Sherritt exits Ambatovy nickel joint venture

Sherritt International Inc. [S-TSX] is to exit the Ambatovy joint venture in Madagascar, but its decision will not affect nickel or cobalt production at the mine.

Toronto-based Sherritt is a world leader in the mining and refining of nickel and cobalt from lateritic ores with projects and operations in Canada, Cuba and Madagascar. Sherritt is the largest independent energy producer in Cuba, with extensive oil and power operations across the island. Its key asset is a nickel mining joint venture with the Cuban government.

The 50/50 partnership, formed in 1994, involves the extraction and processing of nickel and cobalt from an open pit mine at Moa Bay in eastern Cuba.

The laterite nickel ore is processed on site, producing mixed sulphides (containing nickel and cobalt) that are shipped in bags to Halifax, Nova Scotia and then transported by rail to a refinery in Fort Saskatchewan, Alberta.

Sherritt licenses its proprietary technologies and provides metallurgical services to mining and refining operations worldwide.

The Ambatovy joint venture is a vertically integrated nickel and cobalt mining, processing, refining and marketing joint venture that produces Class 1 finished nickel. Sherritt acts as operator of the facility, and is a 12% owner. The other significant partners are Sumitomo and Korea Resources Corp.

On a 100% basis, Ambatovy produced 33,733 tonnes of finished nickel and 2,900 tonnes of finished cobalt in 2019.

The Canadian miner announced on February 26, 2019, that it would not fund its 12% stake in the Ambatovy joint venture in a move to protect its balance sheet after Ambatovy made a cash call to boost short term liquidity. Sherritt subsequently announced that it has become a defaulting shareholder on March 6, 2019.

Two years ago, Sherritt announced plans to reduce its stake in the Ambatovy joint venture from 40% to 12%, but has remained as the mine operator. At the time, Sherritt said the decision would allow it to eliminate $1.4 billion of debt.

This was after Sherritt spent 90% of the $5.5 billion that it cost to develop the asset.

The Ambatovy mine area is located 80 km east of Antananarivo (the capital of Madagascar) near the town of Moramanga. At the mine site, Sherritt has been operating an open pit mining operation and an ore preparation plant.

From the mine, the slurried laterite ore is delivered via pipeline to a processing plant and refinery located directly south of the Port of Toamasina.

The design at Ambatovy is based on Sherritt’s hydrometallurgical process that has been commercially proven at the Moa Joint Venture as well as at other international commercial operations.

On Wednesday, Sherritt International shares eased 4% to 12 cents. The shares are currently trading in a 52-week range of 11 cents and 46 cents.