Wednesday, February 23, 2011

Sherritt expects production declines in Cuba for '11

Sherritt expects production declines in Cuba for '11

In a pessimistic outlook for its Cuban operations this year, Canadian
energy and mining concern Sherritt International expects production
declines in all its business areas for 2011.

Sherritt, Cuba's largest foreign investor, said in its fourth-quarter
financial report that it expects moderate production declines in nickel
(-2%) and cobalt (-2.9%), and considerable declines in the production of
oil (-7.1%) and electricity (-18.7%).

Even so, the company is ratcheting up capital investments on the island.
Sherritt expects to invest $50 million in its Moa nickel joint venture
in Cuba this year, up from $40 million in 2010. Also, Sherritt and its
joint venture partner Cubaníquel are "reviewing options for the
completion of the Phase 2 Expansion and the construction of the
sulphuric acid plant at Moa," the company said in its report, adding
that these projects are not included in the capital spending projections
for this year.

Sherritt expects to invest $100 million in Cuban oil operations, up from
$53 million last year. The rise is mainly due to eight new on-shore
wells planned for this year.

Investments in its power assets in Cuba will be $158 million this year,
up from $20 million in 2010. All of the investment will go into the
150-mw Boca de Jaruco combined-cycle power plant.

The company, which makes the bulk of its business in Cuba, logged in a
fourth-quarter profit of $73.8 million, up from $48.3 million the same
quarter a year ago. For the full year of 2010, Sherritt registered net
income of $222.4 million, up from $57.4 million in 2009. Revenues were
$1.771.1 billion, up from $1,474.9 billion.

The boost for Sherritt came thanks to rising prices for oil, gas, nickel
and cobalt, rather than rising production.

Despite efforts to increase nickel production in the face of rising
prices, sales were flat in 2010 at 37.253 million pounds, compared to
37.365 million pounds in 2009. However, fourth-quarter sales were 9.791
million pounds, up from 9.268 million pounds.

Cobalt sales remained essentially flat, both during the fourth quarter
and full year. All of Sherritt's nickel and cobalt production originates
in Cuba.

Oil production, most of it from Cuba, declined to 11,965 barrels in
2010, from 13,214 barrels in 2009. Due to continued gas shortages,
Sherritt's electricity generation in Cuba declined to 2,067 gw/h in 2010
from 2,167 gw/h the year before.

"Sherritt continues to work with partners in Cuba to increase future gas
production," the company said in its financial report.

Earnings were dragged down by a change in Cuban income tax provisions
for oil and gas. The company included a $15.3 million fourth-quarter
charge related to the change.

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