be referred to as “Moa Nickel” and the operations in Fort Saskatchewan will be
referred to as “the Fort Site”.
For assurance on the responsible production and supply of minerals, Moa Nickel and COREFCO rely on Sherritt policies, due
diligence, and management systems. Accordingly, unless otherwise specified, reference to Sherritt level policies, processes
and management systems applies to COREFCO for meeting reporting obligations under the Act.
Power
Sherritt holds a one-third interest in Energas, a Cuban joint venture corporation established to operate facilities for the
processing of raw natural gas and the generation of electricity for sale and delivery to the Cuban national electrical grid
system.
The remaining two-thirds interest in Energas are held equally by two Cuban government agencies: Unión Eléctrica and Unión
Cubapetróleo.
There are no reporting obligations for Energas per Section 9 of the Act.
Oil and Gas
Oil and Gas is not currently producing or exploring for oil and gas in Cuba and its financial results relate to non-core
operating activities of the Corporation.
There are no reporting obligations for Oil and Gas per Section 9 of the Act.
Fighting Against Forced Labour and Child Labour in Supply Chains
2024 Annual Report
3
Requirement (b): Policies and due diligence processes
The following sections describe Sherritt’s policies and due diligence processes, which are fully integrated into COREFCO’s
management systems.
Sherritt’s responsible sourcing strategy encompasses all elements of the mineral supply chain from sourcing to production
and the supply of intermediate and finished products. Sherritt has a management system in place to manage environmental
and social risks and to meet or exceed performance targets.
Figure 1. Sherritt's Responsible Sourcing Management System & Accountabilities
Policies
Sherritt’s Environment, Health, Safety and Sustainability Policy and Human Rights Policy articulate Sherritt’s overarching
commitments and expectations for our employees, contractors and suppliers in these areas. Collectively, these two policies
set the umbrella for other policies and standards enforced by Sherritt, including Sherritt’s Responsible Production and Supply
Policy. The Responsible Production and Supply Policy is consistent with standards set forth by the Organisation for Economic
Co-operation and Development (OECD)1 and specifically articulates that Sherritt and its subsidiaries will neither tolerate nor
by any means profit from, contribute to, assist with, or facilitate the commission by any party of all forms of forced labour
and child labour.
The Responsible Production and Supply Policy outlines Sherritt’s, the Moa JV’s, and its subsidiaries’ commitments to human
rights including forced labour and child labour, environment, health and safety, transparency, and ethical mineral supply. The
Policy is supported by Sherritt’s Raw Material Feed Supplier Code of Conduct (“Supplier Code of Conduct”), which articulates
in a more detailed fashion the requirements and expectations of mineral feed suppliers to COREFCO in the areas of human
rights including forced labour and child labour, ethical business practices, occupational health and safety, environment, and
Conflict-Affected and High-Risk Areas (CAHRAs).
The Supplier Code of Conduct is supported by a supplier declaration that collects information on supplier responsible
1 OECD Due Diligence Guidance for Responsible Business Conduct - OECD
Responsible sourcing management system component =
Accountability =
Fighting Against Forced Labour and Child Labour in Supply Chains
2024 Annual Report
4
production and supply policies and due diligence management systems. This document assists in the assessment of supplier
policies and systems covering ownership, human rights, environment, occupational health and safety, business ethics, OECD
Annex II risks, CAHRAs, and red flags.
As stated above, all Sherritt’s polices, and the Supplier Code of Conduct, are fully integrated into COREFCO’s management
system.
In 2024, Sherritt advanced and released a Child and Forced Labour Standard. The development of this standard was a result
of Sherritt and COREFCO’s commitment to the Mining Association of Canada’s Towards Sustainable Mining (TSM) program
and the requirements outlined in their protocol pertaining to Preventing Child and Forced Labour. This standard outlines
commitments and management system requirements regarding the prevention of child labour and forced labour at Sherritt
operations. In 2025, Sherritt will conduct rollout efforts in relation to this standard, such as training, to ensure full integration
into COREFCO’s management system.
Requirement (c): Forced labour or child labour risks
The following sections describe Sherritt’s forced labour and child labour risks. These are also representative of COREFCO’s
key risks with respect to forced labour and child labour. Unless explicitly identified otherwise, all management system tools
and mitigative measures described herein are representative of both Sherritt and COREFCO’s approaches.
