Mr. Leon Binedell reports

SHERRITT REPORTS FIRST QUARTER 2024 RESULTS; SOLID PERFORMANCE FROM POWER; METALS ACHIEVED STRONG NICKEL SALES VOLUME; SLURRY PREPARATION PLANT OPERATING AT DESIGN CAPACITY

Sherritt International Corp. has released its financial results for the three months ended March 31, 2024. All amounts are in Canadian currency unless otherwise noted.

Leon Binedell, president and chief executive officer of Sherritt, commented: "The first quarter saw a continuation in depressed nickel market conditions, however, more recently, conditions gradually improved and we are pleased to see the market gaining traction. These conditions contributed towards our success in reducing our opening nickel inventory with strong nickel sales. Our available liquidity in Canada improved from the year-end, reversing the negative trend from the second half of 2023. We achieved this despite our previously disclosed expectations that the first quarter would be our highest NDCC quarter in 2024. We saw improved mining, processing and refining cost from the strong actions taken in response to market conditions, including our restructuring early in the year and increased production year over year, and expect improved operating performance and lower NDCC over the rest of the year in line with our guidance."

Mr. Binedell continued: "Growing geopolitical competition over critical minerals has led to new sanctions being implemented on Russian produced metals and potential trade measures in the nickel market being contemplated against China and Indonesia. We are closely monitoring these developments and their implications for advancing the buildout of regionalized supply chains and influencing future pricing.

"Against this market backdrop, Sherritt is in a strong position with its technical expertise and innovative processing solutions, which are key differentiators and enablers towards our near-term strategic focus to expand mid-stream processing capacity of critical minerals for the EV supply chain in North America. I am excited by the recent advancements our team has made on our MHP mid-stream processing flowsheet, aimed to significantly reduce sodium sulphate effluent, a significant environmental challenge for the industry, while still ensuring low GHG emissions and energy intensity. We believe this project is an important step to help unlock the processing value chain for the North American EV sector while also providing a catalyst for future domestic mine production. We look forward to accelerating this project throughout 2024, with near-term efforts focused on site identification, customer and partnership arrangements, and further process development and project definition."

First quarter 2024 selected developments:

• Sherritt's share of finished nickel and cobalt production at the Moa joint venture (Moa JV) was 3,597 tonnes and 342 tonnes, respectively.
• Sherritt's share of finished nickel and cobalt sales of 4,023 tonnes and 362 tonnes, respectively, exceeded production volumes with strong spot sales driving progress on reducing nickel inventory.
• Net direct cash cost (NDCC) was $7.24 (U.S.) per pound (lb) due to higher-cost opening inventory sold and lower cobalt and fertilizer byproduct credits. Importantly, mining, processing and refining (MPR) costs, the largest component of NDCC, improved 13 per cent compared with Q1 2023:
  • In March, NDCC improved to an average of $6.82 (U.S.) per lb and continues to trend lower.
  • Higher year-over-year NDCC was expected during the quarter and was factored into the corporation's 2024 outlook for NDCC, which Sherritt continues to expect will be within a range of $5.50 (U.S.) to $6 (U.S.) per lb, implying a 20-per-cent decrease from 2023.
• Electricity production was 210 gigawatt-hours (GWh), benefiting from increased gas supply and equipment availability.
• Electricity unit operating cost was $17.12 per megawatt-hour (MWh), benefiting from higher electricity production and sales volume.
• Net loss from continuing operations of $40.9-million or 10 cents per share was primarily due to lower average realized prices for nickel, cobalt and fertilizers, partly offset by higher nickel sales volumes.
• Adjusted net loss from continuing operations was $24.6-million or six cents per share, which excludes a non-cash $9.1-million revaluation loss on the net receivable pursuant to the cobalt swap on updates to valuation assumptions and $3.5-million of severance costs on the restructuring.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was negative $6.5-million.
• Available liquidity in Canada as at March 31, 2024, was $67.9-million, increasing from $63.0-million as at Dec. 31, 2023.
• The Moa JV received a $20.0-million prepayment on a sales agreement for nickel deliveries in 2024.
• The corporation continued implementation of an organization-wide restructuring and cost-cutting program to improve operational performance and respond to market conditions, resulting in a reduction to the corporation's Canadian operations head count by approximately 10 per cent, which is expected to result in annualized cost savings of $13.0-million.
• The overall timing and budget to reach targeted production remain unchanged for the Moa JV expansion. The slurry preparation plant (SPP) was commissioned and has been operating at design capacity since the end of January, 2024, and phase 2 is on schedule for an expected end-of-year-2024 completion, with commissioning and ramp-up in 2025.
• The corporation advanced the mixed hydroxide precipitate (MHP) mid-stream processing flowsheet for production of nickel and cobalt sulphate while also reducing sodium sulphate effluent, which is a key environmental challenge for the industry. Project focus in 2024 will be on site identification, customer and partnership arrangements, and further process development and project definition.
• Sherritt appointed Louise Blais and Steven Goldman to the board of directors in accordance with its succession planning with the retirements of Maryse Belanger in March and John Warwick, who will not seek re-election at the corporation's annual meeting of shareholders in May.

