Sherritt Earnings First Quarter Earnings Fall due to Cobalt Prices and Cuba Issues

Shares of Sherritt International Corp. (S.TO) shares fell almost 30 per cent last Friday after the company reported decreased earnings as a result of low cobalt prices and increased complications in Cuba.

The Toronto-based mining company reported a net loss of $61.8 million for financial results for the three months ended March 31, compared with a net loss of $600,000 for the same quarter in 2018.

Cobalt prices, which had been high due to speculation of increased demand from the battery sector and supply disruptions in the Democratic Republic of Congo, have fallen 70 per cent year over year.

Sherritt CEO David Pathe stated on Friday that, “Dramatic movements in the cobalt prices have had a pretty significant effect on our net direct cash cost and our earnings in the quarter.”

The Cuban government is experiencing negative effects from the increase of U.S. imposed economic restrictions and paid out less than expected of the foreign reserves it owes the company, resulting in a significant backlog of payments from Sherritt’s share of oil and gas and power revenues.

“Foreign currency continues to be a difficult issue in Cuba, made somewhat more difficult by U.S. actions towards Cuba at the moment,” said Pathe.

On April 17, the U.S. enacted Title III of the Helms-Burton Act, which announced that on May 2 it would implement Title III of the Helms-Burton Act, allowing U.S. citizens to bring lawsuits against foreign companies for using property that was nationalized by the Cuban government during the Cuban revolution.

Sherritt has been working with its partners in Cuba since 1994 producing nickel, cobalt, oil and gas, and electricity, and plans to continue to operate business as usual. Sherritt is the largest independent energy producer in Cuba with extensive oil and power operations across the island.

Pathe said that Sherritt has been preparing for the act since it was first passed.

“Frankly our business has been organized for this eventuality since the Helms-Burton Act came into effect in 1996. We have no businesses in the U.S. We have no assets in the U.S. And that has been very conscious decision the way Sherritt was reorganized,” he said.

The U.S. State Department continues to deny entry to the U.S. for most senior management at the company he added.

Sherritt’s share price closed down 10.5 cents, or 28.77 per cent, at 26 cents on the Toronto Stock Exchange.