Sherritt’s Q1 earnings up 116% to $63.6 million

Sherritt’s Q1 earnings rose 116% over the same quarter a year ago. The company reported net earnings on Thursday of $63.6 million or 22 cents a share. A year ago, the company reported only $29.4 million in net earnings or 10 cents a share.

The company’s sales volumes were up slightly. Sherritt’s sales volumes of nickel, reported in thounsands of pounds, was 9,438 in 2011 and 9,392 in 2010, less than a one per cent increase.

Cobalt sales volumes rose more significantly, 1,104 in 2011 and 907 a year ago, a 10 per cent increase.

Thermal coal production fell from 9.8 millions of tonnes a year ago to 9.5 in 2011. The company said that sales volumes were lower due to it’s prairie operations selling less coal to Highvale mine, where two coal-fired generating units were removed from service.

The company reported more highlights in its news release:

• Net earnings for first-quarter 2011 include an unrealized foreign exchange loss, after tax, of $3.2 million ($0.01 per share), mainly due to the impact of the change over the quarter in the value of the Canadian dollar relative to the U.S. dollar on the Corporation’s $0.7 billion of U.S. dollar denominated Ambatovy partner loans.

• Sales volumes for first-quarter 2011 (Sherritt’s share) totaled 9.4 million pounds of nickel, 1.0 million pounds of cobalt, 9.5 million tonnes of thermal coal, 1.1 million barrels of oil and 148 GWh of electricity.

• Cash, cash equivalents and short-term investments were $732.0 million at March 31, 2011, including $35.7 million (50% basis) held by the Moa Joint Venture and $5.0 million (33 1/3% basis) held by Energas S.A. Cash held by the Ambatovy Project is included in “Investment in an Associate” and was $10.5 million (40% basis) as at March 31, 2011.

• Operating cash flow for first-quarter 2011 was $112.8 million, compared to $126.9 million in first-quarter 2010.

• Spending on capital and intangibles relating to existing operations totaled $29.1 million for first-quarter 2011, compared to $39.0 million in first-quarter 2010. Spending on capital in the Ambatovy Project was $290.6 million (100% basis) for first-quarter 2011, 8% lower than the prior-year period as construction activities on the Project are nearing completion.

• At the Ambatovy Project, commissioning activities at the port were completed during first-quarter 2011, allowing for the receipt of the first shipments of input commodities, including sulphuric acid and coal. Several key components began start up activities during the quarter, including the power generation and facilities at the mine site, as well as the water and sewage treatment plants, the demineralized water plant and the compressed air plant at the plant site. At March 31, 2011, 50% of the major process plant modules had been transferred to commissioning teams. The current approved capital spending estimate and schedule are US$4.76 billion with production of first metal in summer 2011. As the Project nears both the estimated schedule and associated capital budget, a review is being conducted to determine if either estimate requires alteration. Revised guidance will be issued if there is any material change to either estimate.

• At March 31, 2011, total available liquidity was approximately $1.2 billion, not including approximately $115 million (40% basis) available under the Ambatovy Joint Venture senior project financing. Total debt was $1.5 billion including approximately $0.7 billion related to non-recourse Ambatovy partner loans to Sherritt.

Michael Allan McCrae wrote this story. You can contact him at [email protected] or @michaelmccrae.