Sherritt CEO sees brighter future in Cuba
The Toronto miner reports weak Q2 results amid severe downturn in
By: Lisa Wright Business Reporter, Published on Wed Jul 29 2015
Toronto-based miner Sherritt International Corp. is taking a beating as
nickel and oil prices plummet, but the chief executive sees a silver
lining for his company as U.S. and Cuba relations continue to thaw.
David Pathe, who delivered weak second-quarter results Wednesday, said
he visited the firm's operations in the island nation last week as the
U.S. reopened its embassy in Havana after 50 years under renewed
"There's a tremendous amount of optimism in Cuba at the moment, and a
lot more interest in Cuba internationally," Pathe said in an interview.
"We've been in Cuba for over 20 years and it's a remarkably stable place
to do business," he said.
Sherritt produces approximately two-thirds of Cuba's oil and also owns a
50 per cent interest in the Moa nickel and cobalt joint venture with the
Cuban government, which includes mining, processing and refining operations.
However, as the Communist-ruled island's largest foreign investor by
far, Sherritt has struggled with "negative connotations" as the Canadian
miner befriended Fidel Castro and continued to extract nickel, cobalt
and oil there amid what he called a "crippling" economic embargo with
While things are opening up on the diplomatic side, Pathe said progress
is still slow on the bigger issues like ending the embargo and repealing
the Helms-Burton Act, which for 19 years has barred Sherritt directors
and executives including Pathe from doing business or even travelling in
"Both would be a big benefit to us," he told analysts on a conference call.
"I think it would change the way our assets are viewed and remove some
of the stigma that, from our experience, has been somewhat overblown,
and that has the potential to create new opportunities for us," he said.
He pointed to cost savings in terms of accessing U.S. suppliers and
being able to run American-owned Caterpillar equipment in the mine, as
it does at its Madagascar operations, and get access to the U.S. gulf
coast for Sherritt's oil business.
Meanwhile, the company's shares had plummeted 55 per cent in the last
year up to Tuesday's close, but got a boost of 16 per cent Wednesday as
the miner reported costs had fallen at global operations in the quarter,
and that they still have $400 million cash on the books.
Oil and base metal miners like Sherritt have been hit hard lately amid
over-supply and weaker demand from China, the world's largest consumer
But nickel, which is used to make stainless steel and other manufactured
items, has fallen to six-year lows and tumbled 40 per cent in the second
quarter while oil tanked 50 per cent.
Sherritt sold its Toronto headquarters and laid off 60 staff last fall,
and Pathe fended off a shareholder revolt aimed at ousting him and other
board members at its annual meeting in 2014.
"It's been a tough first half of the year in the commodity price, and a
tough last couple of weeks in particular…and it's been a tough time to
be a shareholder," Pathe told analysts.
He noted more than half the nickel mining industry is "under water" in
terms of the cash cost of production, and the situation "can't be
sustained much longer," adding he still believes in the metal's
long-term fundamentals which are bound to eventually boost the price.
Sherritt's adjusted net loss from continuing operations was $75.2
million, or 25 Canadian cents per share, in the three months ended June
30, up from a loss of $56.2 million, or 19 cents per share, a year earlier.
The company said its combined revenue fell about 12 per cent to $268.4
million, and expects total production of 78,000-82,000 tonnes of nickel
this year, down from a previous estimate of 80,000-86,000.
The company also cut the estimate for the Ambatovy mine in Madagascar,
in which it has a 40 per cent stake, to 45,000-48,000 tonnes from
Source: Sherritt CEO sees brighter future in Cuba | Toronto Star -