Developments subsequent to the quarter

Subsequent to the quarter-end:

• Sherritt received an additional $10.0-million repayment from the Moa JV on the advances made for short-term working capital purposes at the Moa JV.
• Sherritt's syndicated revolving-term credit facility was amended to extend its maturity by one year from April 30, 2025, to April 30, 2026, and change the EBITDA-to-interest-expense covenant as defined in the agreement. There were no other significant changes to the terms, financial covenants or restrictions.
• Sherritt completed a 10-per-cent work force reduction at its corporate office. Annual cost savings from employee costs and reductions to other corporate-office-related costs are expected to be $2.0-million per year. This follows the 10-per-cent work force reduction to the corporation's Canadian operations earlier this year and is in addition to the 10-per-cent work force reduction at Sherritt's corporate office in 2021. Sherritt's cost-cutting measures demonstrate its continuing commitment to cost optimization, streamlining operations, enhancing efficiencies, and improving profitability and liquidity, while ensuring proper resources for safe and effective operations, and to advance future growth initiatives.
• Sherritt's board of directors continuously engages with shareholders and, following its latest engagement, the board has made the determination to accelerate its review of corporate costs and executive compensation, which was planned to be conducted this year. Executive compensation will be assessed relative to peers to ensure it is aligned with the current size, scope and complexity of Sherritt, as well as reviewed to ensure that it is strategic, fair, appropriate and competitive, and aligns with shareholder experience, which is consistent with its review in 2022. The board will complete this review by no later than Sept. 30, 2024, and will report on the results of this review following its completion.

Q1 2024 financial highlights

Cash and cash equivalents as at March 31, 2024, were $144.4-million, increasing from $119.1-million as at Dec. 31, 2023. During Q1 2024, Sherritt received $11.3-million proceeds from operating activities from Fort Site, including the impact of receipts from strong fertilizer presales and timing of working capital payments, and drew an additional $11.0-million on its revolving credit facility due to timing of receipts and disbursements. These amounts were offset primarily by payments of $3.7-million for property, plant and equipment, and $7.4-million on rehabilitation and closure costs related to legacy oil and gas Spain assets.

Sherritt also began receiving repayment of the advances made for short-term working capital purposes at the Moa JV with an initial repayment of $3.0-million. Advances to the Moa JV under its credit facility with the corporation are to the two non-Cuban operating companies of the Moa JV, are interest bearing at the corporation's borrowing rates and are expected to be fully repaid during the first half of 2024. Sherritt does not expect to advance further amounts to the Moa JV under its credit facility in 2024.

Upon repayment of the advances outstanding by the Moa JV, and subject to the Moa JV's available liquidity to support operations and expected liquidity requirements, the joint venture will be eligible to commence payment of cobalt dividends pursuant to the cobalt swap. At current spot nickel prices and given the prioritization of the joint venture to repay its outstanding advances, as previously disclosed, the corporation expects that under the cobalt swap, the cobalt dividends are anticipated to commence in the second half the year and will not meet the annual maximum amount in 2024. As defined by the agreement, any shortfall in the annual minimum payment amount will be added to the following year.

As at March 31, 2024, total available liquidity in Canada, which is composed of cash and cash equivalents in Canada and available credit facilities of $30.4-million, was $67.9-million, increasing from $63.0-million as at Dec. 31, 2023.

Subsequent to the quarter-end:

• Sherritt received an additional $10.0-million repayment from the Moa JV on the advances made for short-term working capital purposes at the Moa JV.
• Sherritt's syndicated revolving-term credit facility was amended to extend its maturity by one year from April 30, 2025, to April 30, 2026, and change the EBITDA-to-interest-expense covenant as defined in the agreement. The benchmark rate will transition to the CORRA (Canadian overnight repo rate average) after cessation of the bankers' acceptance benchmark rate. There were no other significant changes to the terms, financial covenants or restrictions.
• Sherritt paid interest of $9.4-million on the second lien notes and was not required to make any mandatory redemptions.

