TORONTO – Although Sherritt International has sold its Canadian coal business to focus primarily on mining nickel in Madagascar and Cuba, the company’s metal refinery northeast of Edmonton and scaled-down head office in Toronto remain key to the business, chief executive David Pathe said Thursday.
The refinery — which employs about 700 people in Fort Saskatchewan, Alta., which has a population of only about 22,200, according to the city’s website — was originally built in the 1950s to process nickel from a mine that closed in the 1980s.
Although it seems far away from Sherritt’s main nickel and cobalt operations — Moa in Cuba and the newer, bigger Ambatovy project in Madagascar — Pathe says the Fort Saskatchewan refinery is actually well-positioned because of its proximity to supplies of natural gas, water and sulphuric acid and its access to markets.
“It’ll be there for many years yet,” Pathe said Thursday in a phone interview.
“In addition to the nickel and cobalt products that we take by rail to the West Coast and ship all over the world, a significant byproduct of the process is ammonium sulphate fertilizer, which we sell all over the Prairies of Western Canada.”
“So in terms of where the products go, it’s in a good location,” he said of the plant, which processes material from Cuba.
Pathe also said that Sherritt will continue to keep its head office in Toronto, although it will be downsized by 25 per cent — as announced Wednesday along with the company’s third-quarter financial results.
“We’ve been focused all year . . . on cost control and finding ways of doing things more efficiently and this was one of the outcomes of those initiatives.”
Sherritt announced Wednesday it will sell the head office building, which is in a mid-town neighbourhood of Toronto, and cut 10 per cent of its salaried workforce — 60 people, including 18 in Toronto.
Sherritt (TSX:S) is a mid-sized company with a history of doing things a bit differently, including investing in Cuba during the Fidel Castro era. As a result, it ran afoul of Washington because the U.S. had, and continues to have, a decades-old trade embargo against Cuba.
Sherritt continues to bypass the United States in favour of its business in Cuba. In addition to producing nickel and cobalt for international markets, Sherritt also is one of the island nation’s largest producers of electricity and operates an oil and gas business that taps reserves that are off-limits to foreign companies that honour the U.S. embargo.
“While we’re not to grow our oil business internationally, perpetuating our oil and gas business in Cuba has been another one of our priorities this year,” Pathe said Thursday.
He also notes that the Fort Saskatchewan refinery is owned 50-50 by Sherritt and its Cuban partners and says the operation will continue to process concentrate from Moa for export “all over the world — other than the United States.”
In fact, Sherritt is using the same process at the Ambatovy mining and refining complex in Madagascar — an island country off eastern Africa that has easy shipping access to key markets in Asia, including China.
Pathe — who has became Sherritt’s CEO and a member of its board in January 2012 after holding successive management positions for several years — said much of last year was spent looking for ways to focus its diverse business.
While each of its businesses had its own merits “there was no common thread between them and we were quite (complicated) . . . for a company of our size,” he said.
Pathe announced last Christmas Eve that Sherritt had agreed to sell its coal assets for a total of $946 million to two buyers — Westmoreland Coal — a U.S. company that bought the producing mines in Alberta and Saskatchewan — and a group led by Altius Minerals of St. John’s, N.L., which acquired a royalty portfolio and development projects in Saskatchewan.
Ambatovy’s non-salaried staff are excluded from the white collar downsizing announced Wednesday, since it’s still in growth mode and it is just beginning a mining life that’s expected to last at least 30 years.
Pathe said a slowdown in China’s economic growth is having an effect on nickel prices, but not demand. And he expects that nickel prices will be going up in the longer term.
“We still remain confident that the long-term supply and demand fundamentals for nickel are quite compelling,” Pathe said.
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