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Sherritt launches C$100M units offering to fund debt buyback

Sherritt International Corp. on Jan. 16 announced plans to undertake a C$100 million offering of units.

Each unit comprises 1 common share and half of a share purchase warrant that will be linked to the price of cobalt.

Each full warrant will be exercisable to acquire between 1 and 1.25 shares of the company. The exercise price will be linked to cobalt; should the cobalt price reach US$34.99/lb or lower, the common share-per-warrant ratio will be 1, and if the price goes to US$55/lb or higher, the shares-per-warrant ratio would be 1.25, with incremental stages in between.

The units offering is expected to close Jan. 25.

The net proceeds will be used mainly to repurchase the company's outstanding 8% senior unsecured debentures due 2021, 7.5% senior unsecured debentures due in 2023 and 7.875% senior unsecured notes due in 2025 for a targeted aggregate principal amount of up to C$75 million.

The company has outstanding C$220 million in 2021 notes, C$250 million in 2023 notes and C$250 million in 2025 notes.

The noteholders will receive C$950 per C$1,000 principal of a 2021 note unit, C$900 per 2023 unit and C$880 for each of the 2025 note units.

The notes tender will remain open until Feb. 13, and settlement is expected by Feb. 16.

Sherritt produced 35,474 tonnes of nickel and 3,053 tonnes of cobalt from its Madagascar-based Ambatovy joint venture in 2017, below its full-year guidance of between 36,000 and 39,000 tonnes of nickel and between 3,300 and 3,600 tonnes of cobalt.