Analyst & Investor Day l March 25, 2015

Transcription

1 THE NAME IN NICKEL Analyst & Investor Day l March 25, 2015 SHERRITT INVESTOR DAY l PAGE 1

2 Cautionary Statement on Forward-Looking Information This document 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, projected, continue or other similar words or phrases. Specifically, forward-looking statements in this document include, but are not limited to, certain expectations about capital costs and expenditures; capital project commissioning and completion dates; sufficiency of working capital and capital project funding; production of nickel, cobalt, oil and gas, and power; production costs and the global market for nickel. Forward-looking statements are not based on historic facts, but rather on current expectations, assumptions and projections about future events, including commodity and product prices and demand; realized prices for production; earnings and revenues; development and exploratory wells and enhanced oil recovery in Cuba; environmental rehabilitation provisions; availability of regulatory approvals; compliance with applicable environmental laws and regulations; the impact of regulations related to greenhouse gas emissions and credits; debt repayments; collection of accounts receivable; and certain corporate objectives, goals and plans for 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 those 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 document 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. Key factors that may result in material differences between actual results and developments and those contemplated by this document include global economic and market conditions, and business, economic and political conditions in Canada, Cuba, Madagascar, and the principal markets for the Corporation s products. Other such factors include, but are not limited to, uncertainties in the development, construction, ramp-up and operation of large mining, processing and refining projects; risks related to the availability of capital to undertake capital initiatives; changes in capital cost estimates in respect of the Corporation s capital initiatives; risks associated with the Corporation s joint-venture partners; expectations of the timing of financial completion at the Ambatovy Joint Venture; risk of future non-compliance with financial covenants; potential interruptions in transportation; political, economic and other risks of foreign operations; the Corporation s reliance on key personnel and skilled workers; the possibility of equipment and other unexpected failures; the potential for shortages of equipment and supplies; risks associated with mining, processing and refining activities; uncertainty of gas supply for electrical generation; uncertainties in oil and gas exploration; risks related to foreign exchange controls on Cuban government enterprises to transact in foreign currency; risks associated with the United States embargo on Cuba and the Helms-Burton legislation; risks related to the Cuban government s and Malagasy government s ability to make certain payments to the Corporation; risks related to exploration and development programs; uncertainties in reserve estimates; risks associated with access to reserves and resources; uncertainties in environmental rehabilitation provisions estimates; risks related to the Corporation s reliance on partners and significant customers; risks related to the Corporation s corporate structure; foreign exchange and pricing risks; uncertainties in commodity pricing; credit risks; competition in product markets; the Corporation s ability to access markets; risks in obtaining insurance; uncertainties in labour relations; 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; risks associated with future acquisitions; uncertainty in the ability of the Corporation to obtain government permits; risks associated with governmental regulations regarding greenhouse gas emissions; risks associated with government regulations and environmental, health and safety matters; uncertainties in growth management; interest rate risk; risks related to political or social unrest or change and those in respect of indigenous and community relations; risks associated with rights and title claims; and certain corporate objectives, goals and plans for 2015; and the Corporation s ability to meet other factors listed from time to time in the Corporation s continuous disclosure documents. 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. 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 document and in the Corporation s other documents filed with the Canadian securities authorities including, but not limited to, the Corporation s Annual Information Form for the year ended December 31, 2013 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 document 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. Non-GAAP Measures Management uses Combined Results, Adjusted EBITDA, average-realized price, unit operating cost, and adjusted operating cash flow per share, 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 evaluate the results of its underlying business. These measures do not have a standard definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. As these measures do not have a standardized meaning, they may not be comparable to similar measures provided by other companies. For additional information, including a reconciliation of each non- GAAP measures to the most directly comparable GAAP measure, see the Non-GAAP measures section in our Management s Discussion and Analysis (MD&A) for the year ended December 31, 2014 available on our website at SHERRITT INVESTOR DAY l PAGE 2