Sherritt’s mineral supply chain has been identified as the area of the business most likely to be at risk for interacting with
child or forced labour. Accordingly, Sherritt has embedded several de-risking processes into its mineral supply chain to ensure
that no minerals are sourced from or transit through areas where risks of forced labour or child labour exist.
Given that the majority (>95%) of minerals refined by COREFCO come from its own joint-venture mine (Moa Nickel), most of
the feed is supplied by an operation that is internally subject to Sherritt’s policies, which strictly prohibit any use of forced or
child labour. COREFCO also toll-refines a relatively small amount of minerals from a select group of third-party suppliers,
which are subject to assessments verifying that their practices are consistent with Sherritt’s policies and codes of conduct.
Sherritt’s own joint venture mine and its supplementary feed suppliers are managed under a rigorous due diligence process
to ensure they remain compliant with Sherritt’s Human Rights Policy, it’s Responsible Production and Supply Policy, and its
Supplier Code of Conduct. In addition, suppliers are required to complete ‘Know-Your-Supplier' (KYS) questionnaires and
supplier declarations.
The KYS process includes but is not limited to the following activities:
1. Identifying all mineral feed suppliers;
2. Sending all suppliers a KYS package that includes the mineral feed policy, supplier code of conduct, questionnaire,
and declaration;
3. Reviewing and documenting the supplier responses in the questionnaire;
4. Reviewing and documenting the supplier declaration response;
5. Holding calls and meetings with suppliers; and
6. Conducting risk-based supplier site visits.
The following information is collected and assessed from all mineral suppliers:
1. Where available, a copy of the suppliers responsible and ethical production policies;
2. Documentation of the mineral type, point of origin, and location of the mine;
3. Methods of mineral extraction and processing used;
4. Identification of whether the minerals has been sourced from or transited through a conflict or high-risk area; and
5. Legal status of the entity and the minerals.
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2024 Annual Report
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In addition to completing the aforementioned due diligence requirements, Sherritt regularly conducts mineral supply chain
risk assessments based on the Responsible Business Alliance (RBA)/Responsible Minerals Initiative’s (RMI) Risk Readiness
Assessment for smelters and refiners. The scope of the risk assessment which was updated in 2024 included 29 issue areas
covering environmental, labour and working conditions, community, and business and human rights aspects of mining and
refining operations. No significant material mineral supply chain risks were identified.
Sherritt has also developed and implemented a procedure for conducting regular CAHRA assessments1. CAHRA assessments
cover the minerals produced, transported, mined, and purchased by Sherritt, the Moa JV, COREFCO, and Moa JV subsidiaries.
For the last several years, Sherritt has completed CAHRA assessments on behalf of COREFCO, all of which to-date have
determined that the minerals produced by COREFCO are not sourced from or transit through CAHRAs. The assessments are
updated annually and any time a new mineral supplier is considered for mineral feed sourcing, transit, or operation including
any new joint venture partnerships.
Table 1. Methodology and Scope of Sherritt and COREFCO’s combined CAHRA Risk Assessments
Assessment Information
Details
Assessment Steps
1. Identification of the locations of mineral origin and transit, including third-party mineral
feeds;
2. Identification of all mineral suppliers;
3. Utilization of credible indices to assess the countries and regions of mineral origin and
transit for conflict, other risks, and red flags;
4. Review of mineral supplier CAHRA assessments; and
5. Documentation of the assessment.
Assessment Scope
•
Mineral type and point of origin, including the location of the mine;
•
Geography including known mineral resources and production levels;
•
The methods of extraction, including artisanal and small-scale mining;
•
CAHRA and red flag identification;
•
Supplier legal status and beneficial ownership and/or ownership or other controlling
interests in other entities;
•
Country corruption and transparency; and
•
OECD Annex II risks, including but not limited to human rights abuses, forced labour,
child labour, support for non-state armed group or security forces, bribery, money
laundering, and fraudulent misrepresentation of origin.
The results of the annual CAHRA determination are communicated internally to management and publicly in Sherritt’s annual
Responsible Production and Supply Report.
