Mr. Leon Binedell reports

SHERRITT REPORTS Q1 RESULTS AND SUCCESSFUL IMPLEMENTATION OF THE COBALT SWAP

Sherritt International Corp. today released its financial results for the three months ended March 31, 2023. All amounts are in Canadian currency unless otherwise noted.

"We are pleased with our continued accomplishments in the first quarter of this year," said Leon Binedell, president and chief executive officer of Sherritt International. "The effectiveness of the cobalt swap was proven with almost 75 per cent of cobalt volume for the year received to date. We expect to receive the entire $114-million (U.S.) through cobalt and cash distributions by mid-year, and all cash receipts from the sale of cobalt distributions to be received before the end of the year."

Mr. Binedell continued: "In addition, we published our NI 43-101 technical report for the Moa JV which more than doubles reserves and extends the life of mine to 26 years. This technical report underpins and validates our long-term strategy for producing low-cost, high-purity nickel and cobalt."

Selected Q1 2023 developments

• Net earnings from continuing operations was $13.6-million, or three cents per share, in Q1 2023, compared with net earnings from continuing operation of $16.4-million, or four cents per share, in Q1 2022.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in the quarter was $40-million compared with $59-million in Q1 2022.
• In accordance with the cobalt swap:
  • The Moa JV distributed 1,280 tonnes (100-per-cent basis) of the 2,082 annual maximum volume (61 per cent) of finished cobalt with an in-kind value of $58-million (100-per-cent basis);
  • GNC's 50-per-cent share of the distribution ($29-million) was redirected to Sherritt to settle the GNC receivable;
  • Sherritt sold 696 tonnes, $30-million, of cobalt to third parties during the quarter;
  • Sherritt received $19-million in cash from the sale of cobalt.
• Filed a National Instrument 43-101 technical report for the Moa JV which indicates that current reserves estimates are sufficient to extend the life of mine to 2048 with an after-tax NPV (net present value) (8 per cent) of $1.5-billion (U.S.) (100-per-cent basis) in the alternative case based on recent analyst nickel, cobalt and input commodity price forecasts.
• Sherritt's share of finished nickel and cobalt production at the Moa joint venture (Moa JV) was 3,483 tonnes and 367 tonnes, 10-per-cent and 18-per-cent lower, respectively, than the prior-year quarter.
• Net direct cash cost (NDCC) was $6.46 (U.S.)/pound (lb) in Q1 2023 compared with $3.42 (U.S.)/lb in Q1 2022 primarily due to materially lower realized cobalt prices, placing Sherritt in the second cost quartile for HPAL nickel producers.
• Power production increased 15 per cent to 158 GWh (gigawatt-hours) compared with Q1 2022 as a result of additional gas supply.

Developments subsequent to quarter-end

• Successfully completed the drilling and testing of a new gas well for CUPET in the Puerto Escondido field in Cuba and commenced drilling on a second well. The additional gas will be provided to Energas for use in power production starting in Q2.
• In accordance with the cobalt swap, subsequent to quarter-end:
  • The Moa JV distributed an additional 240 tonnes of cobalt (100-per-cent basis) with an in-kind value of $9-million;
  • GNC's 50-per-cent share of the distribution ($5-million) was redirected to Sherritt to settle the GNC receivable;
  • Sherritt sold 152 tonnes, $7-million, of cobalt to third parties; and
  • Sherritt received $13-million in cash from the sale of cobalt.

Cash and cash equivalents as at March 31, 2023, were $138.3-million, up from $123.9-million at Dec. 31, 2022. During Q1 2023, Sherritt received $18.8-million in cash from the sale of cobalt to third parties (cobalt swap); generated $15.7-million from the Fort Site primarily due to strong fertilizer presales, offset by a $24.4-million payment for share-based compensation. In addition, Energas paid $6-million (33.33-per-cent basis) to GNC, in Cuban pesos, in accordance with the cobalt swap. During the quarter, Sherritt drew $18.0-million on its revolving credit facility.

Of the $138.3-million of cash and cash equivalents, $45.4-million was held in Canada, including cash received under the cobalt swap. The remaining amounts were held in Cuba and other countries.

Subsequent to the quarter-end, Sherritt paid $9.4-million in interest on its second lien notes. At the interest payment date, the corporation was not required to make a mandatory redemption of second lien notes as it did not meet the minimum liquidity threshold as defined in the indenture agreement.

Outlook

Two thousand twenty-three guidance for production volumes, unit operating costs and spending on capital remains unchanged. Sherritt continues to monitor the volatility in cobalt prices. NDCC guidance is based on a $23.50 (U.S.)/lb cobalt reference price. If the Q1 2023 average reference price of $17.56 (U.S.)/lb were to persist through the remainder of the year, NDCC guidance could increase by approximately 85 U.S. cents/lb, assuming all other assumptions remain constant.

Conference call and webcast

Sherritt will hold its conference call and webcast May 11, 2023, at 10 a.m. Eastern Time to review its Q1 2023 results. Dial-in and webcast details are as follows:

North American callers:  please dial 1-888-396-8049, passcode: 60594804

International callers:  please dial 1-416-764-8646, passcode: 60594804

Live webcast:  Sherritt website

Please dial in 15 minutes before the start of the call to secure a line. Alternatively, listeners can access the conference call and presentation via the webcast available on Sherritt's website.

An archive of the webcast and replay of the conference call will also be available on the website.

Financial statements and management's discussion and analysis

Sherritt's condensed consolidated financial statements and MD&A for the three months ended March 31, 2023, are available at the SHerritt website and should be read in conjunction with this news release. Financial and operating data can also viewed in the investor relations section of Sherritt's website on SEDAR.

About Sherritt International Corp.

Sherritt is a world leader in using hydrometallurgical processes to mine and refine nickel and cobalt -- metals deemed critical for the energy transition. Sherritt's Moa joint venture has a current estimated mine life of 26 years and has embarked on an expansion program focused on increasing annual mixed sulphide precipitate production by 20 per cent, or 6,500 tonnes of contained nickel and cobalt (100-per-cent basis). The corporation's power division, through its ownership in Energas SA, is the largest independent energy producer in Cuba, with installed electrical generating capacity of 506 megawatts, representing approximately 10 per cent of the national electrical generating capacity in Cuba. The Energas facilities comprise two combined cycle plants that produce low-cost electricity from one of the lowest-carbon-emitting sources of power in Cuba. Additionally, its technologies group creates innovative, proprietary solutions for natural-resource-based industries around the world to improve environmental performance and increase economic value.

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