Sherritt International Corp. (S.TO)

(Market Call Minute.) Metal prices on nickel and cobalt as well as thermal coal are working against them right now and she would like to see how their new mine in Madagascar ramps up.

Perpetually cheap as assets tend to be in political unstable places. Their new mine in Madagascar has had trouble getting up to speed. In the meantime they are burning cash and increasing their debt load.

(A Top Pick March 7/12. Up 14%.) 8% bond due 2018.

On the surface, this would seem to be a really great company with nickel operations in Madagascar coming on. It has a Cuban story that seems like it is ready for a turnaround. Fundamentally the stock is okay but he feels the problem is that it is unloved on the street. There is really no catalyst for the name.

Big nickel project in Madagascar is taking longer than expected. Now looks like it will probably be in the 2^nd half. Increased the dividend. It’s a sum of the parts story. Once their nickel project gets into full production, they have the potential to split themselves up. Feels the sum of the parts is worth more than the whole. 3.3% dividend while you are waiting.

Owns stock and bonds. Bonds outperformed stock. It is a viable company. You are dealing with coal and nickel prices. He thinks it is worth $9-$10 from a net asset value point of view. Have some very good assets. Are undervalued because of assets in Cuba. Pays a nice dividend and increased last quarter even though they missed their numbers. It is cheap at these levels. Thinks it will go higher

Nickel has a seasonality that is very similar to copper, from November right through until May. Nickel prices have been going higher over the last 6 weeks. This stock has been responding to higher nickel prices. Has come off a little bit recently on weakness in the mining sector in general. Have a major project which is coming into production. The key is if they can bring the project on at a reasonable cost. Watch the resistance level at around $6. Forming a base pattern which indicates a stock is getting close to a short-term bottom.

(Market Call Minute.) Have their big Madagascar mine as well as Cuba. He’ll feel better when Fidel Castro dies because he thinks this will open the door for the Americans to make up with Cuba.

(Market Call Minute) Owns some competitors. Good space and based on Asian play.

Has coal and oil, but essentially a nickel play. Mine is not 100% producing yet. 3% yield. If you believe China growth is real, this is not a bad place. Quite cheap.

[Caller asked if Dividend stocks under $10 are ok]. It depends how many shares are out there. He has S-T, which is a best in class management team. Their balance sheet is incredibly conservative. Just finished Madagascar mine and did it at a sane cost. Now they are executing and there is a change for a dividend increase. It is not about the $10 but about the actual company.

Formed a base and then had a breakout followed by a nice run up. Probably due for a little pull back. Next breakout target would be just under $7. (He owns their bonds but not the stocks.)

Interesting and very adventurous company. Very active in Cuba and now very active in Madagascar, developing a very big deposit. Pretty good entry point but the problem with big mining projects globally is that sometimes they run into cost overruns. Doesn’t know if they will be able to get the Madagascar project done on time and on budget. Great track record. Before investing, do some homework by going to the website, reading the last couple of quarters and seeing if they are on track on that project.

Next big catalyst for this company will be when Fidel Castro dies because US and Cuban relations will thaw tremendously. Pays a pretty good dividend. Their bonds also have pretty good yields on them. A bit speculative, but pretty solid.

2.9% yield. Comes on his radar often because it is extremely cheap and the dividend is relatively safe. It can be extremely volatile and so he stays away from these names. If volatility goes down it should do well next year.