3 Agenda Analyst & Investor Day l March 25, 2015 David Pathe President and Chief Executive Officer Dean Chambers Executive Vice President and Chief Financial Officer Elvin Saruk Senior Vice President Oil & Gas and Power Martin Vydra Senior Vice President Moa JV Tim Dobson Senior Vice President Ambatovy JV Sean McCaughan Vice President Investor Relations and Communications 09:00 AM Welcome l Sean McCaughan, Vice President, Investor Relations and Communications 09:05 AM Overview & Strategy l David Pathe, President and Chief Executive Officer 09:30 AM Finance Update l Dean Chambers, Executive Vice President and Chief Financial Officer 10:00 AM Break 10:15 AM Nickel Markets & Moa JV l Martin Vydra, Senior Vice President, Moa JV 10:40 AM Ambatovy JV l Tim Dobson, Senior Vice President, Ambatovy JV 11:15 AM Oil & Gas and Power l Elvin Saruk, Senior Vice President, Oil & Gas and Power 11:45 AM Concluding Remarks l David Pathe, President and Chief Executive Officer SHERRITT INVESTOR DAY l PAGE 3

4 OVERVIEW & STRATEGY David Pathe, President & CEO SHERRITT INVESTOR DAY l PAGE 4

5 Investment Proposition LOW COST PRODUCER PRODUCTION GROWTH IN NICKEL EXPERIENCED BOARD AND MANAGEMENT TEAM LONG LIFE ASSETS FOCUS ON NICKEL AND ENERGY YIELDING SOLID RESULTS SHERRITT INVESTOR DAY l PAGE 5

6 Building on Our 2014 Accomplishments Focusing On Core Nickel Business Continuing To Ramp Up At Ambatovy Extending The Life Of Cuban Energy Business Strengthening The Balance Sheet Reducing Costs Completed sale of Coal division Achieves guidance Record production Major planned maintenance undertaken and solved technical issues Signed two new PSCs with 25 year terms Extended term on an existing PSC to 2028 for new wells Boca de Jaruco plant successfully commissioned, followed by strong increase in production and adjusted EBITDA Reduced debt by $790M Cost savings from reorganization and other administration savings SHERRITT INVESTOR DAY l PAGE 6

7 Executing on Our 2015 Strategic Priorities Focusing On Core Nickel Business Continuing To Ramp Up At Ambatovy Extending The Life Of Cuban Energy Business Maintaining Strong Balance Sheet And Liquidity Sustaining production and lowering costs at Moa Successful progression of the acid plant project at Moa Targeting a production rate of 90% of nameplate capacity over a 90 day period within the first half of 2015 Securing two additional exploration PSCs and continued drilling on extended Puerto Escondido/Yumuri PSC Optimizing operating and administrative costs SHERRITT INVESTOR DAY l PAGE 7

8 Nickel Production Growth Finished Nickel Production (tonnes) - Sherritt s Attributable Share 2,278 10,059 14,821 19,800 17,132 16,771 16,455 16, E Moa Ambatovy 50% 40% Production expected to increase by 17% in 2015 (1) (1) Mid-point of guidance SHERRITT INVESTOR DAY l PAGE 8

9 Shifting Our Business Focus Historical Contribution: Adjusted EBITDA by Division (%) (1) Medium Term Outlook Contribution: Adjusted EBITDA (%) (1) 6% 60% 9% 5% 30% 34% 81% 66% 65% 19% 25% (0.6%) Metals Oil and Gas Power Metals Oil and Gas Power (1) Excludes Corporate and Other SHERRITT INVESTOR DAY l PAGE 9

10 Production Growth Leading to Strong Cash Flow Analysts Mean Cash Flow Per Share Estimates 2015E-2017E $0.99 $1.01 $0.48 $0.25 (1) E 2016E 2017E Source: Factset Broker Estimates March 20, 2015 (1) Adjusted cash flow from operations for 2014 SHERRITT INVESTOR DAY l PAGE 10

11 Ambatovy is on the Cusp of Cash Flow Long-life nickel asset that is on the cusp of cash flow World class accomplishment for Sherritt Illustrative Mining Life Cycle 10 Year Nickel Price Performance Cash Flow Exploration & Drilling Construction & Ramp-Up Operations Time 10 5 Current spot price US$ Nickel (US$/lb) ($/lb) SHERRITT INVESTOR DAY l PAGE 11

12 Next Step in Investment Plan Capital expenditures in 2015 targeted at Oil & Gas division and Moa JV Moa capital based on life extensions and optimization project 2015 Capital Guidance Attractive opportunities in Oil & Gas business to extend production Mobilization of second drilling rig increases annual capital spend Plan to drill 10 wells in 2015 compared to 6 wells in 2014 Metals - Sustaining Oil and & Gas Gas Growth - acid plant Power SHERRITT INVESTOR DAY l PAGE 12

