Opinions Hank Cunningham
Sherritt International Corp.S.TOCOMMENTJan 29, 2014
Hank CunninghamUnknown
$3.50
Stock price when the opinion was issued
$0.12
As of Jul 24, 2026. Market Open.
integrated mines
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RISKY
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research
It is certainly not beyond possibility. Bloomberg default ratio is 7.36%, which is very high for that indicator. Cash flow was negative in the last quarter, yet 12-month interest expenses were $36.1M net. With its small size and Cuban and other issues, we are not sure it could raise a lot of money with a dilutive equity issue. Most debt matures in 2026. Certainly any investment here needs to be considered extremely risky.
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DON'T BUY
This is a zero, although not priced there yet. That is where it is going. It has been a lousy company for a long time. Madagascar will prove to be their undoing. They defaulted on their debt in February. Their debt is currently worth 54 cents on the dollar so the stock is worth zero.
integrated mines
COMMENT
The share price keeps falling. Why? The biggest thing recently is in Cuba where they have assets and deal with the government to repatriate cash flow, not related to that quarter's cash flow. A quarter ago, Cuba didn't pay. Two weeks ago, they announced a solution, a deal with the Cuban government which is cash-strapped, especially as it deals with the costs of hurricanes that have hit Cuba. Cuba has to pay or else it will scare off other Western companies.
integrated mines
COMMENT
Cobalt is a partner commodity in the production of lithium batteries. Earnings are expected to be negative in 2019. Cobalt prices have risen sharply, causing manufacturers to find a way to move away from using it -- nickle may replace it (as an aside Sherritt could be a potential benefactor of this). He would consider selling FCC-V in favour of XBC-V (who focuses on garbage dump gas extraction).
integrated mines
Your opinion on their bond maturing in 2020? This bond has had a history because of its involvement in Cuba. The major dealers in Canada would not underwrite their securities so it has always had a reasonably good balance sheet but is rated below investment grade. They have rallied lately and it has gone down about 150 basis points and its current level is at about 8%. Nickel production is up and running full time and the nickel glut has seemed to have come to an end. He would recommend that no more than 5% of a fixed income portfolio be in such securities, and even then, he is reluctant to buy individual bonds. He prefers ETFs if he were going to buy high yields at all.