Review of operations

Reportable segment update

As a result of the organization-wide restructuring in January, 2024, the former technologies reportable segment and corporate reportable segment were combined into a single corporate and other reportable segment, which includes the corporation's management of its joint operations and subsidiaries, and general corporate activities related to public companies, including business and market development, growth and external technical services activities, as well as management of cash, publicly traded debt and government relations. Segmented information for the prior year was restated for comparative purposes to reflect the new corporate and other reportable segment. In the current-year period, expenses incurred to support and enhance metals operations and business and market development, formerly reported within technologies, are recognized within the metals reportable segment.

Metals

Revenue

Metals revenue in Q1 2024 was $115.1-million, compared with $176.5-million in Q1 2023. Revenue in the current-year period was lower primarily due to lower average realized prices for nickel, cobalt and fertilizer, and the timing of receipts and sales of cobalt by Sherritt under the cobalt swap agreement, partly offset by higher nickel sales volumes. In Q1 2024 the average realized prices for nickel, cobalt and fertilizers were $9.90 per lb, $14.51 per lb and $412.05 per tonne, 40 per cent, 24 per cent and 27 per cent lower, respectively, compared with the same period in the prior year.

Nickel revenue in Q1 2024 was $87.8-million, compared with $121.4-million in Q1 2023. Finished nickel sales volumes in Q1 2024 were 20 per cent higher than Q1 2023 and exceeded production volumes as metals reduced its opening inventory with strong spot sales.

Cobalt revenue in Q1 2024 was $11.6-million, compared with $30.8-million in Q1 2023. Cobalt revenue on the cobalt swap sales was $900,000 in Q1 2024, compared with $29.8-million in Q1 2023. Higher Moa JV cobalt revenue of $10.7-million in Q1 2024 compared with $1.0-million in Q1 2023, partly offsetting the lower cobalt swap revenue.

Fertilizer revenue in Q1 2024 was $9.9-million, compared with $16.9-million in Q1 2023. Fertilizer sales volume was 20 per cent lower on delayed demand ahead of the spring planting season.

Cobalt swap sales

During Q1 2024 and for the remainder of 2024, Sherritt anticipates variances in cobalt sales volumes, revenue and cost of sales as a result of the timing of receipts of cobalt and their subsequent sale by Sherritt under the cobalt swap agreement. In 2023, Sherritt began receiving and selling 100 per cent of the available cobalt in Q1 and received the annual maximum amount of cobalt (2,082 tonnes) by the end of Q2. In the current year, Sherritt expects to begin receiving cobalt under the cobalt swap in the second half of the year.

As a result, sales of cobalt will be recognized by the Moa JV at Sherritt's 50-per-cent share until such time as Sherritt begins receiving cobalt from the cobalt swap. While this will result in variances in cobalt sales volumes, revenue and cost of sales, it will not have a material impact on earnings from operations, average realized prices, cobalt byproduct credits or NDCC.

Production

Mixed sulphides production at the Moa JV in Q1 2024 was 4,052 tonnes, up 8 per cent from the 3,750 tonnes produced in Q1 2023, benefiting from lower unplanned maintenance activities, improved ore blends and grades, and additional processing capacity and efficiencies resulting from the completion of the SPP.

Sherritt's share of finished nickel and cobalt production in Q1 2024 was 3,597 tonnes and 342 tonnes, 3 per cent higher and 7 per cent lower, respectively, than Q1 2023. Finished nickel production during the quarter increased due to higher nickel-rich third party feed processed, partly offset by weather-related shipping delays in delivering Moa mixed sulphides feed to the refinery and reduced production rates to mitigate feed contaminants. Finished cobalt production was lower, consistent with the higher nickel-to-cobalt ratio in available feed processed. The delayed shipment of mixed sulphides was received at the refinery in April.

Fertilizer production in Q1 2024 of 57,064 tonnes was 2 per cent lower compared with Q1 2023.