13 Strong Leverage of NAV to Nickel Price Sensitivity ~50% $8.66 $7.25 $5.87 (1) Analyst Consensus +$0.50/lb +$1.00/lb Analyst Consensus Nickel Price Assumptions: 2015E: US$8.00/lb. l 2016E: US$9.00/lb. l 2017E: $9.60/lb. US$1.00 CHANGE IN NICKEL PRICES = ~$100 MILLION IN ADDITIONAL CASH FLOW PER YEAR (1) Factset March 20, 2015 SHERRITT INVESTOR DAY l PAGE 13

14 The Political Landscape Cuba Discussions continue regarding the re-establishment of diplomatic relations Embargo/Helms-Burton legislation New foreign investment law in Cuba Madagascar Diplomatic relations with international community restored and foreign aid resumed Key achievement in June with IMF financial support agreement in 2014 Developed constructive relationships with governmental bodies SHERRITT INVESTOR DAY l PAGE 14

15 The Political Landscape Relevance of U.S. legislation to Sherritt U.S. Embargo Impacts ability to conduct business in U.S., raise financing in U.S., source U.S. products Helms-Burton Act Travel impact Legacy US ownership SHERRITT INVESTOR DAY l PAGE 15

16 Sustainability: Managing Risks, Building Value Sherritt identifies environmental, social and governance risks/opportunities and implements measures to enhance our social license, build reputation and drive business value. Sustainability Framework We have been recognized for: Sustainability Commitment Sherritt is committed to providing a safe and rewarding workplace, operating ethically, demonstrating environmental responsibility, engaging stakeholders and benefitting communities. We will meet or exceed the standards where we operate and continuously improve performance. Providing a Safe and Rewarding Workplace Operating Ethically Demonstrating Environmental Responsibility Engaging Stakeholders and Benefitting Communities Risk Mitigation Management System Risk Crisis Response Risk Brand / Employee Engagement Risk Fraud and Corruption Risk Human Rights & Security Risk Tailings Risk Regulatory Risk Water Quality / Quantity Risks Social License Risk Political and Regulatory Risks Brand / Employee Engagement Risk Biodiversity conservation won 2014 Nedbank Capital Sustainable Business Award Local supply chain development won 2014 Excellence in Corporate Responsibility Award Humanitarian work won United Nations Good Practice Award for HIV/AIDS awareness building efforts in 2014 SHERRITT INVESTOR DAY l PAGE 16

17 FINANCE UPDATE Dean Chambers, Executive Vice President & CFO SHERRITT INVESTOR DAY l PAGE 17

18 Maintaining Financial Strength SHERRITT INVESTOR DAY l PAGE 18

19 Maintaining Financial Strength Reduced leverage in 2014 As at December 31, 2014 ($ millions) Total Recourse Senior unsecured notes (2018, 2020, 2022) $732 $732 Ambatovy partner loans Ambatovy additional partner loans Other Total debt Total debt to capital Cash and short term investments Net debt 111 1, ,867 38% 476 1, DEBT REDUCED IN 2014 $790 MILLION Sherritt share of Ambatovy Project financing not consolidated on balance sheet due to equity accounting (US$731.6 million Sherritt share as of 12/31/14) SHERRITT INVESTOR DAY l PAGE 19

20 Ambatovy Distributable Cash Flow Revenue Generated by Ambatovy (100%) subtract Payment of Operating Expenses (100%) subtract Payment of Debt Service (2 parts) (100%) subtract 1. LIBOR bps (post financial completion) 2. Principal repayments made semi-annually (June, Dec) Funding of Maintenance Capital (100%) equals Distributable Cash Flow (100%) 40% 27.5% 27.5% 5% Sherritt Sumitomo KORES SNC-Lavalin 30% x 40% (1) 70% x 40% Partner Loan Repayment (1) Distributable cash flow to Sherritt until partner loans repaid. SHERRITT INVESTOR DAY l PAGE 20

