Concerned shareholder offers to buy Sherritt shares

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Shares of Sherritt International Inc. [S-TSX] advanced on the news that the company has received an offer to purchase 21.62 million of its common shares from SC2 Inc., sending the share price up 4.8% or $0.015 to 32.5 cents. The offer made by SC2 is a limited company that was incorporated under the laws of the Province of Alberta and is acting on behalf of a concerned shareholder of Sherritt, for the specific purpose of making the offer.

The shares had previously traded in a 52-week range of 62 cents and 26 cents, leaving the company with a market cap of $129 million, based on 397.2 million shares outstanding.

SC2 Inc. is offering to pay 37 cents per share, payable in cash. It said the purchase price is equal to a 19.4% premium to the closing prices of the shares on the TSX on April 8, 2024 and an approximate 27.6% premium to the volume-weighted average trading price of the shares for the 30 trading days before the offer was announced.

The offer is open for acceptance until 5:00 p.m. (Calgary time) on Friday, May 10, 2024, unless the offer is extended, varied or withdrawn.

SC2 said it is making the offer following recent engagements with management and the board of Sherritt. It is advising shareholders to consider the following factors, among others, when making a decision to accept the offer.

  • As a result of the offer, shareholders will receive immediate liquidity at a premium to the current trading price of the common shares.
  • SC2 believes that, in the absence of a motivated large shareholder, it seems unlikely that Sherritt’s performance will improve. SC2 is prepared to take an active role in ensuring the future success of Sherritt, for the benefit of all shareholders.

Toronto-based Sherritt is a world leader in the mining and refining of nickel and cobalt from lateritic ores. The company ranks as 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, N.S., and then transported by rail to a refinery in Fort Saskatchewan, Alberta.

Sherritt reported a net loss from continuing operations of $53.4 million, or 13 cents per share in the fourth quarter of 2023, and $64.3 million or 16 cents per share for the full year 2023. It said results were primarily impacted by delayed nickel sales, lower fertilizer sales volumes, lower average realized prices, higher maintenance costs, inventory write-downs and an increase in rehabilitation and closure costs related to legacy oil and gas assets.

Full-year 2023 finished nickel and finished cobalt production was slightly below their respective guidance ranges, coming in at 28,672 tonnes and 2,876 tonnes respectively.

Sherritt was in the news recently when the company said it has reduced its Canadian staff by 10% and appointed Elvin Saruk as Chief Operating Officer. In that role, he is responsible for leading the company’s metals, power and oil and gas divisions.

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