Anaconda sinks Sherritt

A $29.8-millliion writedown on its investment in Aussie laterite nickel miner Anaconda Nickel sent Sherritt International (S-T) $1.1 million into the red for the three months end Sept. 30.

The net loss translates to 7 per fully diluted share, and is significantly off year-ago net earnings of $23.5 million or 14 per share. On a brighter note, revenues climbed to $207.7 million from $186.8 million on higher nickel and oil prices, which were partially offset by higher financing expenses and lower earnings from the coal business. The Oil and Gas business contributed $67.7 million toward consolidated revenue; nickel operations chipped in $51.3 million. Operating cash flow before working capital changes climbed $19.3 million to $71.9 million.

For the first three quarters of 2002, net earnings were $45.8 million (or 28 per share) on revenue of $609.5 million, down from earnings of $60.8 million (40 per share) on $447.6 million in the corresponding period of 2001. Revenue benefited from a $105 million contribution from the coal business for the full nine months. Cash from operating activities before working capital changes was $173.3 million, up $33.1 million from a year earlier.

Ignoring the Anaconda write down, quarterly and nine-month earnings were $28.7 million or 23 per share and $75.6 million or 60 per share, respectively.

Anaconda recently struck a deal that will see its secured creditors get about US25 on each dollar owed them. The creditors will also receive about A$35.8 million, or 90% of an arbitrated award relating to a claim against U.S.-based Fluor Daniel for problems at the Murrin Murrin plant, which is well behind the originally estimated start-up date of early 2000.

Sherritt has an 8% stake in Anaconda.

Sherritt’s quarterly nickel and cobalt metal production slipped slightly from the previous year, at 3,515 tonnes nickel and 332 tonnes cobalt. Nickel and cobalt sulphide production fell 3% to 4,177 tonnes. The decrease in production is owing to a maintenance shutdown.

The company realized US$6,834 per tonne for its nickel, 37% better than a year earlier, and US$6.87 per lb. for its cobalt, off 27%.

On Oct 21, Sherritt, in equal partnership with the Ontario Teachers’ Pension Plan, launched a $1.6-billion takeover bid for Fording (FDG-T). Fording, Canada’s largest export-coal producer, called the offer inadequate and tabled plans to convert itself into an income trust in an attempt to thwart the takeover.

Fording recently beat out the partners’ jointly owned Luscar Energy Partnership for a 5-year contract to operate TransAlta‘s (TA-T) Whitewood and Highvale mines in west-central Alberta, about 65 km west of Edmonton. The contract calls for 15 million tonnes of coal to be supplied annually, beginning next January. Fording had already been operating the Whitewood mine on a contract basis since 1986.

Looking ahead, Sherritt expects fourth-quarter finished nickel and cobalt production to meet or exceed that recorded so far this year. Net oil production in Cuba and Spain is expected to remain steady.

At the end of Sept., Sherritt had cash and short-term investments totalling $253 million, and long-term debt of $244 million.