21 Rigorous Liquidity Management Desirable level of liquidity driven by: maturity profile of long-term debt estimate of cash flow from operations based on conservative commodity price assumptions fixed charges (interest, dividend) for the following 18 to 24 months sustaining capital expenditures required for the following 18 to 24 months Cash and Cash Equivalents ($ millions) $ Based on 2015E capex of +/-$230 million, year end cash balance estimated at +/-$350 million SHERRITT INVESTOR DAY l PAGE 21

22 Ambatovy Progressing Towards Financial Completion Requirement for financial completion by September 30, 2015 Ten certificates to be delivered Upon achieving financial completion Financing is non-recourse to all partners One-time funding of reserve account equivalent to 6 months principal + interest Interest changes from Libor + ~140 bps to Libor + ~255 bps Put/call option for SNC-Lavalin s 5% equity and loans can be triggered Efficiency Certificate Legal and Other Conditions Certificate Financial Certificate Production Certificate Physical Facilities Certificate Environmental Certificate FINANCIAL COMPLETION Mining Certificate Pipeline Capacity Certificate Port Capacity Certificate Marketing Certificate SHERRITT INVESTOR DAY l PAGE 22

23 Ambatovy Expected to be Cash Flow Positive Prior to Debt Service Funding to Ambatovy driven by debt reduction On pace to become funding neutral at end of 2015 Funding estimates in the range of $50-$100 million to Ambatovy from Sherritt Funding includes principal payments of US$75 million (40%) and one-time funding of a reserve account of US$48 million (40%) Potential 2015E Sherritt Funding to Ambatovy $100 ($ millions) $50 $- $(50) US$7/lb US$8/lb 2015E funding estimate 2015E funding estimate, excluding one-time funding requirement 2015E funding estimate, excluding one-time funding requirement + principal payment $(100) $(150) SHERRITT INVESTOR DAY l PAGE 23

24 IFRS to Proportionate Ownership Reconciliation Adjusted Results to IFRS 2014 Actual ($ millions) Adjusted IFRS adjustments IFRS Results (1) and other (2) Results Revenue Moa JV and Fort Site Ambatovy JV Other Metals Subtotal Oil & Gas Power Corporate Total $ ,140.4 $ (385.6) (291.8) (3.3) (680.7) (4.1) - - (684.8) $ Adjusted EBITDA Moa JV and Fort Site Ambatovy JV Other Metals Subtotal Oil & Gas Power Corporate Total $ 78.8 (5.5) (45.0) $ (62.9) (57.4) (7.1) (0.3) 8.4 (56.4) $ (36.6) (1) Moa JV and Ambatovy JV stated at 50% and 40% respectively (2) Adjustments represent the Corporation s Investments in the Ambatovy and Moa Joint Ventures that are equity accounted for under IFRS and include other non-operating adjustments. SHERRITT INVESTOR DAY l PAGE 24

25 Navigating the Statement of Cash Flow Operating Cash Flow CASH PROVIDED BY OPERATING ACTIVITIES REFLECTS: Operating cash flow generated (used) by consolidated business units only, being Oil & Gas, Power, Fort Site and Corporate Cash generated (used) by Moa and Ambatovy reflected on the basis of distributions received Other operating items including interest paid/received and taxes paid Current cash flow per share disclosure based on the IFRS cash flow statement Adjusted operating cash flow per share was $0.25 for the year ended December 31, 2014 Effective Q Combined cash flow per share to be disclosed that will also reflect operating cash flow generated (used) by Moa and Ambatovy Cash flow by division disclosure SHERRITT INVESTOR DAY l PAGE 25

26 Navigating the Statement of Cash flow Other Items Power cash flow Power conditional sales agreement to Energas provides annual principal and interest cash flow in addition to EBITDA Interest received of $27 million ($0.09/share) in 2014 netted against Interest paid in the statement of cash flow Principal repayments included in Repayments in advances, loans receivable and other financial assets December 31, 2014 ($ millions) Per Share 2014 Principal + Interest ($ millions) Per Share Power - CSA $239.3 $0.81 $27 $0.09 SHERRITT INVESTOR DAY l PAGE 26

