Opinions
Bruce Campbell (1)
Sherritt International Corp.
S-T
COMMENT
Jan 03, 2017
$1.340
Stock price when the opinion was issued
integrated mines
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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
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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integrated mines
He prefers Hudbay Minerals (HBM-T). Sherritt is nickel, which is finally perking up for the 1st time in quite a while. Their Madagascar mine has a cost of about $4.40. Nickel got over $5 recently, and this spent a lot of time below its breakeven point for quite a while. They have extended their bonds out 5 years, and have done a deal where they no longer fund their 40% of Ambitovy mine, they are only funding 12%, so the balance sheet looks okay. If you believe in the whole economy growing because the US is fiscal stimulating and these prices go higher, he still finds Hudbay safer with a better balance sheet with better zinc prices and a better copper price, and it could go to $10.