NDCC

NDCC per pound of nickel sold was $7.24 (U.S.) per lb in Q1 2024, compared with $6.46 (U.S.) per lb in Q1 2023; however, NDCC was 8 per cent lower than in Q4 2023, improving quarter over quarter. During Q1 2024, NDCC was impacted by higher-cost opening inventory sold in addition to lower cobalt and fertilizer byproduct credits. NDCC improved to average $6.82 (U.S.) per lb during the last month of the quarter and continues to trend lower. Importantly, mining, processing and refining costs per pound of nickel sold (MPR/lb), the largest cost component of NDCC, improved 13 per cent from Q1 2023. Lower MPR/lb costs were primarily due to lower sulphur, natural gas and diesel prices, lower maintenance costs, and the impact of higher nickel sales volumes, partly offset by the higher opening inventory costs. The cobalt swap did not have a significant impact on NDCC in either of the comparative periods.

Higher year-over-year NDCC was expected during the first quarter and factored into the corporation's 2024 outlook for NDCC, which Sherritt continues to expect will be within a range of $5.50 (U.S.) to $6 (U.S.) per lb, implying a 20-per-cent decrease from 2023.

Spending on capital

Sustaining spending on capital in Q1 2024 was $7.4-million, compared with $5.9-million in Q1 2023, with modestly higher spending during the current year quarter.

Growth spending on capital in Q1 2024 was $2.0-million, most of which was related to spending on the second phase of the Moa JV expansion.

Expansion program and strategic developments

Moa JV expansion program update

The first phase of the Moa JV expansion program, the SPP, was commissioned and has been operating at design capacity since the end of January.

The second phase, the processing plant, is under way and:

• Civil construction and structural erection are nearing completion;
• Piping installation will commence in the second quarter;
• In response to lower nickel prices, the joint venture optimized the timing of certain capital spending items shifting some phase 2 spending to beyond 2024. Deferring the ordering of equipment and materials for the fifth sulphide precipitation train beyond 2024 is an additional opportunity that was identified during the quarter to optimize the timing of near-term spending without any expected impact on the timing of the ramp-up of mixed sulphide precipitate production from the expansion.

The overall timing and budget to reach target production remain unchanged, and the corporation is on schedule for an expected end-of-year-2024 completion with commissioning and ramp-up in 2025. With completion of phase 2 of the expansion, annual mixed sulphide precipitate production is expected to increase by approximately 20 per cent of contained nickel and cobalt, and is expected to fill the refinery to nameplate capacity to maximize profitability from the joint venture's own mine feed, displacing lower-margin third party feeds, and increasing overall finished nickel and cobalt production.

Strategic developments

Sherritt's technical expertise and innovative processing solutions are key differentiators and enablers toward the corporation's near-term strategic focus to expand mid-stream processing capacity of critical minerals for the electric vehicle supply chain in North America.

During the quarter, Sherritt advanced its MHP mid-stream processing flowsheet for production of nickel and cobalt sulphate while also reducing sodium sulphate effluent, which is a key environmental challenge for the industry. Project focus in 2024 will be on site identification, customer and partnership arrangements, and further process development and project definition.

Power

Revenue for Q1 2024 of $12.0-million was 17 per cent higher than Q1 2023, primarily due to higher production resulting in higher sales of 210 gigawatt-hours, compared with 158 gigawatt-hours in the prior-year period, partly offset by lower average realized price. Higher production was a result of higher gas availability as a result of the two wells that went into production at the end of the second quarter of 2023 and better equipment availability.

As a key partner in supporting the Cuban government's plans to increase power production, Sherritt continues to work with its Cuban partners to drill additional wells, which will increase gas supply for additional electricity production.

Unit operating costs for the three months ended March 31, 2024, were $17.12 per megawatt-hour, 12 per cent lower than Q1 2023, primarily as a result of higher electricity production and sales volume relative to maintenance costs during the periods.

Spending on capital of $2.6-million in Q1 2024 was primarily driven by timing of maintenance activities at Varadero.

Outlook

Two thousand twenty-four guidance for production volumes, unit operating costs and spending on capital remains unchanged.

Conference call and webcast

Sherritt will hold its conference call and webcast on May 9, 2024, at 10 a.m. Eastern Time, to review its first quarter 2024 results. Dial-in and webcast details are as follows.

North American callers, please dial:  1-800-717-1738, passcode 00402

International callers, please dial:  1-289-514-5100, passcode 00402

Live webcast:  See the company's 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 company's 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, 2024, are available on the company's website and should be read in conjunction with this news release. Financial and operating data can also be viewed in the investor relations section of Sherritt's website or 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 25 years and has embarked on an expansion program focused on increasing annual mixed sulphide precipitate production by approximately 20 per cent of contained nickel and cobalt. The corporation's power division, through its ownership in Energas S.A., 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. Sherritt's common shares are listed on the Toronto Stock Exchange under the symbol S.

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