27 Tax Overview Oil & Gas, Power and Moa are cash taxable Not cash taxable in Corporate and Ambatovy due to previous losses Tax expense on financial statements is primarily Oil & Gas Overall effective tax rate is dependent on the jurisdiction in which profits/losses are earned and; The effective tax rate for a jurisdiction will differ from the statutory tax rate because of non-deductible expense and/or non-taxable income Segment/ Operation December 31, 2014 Tax Expense/(Recovery) ($ millions) Oil & Gas Power Corporate & other Financial statement income taxes Moa Ambatovy Combined income taxes $44.1 (0.5) 1.8 $45.4 $12.5 (21.6) $36.3 Note: The tax expense/(recovery) for Power, Moa and Ambatovy are shown at Sherritt s proportionate share. SHERRITT INVESTOR DAY l PAGE 27

28 New Foreign Investment Law in Cuba to Reduce Taxes Sherritt s Cuban tax rates are decreasing 2014 cash taxes would have been lower by ~$15 Million ($0.05/share) if in place all of 2014 Segment/Operation Oil & Gas Power Moa Ambatovy Corporate & other Jurisdiction Cuba Cuba Cuba Madagascar Canada Statutory Tax Rate 30% 22.5% 30% 15% 45% 22.5% 10%, 25% 25% Statutory tax rates in Cuba for Oil & Gas, Moa and Power are reducing to 22.5%, 22.5%, and 15% in 2015 SHERRITT INVESTOR DAY l PAGE 28

29 Analysts Consensus NAV NAV ranges from $ $9.18 per share Valuations for Ambatovy account for one of the largest variances, followed by Moa Current share price $2.29 NAV Per Share $9.18 $7.64 $8.06 $3.44 $3.98 $4.55 $4.68 $5.33 $6.00 $5.87 Analyst 1 Analyst 2 Analyst 3 Analyst 4 Analyst 5 Analyst 6 Analyst 7 Analyst 8 Analyst 9 Average Source: FactSet March 20, 2015 SHERRITT INVESTOR DAY l PAGE 29

30 NICKEL MARKET Martin Vydra, Senior Vice President, Moa JV SHERRITT INVESTOR DAY l PAGE 30

31 Nickel Market Supply/Demand 2015E-2019E Despite a 10% increase in nickel averaged prices to US$7.65/lb in 2014, market expectations were higher Consensus forecasts call for higher nickel prices in 2015 given anticipation of supply deficit forming Analysts consensus price for 2015 is US$8.00/lb World Supply/Demand ,400 2,300 2,200 2,100 2,000 1,900 1,800 1,700 Indonesian ban on nickel ore exports to be more visible in 2015 Deficit expected H and will be more pronounced in future years 1,600 1, World Demand World Supply Source: CRU SHERRITT INVESTOR DAY l PAGE 31

32 Premium Pricing for Highest Grade Nickel (Class II nickel) (Class I nickel) PRICING OPERATIONS AMBATOVY MOA Only 14 companies in the world can deliver nickel to the LME. Sherritt is one of them SHERRITT INVESTOR DAY l PAGE 32

33 Low Cost Nickel Producer Nickel Cost Curve (U.S. $/lb) Nickel Industry, Normal, C1 Cash Cost Source: Wood Mackenzie SHERRITT INVESTOR DAY l PAGE 33

34 MOA STEADY PROFITABLE PRODUCTION Martin Vydra, Senior Vice President, Moa JV SHERRITT INVESTOR DAY l PAGE 34

35 Moa Long Life Quality Asset A vertically integrated nickel mining, processing, refining enterprise Sherritt owns 50% & General Nickel Company S.A. (GNC) of Cuba owns 50% Open pit mine producing nickel and cobalt from laterites Over 20 years of profitable operations and ~16 more years of reserve life Cash flow positive at all points in the nickel cycle SHERRITT INVESTOR DAY l PAGE 35

36 Long-Term Resource Long life ore body consisting of: Proven and Probable reserves ~16 years Additional resources received in 2013 require drilling to upgrade to reserve Agreement with Cuba for a total of 25 years of reserves at expanded throughput rate Mine plan continues to maximize extraction from resource base while minimizing reserve depletion. One third of 2014 production came from material outside of the reserve base Classification (1) Tonnes (millions) Nickel Grade (%) Cobalt Grade (%) Reserves Proven Probable Proven and Probable Resources Measured Indicated Measured and Indicated (1) As at December 31, 2014 SHERRITT INVESTOR DAY l PAGE 36

