Sherritt's president and CEO David Pathe attends the company's AGM on May 6, 2014.Handout/Chris Young/The Canadian Press
Sherritt International Inc. is aiming to cut costs by $10-million a year by trimming its salaried workforce 10 per cent, a move that will affect about one-quarter of the Canadian mining company's staff at head office in Toronto.
The downsizing was disclosed in Sherritt's third-quarter financial report, which included a net loss of $51.3-million from continuing operations, or 17 cents per share, in the three months ended Sept. 30. That compared with a break-even profit of $1.1-million a year earlier, before Sherritt sold its coal operations in Western Canada.
Sherritt said it expects to recognize a $9-million, one-time expense related to the restructuring in the fourth quarter.
The total number of people affected by the white-collar downsizing is a small fraction of Sherritt's overall workforce, which is mainly outside of Canada at mining and oil and gas operations in Africa and Cuba.
There will be 60 salaried staff cut worldwide, including 18 in Toronto according to an emailed statement. Sherritt also plans to sell its head office building at 1133 Yonge St., a mid-town portion of the city's main street, but it hasn't said whether operations will move or the property will be leased back from a new owner.
"We have well defined 2014 priorities and are making clear advancements towards achieving them," president and CEO David Pathe said in a statement Wednesday.
Pathe said a top priority for Sherritt is a strengthened balance sheet and enhanced liquidity. Earlier in the month, the company undertook a number of transactions that will reduce its outstanding debt by $425 million and spread out debt over a longer period, with about $250 million due in each of 2018, 2020 and 2022.
It also announced on Monday that it has initiated a share buyback program allowing the repurchase of up to five per cent of common shares over the next 12 months.
Sherritt stock set a new 52-week low of $2.58 on Tuesday before closing at $2.69. As of midday Wednesday, nearly 2.8 million shares had traded — nearly three times the daily average — with the shares at $2.89.
According to a regulatory filing in March, the company had about 8,000 employees at its various operations around the world. Since then it has sold its coal business in Western Canada, which employed about 1,590, to Westmoreland Coal. It has also been building up production from its metals business, which employed 5,710 at the end of 2013.
Operationally, Pathe said Sherritt did well during the third quarter and the noted that prices for nickel, a base metal used to make stainless steel and other manufactured items, were up from last year and held steady compared with the second quarter until they began to pull back in September.
Prices for cobalt, also used in steel production, also rose in the third quarter.
The company has a diverse resource operations in several countries, including the Ambatovy nickel and cobalt mine in Madagascar and the Moa nickel and cobalt mining and refining operation in Cuba.
"Moa had an outstanding quarter following the completion of activities relating to its move into a new mining area in the first quarter. Ambatovy is making steady progress and is demonstrating improved mechanical reliability," Pathe said in a statement.
However, Sherritt also revised its 2014 production targets for nickel and cobalt for both mines while reducing on Moa to $55-million from $70-million. It's keeping output from its oil and gas operations unchanged but increasing the 2014 capital spending plan to $94-million, from $73-million.
Sherritt's overall capital spending this year is now projected at $187 million, up from $181 million in the previous outlook.
The Ambatovy mining operation in Madagascar, which took years to build, has been ramping up production since achieving commercial production. As a result, Sherritt's revenue for the three months ended Sept. 30 were up 55 per cent to $302.7 million from $195.3-million a year earlier on an adjusted basis.
Sherritt said its third- quarter net loss was mainly due to $41-million of depreciation on the value of the Ambatovy joint venture, plus higher income tax expenses. It had a similar net loss of 16 cents per share from continuing operations in the second quarter of 2014.
The third quarter had no earnings from discontinued operations this year, compared with an $800,000 loss a year earlier.