Sherritt makes big move on US-Cuba deal

Sherritt International (TSX:S), the natural resources company with extensive operations in Cuba, saw a whopping 42.9 percent gain between last Monday and Friday, resulting from an announced thaw in US-Cuba relations.

Shareholders in the Canadian firm were rewarded handsomely after a historic deal struck Wednesday between the United States and Cuba, that would restore diplomatic ties that Washington severed over 50 years ago. US President Barack Obama also called for an end to the economic embargo against its former Cold War enemy, that has crippled the island nation's economy and kept the country in a sort of time warp, symbolized by its revolutionary slogans, vintage cars and crumbling buildings.

As Cuba's largest foreign investor by far, mining and energy firms will be watching Sherritt closely to see how the lifting of the embargo will affect the company and other foreign firms doing business in Cuba. The company has oil and gas operations in Cuba and mines cobalt and nickel through its Moa nickel operation, a joint venture between subsidiaries of Sherritt and General Nickel Company S.A, a Cuban company.

CEO David Pathe said last week that lifting the embargo could save Sherritt costs by sourcing mining equipment in the States and selling processed nickel and cobalt to US customers. It would also make it easier for US investors to buy the stock.

“There’s always been this uncertainty around political risk in Cuba as a result of the Cuba-America relationship,” Pathe told the Financial Post. “And if this can help alleviate that, we think it’s a positive development for Cuba and for us.”

According to the Post, Sherritt plans to expand its Cuba business next year by building an acid plant that would reduce operating costs. Along with mining, Sherritt is the largest independent oil producer in Cuba. It currently operates three commercial fields through two Production Sharing Contracts (PSCs) with the Cuban government. Last Thursday, Sherritt announced it signed two new PSCs with the government.

"We are very pleased with the addition of these two Production Sharing Contracts as they are a significant part of our strategy to extend the production life of our energy business in Cuba," Pathe said in a statement, adding: "We are also awaiting final approval on two additional PSCs on the west side of the City of Havana."