I’ve owned Sherritt International since January, when I posted about the idea here. The timing of my stock purchase coincided with the start of the Indonesian export ban on ferrous nickel and nickel in pig iron. I bought Sherritt throughout the low to the mid $3’s (my average cost is $3.48) and did pretty well on with it until the last couple of weeks when the stock has dropped back to the $4 range.
About half of that drop occurred after the release of the second quarter results. The stock pulled back because nickel production from the Moa joint venture was a bit weak in the first half and because full year guidance for the Ambatovy joint venture was reduced (from the range of 44,000-50,000 tonnes to 37,000 – 41,000 tonnes). The Cuban oil business saw production in-line with what I had expected and the company has recently signed an extension on its oil production sharing contract with the Cuban government and expects to expand that agreement to include new exploration targets.
The Ambatovy Ramp
The slow ramp at Ambatovy comes as no surprise. Its been slowly ramping for almost two years now. The mine has seen one hiccup after another. Yet there is progress being made towards positive cash flow. By the first quarter of 2015 Sherritt is expecting the mine to operate at 90% capacity (its currently in the mid-70’s) and when it does cash costs are expected to drop to the $3-$5 per pound range. Read more