37 Moa Mining Concessions SHERRITT INVESTOR DAY l PAGE 37

38 Production Increase in 2015 Recoveries of 87% in 2014 and ore grades >1.30% Ni+Co historically exploited expected to be consistent for the future Moa Nickel Production E (1)(2) Moa Cobalt Production E (1)(2) 16,455 16,750 1,605 1, E E Targeting to increase production to ~19,000 tonnes of mixed sulphides per year (1) Mid range of guidance (2) Represents Sherritt s attributable production of 50%. SHERRITT INVESTOR DAY l PAGE 38

39 Progress at Acid Plant Commenced construction in Q Re-start construction on existing infrastructure Decrease in operating costs will vary with commodity prices Expect start-up in second half of 2016 SHERRITT INVESTOR DAY l PAGE 39

40 Pipeline of Opportunities to enhance Moa JV business Operational Efficiencies Potential Medium Term Projects Optimization Projects Acid Plant Fleet dispatch system Maintenance planning Improving ore settling rate Drive to improve safety Replace slurry prep plant 5th sulphide precipitation train 6th autoclave train SHERRITT INVESTOR DAY l PAGE 40

41 Reinvesting to Sustain Operations for 25 Years Sustaining capital for mobile equipment at Moa and infrastructure at refinery to extend life of operation $20 million in growth capital supported by financing in Cuba E ($ millions) $20 $60 $6 $ E Sustaining Acid Plant SHERRITT INVESTOR DAY l PAGE 41

42 Moa s Highlights Deep technical expertise with over 60 year operating history Low cash costs of US$5 per lb in forecasted to continue to 2016 Construction of new acid plant will reduce operating costs Long-term resource with ~16 years proven and probable reserves + agreement in place for additional resources SHERRITT INVESTOR DAY l PAGE 42

43 AMBATOVY PRODUCING RESULTS Tim Dobson, Senior Vice President, Ambatovy JV SHERRITT INVESTOR DAY l PAGE 43

44 Growth SHERRITT INVESTOR DAY l PAGE 44

45 Ambatovy Transitioning to Steady State Operations Sherritt is the operator with a 40% interest The world s largest finished nickel laterite project Nameplate capacity of 60,000 t/yr LME-grade nickel Long life asset with a mine life of ~30 years Commercial production achieved in January 2014 Production test completed in March month ramp up nearing completion SHERRITT INVESTOR DAY l PAGE 45

46 Significant Assets In a New Mining Frontier Port Mine Site Tailings Pond Ore Slurry Pipeline Plant Site Port of Toamasina Supported by a ~30 year mine life Proven and Probable reserves of 186 million tonnes at 0.85% nickel grade and 0.07% cobalt grade SHERRITT INVESTOR DAY l PAGE 46

47 The Ambatovy Plant World Class Operations SHERRITT INVESTOR DAY l PAGE 47

48 Sherritt s Proven Laterite Expertise Demonstrated Over Decades HPAL 20+ years Moa experience Proven autoclave technology Multiple train operations Refinery 60 years Fort Saskatchewan experience 100% LME grade metal products SHERRITT INVESTOR DAY l PAGE 48

49 Production Levels Rising 36 Month Ramp-Up Nearing Completion Quarterly Finished Nickel Production (tonnes, 40% basis) 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, ,500+ 3,964 3,743 3,513 3,602 2,854 2,690 2,332 2,183 Q Q Q Q Q Q Q Q Q1 2015E SHERRITT INVESTOR DAY l PAGE 49

50 Key Milestones A Track Record of Success January 2014 December 2014 January 2015 Commercial production: 70% nameplate capacity for 30 days Full year metal production: 61% nameplate capacity Autoclave throughput: 102% of nameplate capacity Nickel production: 92% of nameplate capacity February 2015 On-spec LME grade nickel: 98% March First nickel. utilities issues solved Autoclave circuit reliability issues addressed 90 for 90 completed, awaiting Independent Engineer sign-off for production certificate January 2014 Commercial production achieved Q CCD and raw liquor neutralization control achieved December 2014 Achieved 2014 guidance January % nameplate autoclave capacity achieved March for 90 achieved SHERRITT INVESTOR DAY l PAGE 50

51 Nickel Production Forecast Targeting 100% Nameplate Production Rate 2015 Achieved 90% nameplate production rate Transition from ramp up to operations will bring increased focus on optimization, cost control and debottlenecks Nickel Production Forecast E (1)(2) 14,821 19, Triennial maintenance shutdown in Q E (1) Mid range of guidance (2) Represents Sherritt s attributable production of 40%. SHERRITT INVESTOR DAY l PAGE 51

