Sherritt CEO says move on Cuban nickel needed within six months
TORONTO (CP) - The head of Sherritt International says the company needs to "make something happen" in the next six months to get expansion of its Cuban nickel project underway or it will miss a chance to take advantage of the recent strength in nickel prices.
"We're sitting down with our counterparts in Cuba and it's really a matter of negotiations to define the terms that are satisfactory to both parties," Dennis Maschmeyer, Sherritt's chief executive, said Friday during a conference call with analysts.
"To me, we either have to get it off, make something happen in the next six months, or metal prices will be too far down the road that we will probably have lost the opportunity."
Last year, Sherritt's Moa mining and processing facilities in Cuba produced 7,715 tonnes in the fourth quarter and 32,042 tonnes for the full year of nickel plus cobalt contained in mixed sulphides.
That compared with 8,159 tonnes during the fourth quarter of 2002 and a record 33,382 tonnes during the prior year. The company attributed the lower production rates to lower-grade ore and additional maintenance activities in 2002.
Sherritt has repeatedly said it believes expansion of the Cuban operation represents the best nickel laterite opportunity in the world.
"I think everybody keeps looking at everybody else to see what is the right return and the right nickel price and cobalt price assumption to provide that return, and nobody really wants to jump the gun and give a concession that appears to be too big," said Jowdat Waheed, Sherritt's chief financial officer.
Nickel prices on the London Metal Exchange closed last year up 134 per cent at $7.55 US a pound, driven by strong demand from China and no significant increases in global supply.
Nickel is a key ingredient in stainless steel, widely used for a variety of products including major household appliances.
Sherritt reported Thursday that its annual profit nearly doubled in 2003 on record revenues, helped by higher prices for some of its key commodities, particularly nickel and cobalt, slightly higher volumes in its metals business and the reorganization of its coal and electricity businesses.
The company earned $115.8 million, or 67 cents a share, for the year, compared with $60.5 million, or 38 cents a share, in 2002. Revenue hit $820.8 million, up from $729.4 million.
Sherritt said it expects nickel and cobalt production to remain close to its record levels in 2004, with sales closely matching production.
Limited availability of stainless steel scrap, strong stainless steel demand and limited new nickel production are expected to continue giving strength to the market.
Shares in Sherritt (TSX:S) were fell 16 cents Friday to close at $7.34 on the Toronto stock market.
© The Canadian Press 2004