Although Sherritt International (S-T, SHERF-o) had a strong third quarter, the company says it will cut back on spending in the new year as it braces for much weaker fourth-quarter results.
Sherritt earned $133.1 million in the third quarter, up from $65.4 million in the same period a year earlier. Overall revenue was $477.2 million compared with $301.3 million in last year’s third quarter.
The company reported record-setting operating results in its coal, oil and gas operations, which more than offset the impact of lower nickel prices.
Sherritt’s average coal price was US$87.19 per tonne in the third quarter, 73% higher than last year, bringing in revenue of $39.3 million.
The average oil prices in Cuba and Spain were 64% and 50% higher, respectively, raising revenue from oil and gas to $112.9 million.
Nickel prices, on the other hand, were 35% lower during the period compared with the third quarter of 2007, trimming revenue to $137.5 million from $150.7 million.
Sherritt says it has begun plans to bring its spending in line with the projected cash flow generation of its operations to keep its balance sheet and liquidity position strong. It has already lowered its forecast sustaining capital spending for next year and reduced controllable operating expenses by at least 15%. Sherritt will also review costs and re-evaluate expansion schedules for its Ambatovy nickel project in Madagascar and its power joint venture in Cuba.
The company will suspend $270 million in contributions for the expansion of its 50%-owned Moa nickel-cobalt joint venture. Last year the operation — which consists of the Moa mine and processing facility in Cuba and a refining facility in Fort Saskatchewan, Alta. — produced nearly 31,400 tonnes of finished nickel and almost 3,600 tonnes of cobalt. After the expansion, the operation is slated to produce 3,000-6,000 more tonnes of nickel, plus cobalt per year.
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