52 Net Direct Cash Costs Expectations Increasing Production Volume Unlocks Value Targeted C1 Costs (US$/lb) $12 $10 $8 $6 $4 $6 - $8 $4 - $6 $3 - $5 $2 $0 70% 90% 100% Production as a % of nameplate capacity Low cash costs of $4 - $6 at 54,000 tonnes SHERRITT INVESTOR DAY l PAGE 52

53 Capital Expenditures Plant Transitioning to Sustaining Capital Phase Capital Expenditures ($ millions, 40% basis) Reliability and debottlenecking capital will decrease over next 2 3 years Mine development and tailings facility construction will continue throughout life $38 $ E SHERRITT INVESTOR DAY l PAGE 53

54 A Bright Future for Ambatovy New, Long Life Assets Increasing production provides strong leverage to rising nickel prices expected in the second half of for 90 production test completed Transitioning from ramp up to operations will enhance business focus to optimization New asset base with ~30 year mine life and ongoing refinery capacity SHERRITT INVESTOR DAY l PAGE 54

55 OIL & GAS AND POWER BUILDING LONG-TERM PRODUCTION Elvin Saruk, Senior Vice President, Oil & Gas and Power SHERRITT INVESTOR DAY l PAGE 55

56 Profitable SHERRITT INVESTOR DAY l PAGE 56

57 Profitable Production Largest independent oil producer in Cuba Production of ~20,000 gross workinginterest (GWI) bopd from 56 wells Low unit operating costs in 2014 of $8.56 per GWI bbl Strong operating margin and contribution to adjusted EBITDA Realized pricing is an average of 73% of Gulf Coast Fuel Oil No. 6 Price Provides employment to 349 workers Completed 2014 goal of securing new agreements SHERRITT INVESTOR DAY l PAGE 57

58 Expansion Drilling in Two New Blocks Received extension of Puerto Escondido/Yumuri PSC to 2028 plus two new PSCs covering 1,228 square kms with 25 year term Completed five out of seven commitment wells on extension lands Interpret/shoot seismic on two new PSC s SHERRITT INVESTOR DAY l PAGE 58

59 Revenue Based on Fuel Oil No. 6 Performance Revenue is based on Fuel Oil No. 6 price Price relationship of Fuel Oil No. 6 to WTI is currently at approximately 90% Jan-02 Oct-02 Jul-03 Apr-04 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 WTI Fuel Oil No Jan-02 Oct-02 Jul-03 Apr-04 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Fuel Oil No. 6 as a % of WTI SHERRITT INVESTOR DAY l PAGE 59

60 Revenue Model For each PSC, after commercial production, Sherritt is allocated cost recovery oil as reimbursement for approved capital and operating costs, including costs in the cost recovery pool Volume of cost recovery oil = balance of approved capital and operating costs/ average net selling price per barrel of oil produced in the quarter The amount of cost recovery oil can vary significantly depending on the size of the pool (capital and operating costs) and prevailing oil price Example Production Calculation Scenario US $80.00 Fuel Oil No. 6 Gross production Eligible costs to be recovered Cost recovery US $80.00 Fuel Oil No.6 (1) Remaining bbls (A-B) Profit oil bbls (C x 45%) 100 bbls (A) $2, bbls (B) 66 bbls (C) 30 bbls (D) Scenario US $60.00 Fuel Oil No. 6 Gross production Eligible costs to be recovered Cost recovery US $60.00 Fuel Oil No.6 (1) Remaining bbls (A-B) Profit oil bbls (C x 45%) 100 bbls (A) $2, bbls (B) 54 bbls (C) 24 bbls (D) Net Production (B+D) 64 bbls Net Production (B+D) 70 bbls (1) Based on a realization of ~73% of Fuel Oil No. 6 SHERRITT INVESTOR DAY l PAGE 60

61 Attractive Netback Business Model Low Cash Costs Attributed To: ( Vertical integration Successful operating model Experienced Team 2015E ~$10/bbl Sherritt s netback is ~5% higher when compared to other heavy oil producers Sherritt Cuba Netback for ($/bbl) Adjusted EBITDA for ($ millions) $80 $250 $60 $40 $20 Resulting in strong Adjusted EBITDA $200 $150 $100 $ Netback Profit tax OPEX T&T $50 $ Low cash costs for heavy oil production SHERRITT INVESTOR DAY l PAGE 61