As a result of Sherritt’s due diligence, no risks or incidents of forced labour or child labour were identified in Sherritt or
COREFCO’s mineral supply chain for the reporting period January 1, 2024, to December 31, 2024. Table 2 below provides the
annual data concerning forced labour and child labour determined through Sherritt’s annual assessments.
Table 2. Child labour and forced labour annual risk assessment results
Disclosure Component
2024
2023
2022
2021
Operations and suppliers at significant risk for
incidents of forced or compulsory labour
0
0
0
0
Presence of worst forms of child labour
None
None
None
None
1 According to the OECD, CAHRAs are identified by the presence of armed conflict, widespread violence, or other risks of
harm to people including human rights abuses such as forced labour and child labour.
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2024 Annual Report
6
In 2025, Sherritt and COREFCO will undergo external verification against the Mining Association of Canada’s TSM program.
This verification process will include an evaluation of performance against the requirements outlined in the Preventing Child
and Forced Protocol. This process includes a review of the completed self-assessment against the protocol by an accredited
verifier. Once the verification process is complete, the verification summary report will be publicly available on Sherritt’s TSM
webpage.
Requirement (d): Remediation measures
Not applicable. No remediation measures have been employed by Sherritt or COREFCO as multiple internal assessments and
independent audits have verified that there is no forced or child labour within Sherritt’s or COREFCO’s supply chain.
Requirement (e): Remediation of loss of income
Not applicable. No measures have been required to be taken to remediate any forced labour or child labour as multiple
assessments and independent audits have verified there is no forced or child labour within Sherritt’s or COREFCO’s supply
chain.
Requirement (f): Training
Sherritt and COREFCO have a comprehensive Responsible Production and Supply Training Plan. There are three key modules
identified for development in this training plan, including:
1. General Awareness Training
2. Material Receipt Training
3. Supplier Awareness
The first module was developed and delivered in 2023, with training provided to several representatives of both Sherritt and
COREFCO including individuals involved in marketing and sales, sustainability, supply chain management, and operational
logistics. The goal of the training sessions was to increase awareness and understanding of responsible production and supply
context, human rights and forced labour and child labour commitments, management systems and due diligence practices.
In 2024 general awareness training was provided to the customer service manager.
Requirement (g): Assessing effectiveness
Sherritt and COREFCO maintain internal control systems to prevent forced labour and child labour in the mineral supply chain
through processes and procedures that identify and control the origin of material.
Sherritt and Moa JV policies require the identification of risks in the mineral supply chain and risk-based mitigation through
engagement and due diligence reviews with mineral feed suppliers. Supplier expectations and requirements are documented
and enforced through agreements and signed supplier declarations. Supplier declarations are reviewed upon receipt and an
internal material control system is in place. It allows for the reconciliation of material inputs and outputs through a mass
balance approach.
To evaluate and confirm the effectiveness of these processes, Sherritt and COREFCO, jointly, are subject to regularly
scheduled independent third-party audits of its supply chains, the results of which are made publicly available on Sherritt’s
website. Both the independently conducted 2021 OECD-aligned audit and 2024 independent London Metal Exchange red
flag assessment validated that Sherritt and COREFCO have a strong internal material control system. Independent audits from
2021 to present have also reviewed Sherritt and COREFCO’s CAHRA and red flag assessments and validated them.
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2024 Annual Report
7
Appendix 1: Report Approval and Attestation
In accordance with the requirements of the Act, and in particular Section 11 thereof, I attest that I have reviewed the
information contained in the report for the entity or entities listed above. Based on my knowledge, and having exercised
reasonable diligence, I attest that the information in the report is true, accurate and complete in all material respects for the
purposes of the Act, for the reporting year listed above.
Name: Elvin Saruk, Chief Operating Officer
I have the authority to bind Sherritt International Corporation
Signature: “Elvin Saruk”
Date: February 4, 2025
Name: Peter Hancock, Non-Executive Director
I have the authority to bind The Cobalt Refinery Company Inc.
Signature: “Peter Hancock”
Date: February 4, 2025
Sherritt International Corporation
22 Adelaide Street West, Suite 4220
Toronto, ON M5H 4E3
For further investor information contact:
Telephone: 416.935.2451
Toll-free 1.800.704.6698
www.sherritt.com