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Site of Sherritt's Ambatovy mining project in Madagascar (Geoffrey York)
Site of Sherritt's Ambatovy mining project in Madagascar (Geoffrey York)

Sherritt shares tumble on weak results Add to ...

Sherritt International Corp. said lower commodity prices and the loss of an oilfield in Cuba sent its third-quarter profit down 58 per cent to $55.9-million.

The diversified resource company said Wednesday its profit amounted to 19 cents per share in the third quarter, down from $133.1-million or 45 cents per share a year earlier. Sherritt's revenue fell to $389.6-million from $478.3-million in the third quarter of 2008.

The earnings report helped send Sherritt's shares tumbling 34 cents or 4.7 per cent to $6.91 in morning trading on the Toronto Stock Exchange.

As of the end of September, Sherritt's long-term debt was $3.4-billion, of which about $2.1-billion was related to the troubled Ambatovy nickel project in Madagascar.

The company said total capital expenditures were $397.0-million in the quarter, of which 84 per cent or $330.9-million related to Ambatovy. Total project expenditures were $3.1-billion (U.S.) as of Sept. 30.

Sherritt said construction activities at the project are ongoing and are scheduled to be completed by "the latter part of 2010."

The company has been struggling with ballooning costs and legal difficulties at Ambatovy as it struggles to get the project up and running.

In the summer, reports said the new president of the poor island country off the east coast of Africa has hired a French law firm to press for changes to the mining act and an Ambatovy agreement signed earlier with the project partners.

Sherritt, the project operator, owns 40 per cent of Ambatovy, and Sumitomo and Korea Resources each have a 27.5 per cent stake. The project's engineering contractor, Montreal-based SNC-Lavalin Group , has a 5-per-cent interest.

Although the final cost of developing the project hasn't yet been determined, it is estimated to be approximately $4.52-billion.

Ambatovy is expected to product 60,000 tonnes of nickel and 5,600 tonnes of cobalt annually.

Sherritt said nickel sales of 9.8 million pounds were similar to a year earlier, while cobalt sales of 1.0 million pounds were up 7 per cent, reflecting increased cobalt production.

The average nickel reference price was down 7 per cent to 62 cents per pound in the quarter, while the average cobalt reference price was down 47 per cent to $15.24 per pound due to weak demand.

Sherritt sold 8.9 million tonnes of coal from its prairie operations, up three per cent from a year earlier, while sales from its mountain coal operations were 600,000 tonnes, up 20 per cent.

Realized prices for coal from the company's prairie operations were down 9 per cent to $1.47 per tonne while prices for coal from the mountain operations were down 20 per cent to $17.13 per tonne.

Oil production in the quarter was 12,875 barrels of oil equivalent per day, down 23 per cent from the year earlier period, reflecting the loss of Block 7 in Cuba due to the Cuban government's termination of a production-sharing contract earlier in the year.

Electricity sold was up slightly to 588 gigawatt hours compared to 577 gigawatt hours a year earlier due to higher gas availability.

For the full year, Sherritt said it expects to produce 33,500 tonnes of nickel, 3,700 tonnes of cobalt, 39.3 million tonnes of coal, 12,600 barrels of oil equivalent per day and 2,100 gigawatt hours of electricity.

The Toronto-headquartered company is active in a number of resource-oriented businesses, including nickel, coal and oil and gas production in several countries including Canada and Cuba.

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