62 Long-Term Production Strategy Multi-year production strategy to reach 20,000 bbls over the long-term Existing Varadero PSC ends in November 2017 and PE/YU ends in March 2018 Immediate focus in on the PE/YU extension lands Production to increase by 3% in 2015E and a further increase in 2016E Encouraged by discovery in 1992 on Block 10 plus results from the reprocessing of seismic data Short-term production test from the Block 10 discovery 3,000 bopd Offsetting Varadero West wells produce up to 1,500 bopd Block 10 reservoir can be reached by using existing technology from onshore drilling locations (1) Production Guidance (bopd) 19,456 20,000 Potential Long-Term Production Profile (bopd) (bopd) 30,000 25,000 20,000 15,000 10,000 5, E Existing PE/YU Extension + Exploration (1) Mid range of guidance SHERRITT INVESTOR DAY l PAGE 62

63 Investing in Long-Term Production Capital Expenditures E Increased oil production increasing drilling activity $107 Second drill rig in operation $65 Extensive land position to develop new wells Low cost production E Attractive model Netbacks and well payouts expected to be similar to recent results, in a similar commodity pricing environment Multi-year capital program to 2018 designed to achieve this SHERRITT INVESTOR DAY l PAGE 63

64 2015 Highlights The Year of Execution Priorities for 2015 Plan is to drill 10 wells in 2015 dependent on success Receive approval for two new PSCs Prepare to drill on Block 10 in early 2016 Challenges Low oil prices SHERRITT INVESTOR DAY l PAGE 64

65 Reliability SHERRITT INVESTOR DAY l PAGE 65

66 Largest Independent Power Producer in Cuba Sherritt Power operates in Cuba through its 33 1/3% interest in Energas S.A. Natural gas is processed from oil fields and generates electricity and liquids The 150 MW Boca de Jaruco Combined Cycle Project increased capacity to 506MW Represents 10% of adjusted EBITDA Investigating opportunities to use underutilized capacity at the plant Provides employment to 273 workers SHERRITT INVESTOR DAY l PAGE 66

67 Seeking Opportunities to Increase Utilization Stable power generation of ~850 GWh Business focused on optimal utilization of gas Current unused generation capacity of 145 MW Opportunity to increase power generation Varadero plant investigating using an alternate fuel such as LPG to utilize capacity Boca plant opportunity comes with potential additional gas from continuing drilling activities Electricity (GWh) E SHERRITT INVESTOR DAY l PAGE 67

68 Predictable Cash Flow Model Total Capital Expenditures ($ millions) Cash flow is received from adjusted EBITDA and net finance income Contributed adjusted EBITDA of $25 million in 2014 Capital is anticipated to remain constant at approximately $4 million per year Evaluating extensions to the Varadero power generation facility $4.4 $ E SHERRITT INVESTOR DAY l PAGE 68

69 Power Highlights Reliable contributor to adjusted EBITDA Seeking fuel opportunities to achieve increased power generation by utilizing installed capacity SHERRITT INVESTOR DAY l PAGE 69

70 Conclusion SHERRITT INVESTOR DAY l PAGE 70

71 Delivering Results Focused on delivering against stated priorities Clear strategy, simplified business Strategic priorities to result in stronger business Prudent Decision Making Strategic deployment of capital : Disciplined growth based on the following criteria Debt reduction Return of capital Balance sheet Ambatovy ramp-up Jurisdiction risk Expertise Visibility to return SHERRITT INVESTOR DAY l PAGE 71

72 Investment Summary Top 10 largest nickel producer in the world Rising production in base metals with forecasted nickel price increases Strong cash flow growth Catalysts - financial completion at Ambatovy SHERRITT INVESTOR DAY l PAGE 72

73 Questions SHERRITT INVESTOR DAY l PAGE 73

74 Sherritt International Corporation 1133 Yonge Street, Toronto, Ontario, Canada M4T 2Y7 Media & Investor Relations Sean McCaughan Telephone: Toll-Free: Website: SHERRITT INVESTOR DAY l PAGE 74