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'No appetite' to sink more cash into Ambatovy, Sherritt CFO says

Should the Ambatovy nickel-cobalt joint venture require more cash than expected with payments on US$1.6 billion in debt starting in 2019, Sherritt International Corp.'s participation is not guaranteed.

"If there's a need for cash we'll look at that on its merits," said Andrew Snowden, Sherritt's senior vice president and CFO. "But we have no appetite to put additional cash into Ambatovy at this point."

Ambatovy, which is 12% owned by Sherritt, has a US$1.6 billion debt that starts to come due in June 2019. Snowden said the first payment on a 100% basis by the Ambatovy joint venture will be for US$94 million with semiannual payments of the same amount thereafter until maturity in 2024.

But the expectation, Snowden said, is that Sherritt will not face a cash call beyond what it has already put in escrow to contribute to the debt payment.

Sherritt owned 40% of Ambatovy until December 2017, when it eliminated C$1.3 billion in debt by reducing its Ambatovy ownership to 12% through a restructuring. Doing so protects Sherritt from the downside risk of future cash calls, Snowden said at an investor event.

Sherritt has had a bumpy ride in recent years with depressed nickel prices adding to its debt-related woes. David Pathe, Sherritt chairman, president and CEO, said the company took "dramatic actions" to put the company on more solid footing and as a result, Sherritt is "no longer bleeding cash."

A turnaround in nickel prices and soaring cobalt prices, the two main metals Sherritt mines, have helped. Pathe pointed to the growing demand for nickel and cobalt from increasing production of electric vehicles, notably in China, which he expects to contribute to years of tightness or undersupply in the nickel and cobalt markets.

The desire for cobalt and its skyrocketing price has brought new players to the sector including streaming companies that are keen to secure supply from the likes of Sherritt.

Snowden said that Sherritt has received "lots of phone calls" about streaming deals, but that it has yet to see a deal worth doing. Still, Sherritt is open to the possibility, he said. "I think the economics makes sense," Snowden said.