Analysts are disappointed with Sherritt International Corp.’s first quarter results, which can only be described as ugly as the company deals with a very weak nickel market. There is plenty of red ink, notably in adjusted earnings (negative 43 cents a share) and free cash flow from the metals business (negative $11.9 million).
RBC Capital Markets analyst Fraser Phillips said nickel production and realized prices were both lower than expected, while costs were higher. He noted cash costs at the new Ambatovy mine in Madagascar increased eight per cent quarter-over-quarter to US$4.41 a pound. That is well above recent nickel prices, which have traded around US$4.00 for the last several months.
The company also has short-term issues to deal with at Ambatovy, where it chose not to make a US$50 million cash call in January because of a dispute over loan repayments with the mine’s joint venture partners. Until that is resolved, Sherritt’s economic interest in the mine is just 12 per cent instead of the planned 40 per cent.
“The latter should not be unexpected,” he said.