Sherritt International Corp. (S.TO)

Primarily nickel and cobalt. Have projects in Madagascar. Just eliminated the dividend. Thinks they are buckling down the hatches and making sure they can ride out this low based metal environment. The depressed nickel prices are going to be weighing on them for some time.

Just eliminated their dividend. Debt level is very, very high. If you have a lot of guts and intestinal fortitude, he could see buying it. Anything you put in it, you have to think that you could lose at all. He wouldn’t buy it now.

It has been a tough road. They have a new nickel mine in Madagascar. He would be concerned about mine construction, but they are basically done now. Nickel prices are below $5 now so it is tough for the miners. Longer term he likes the base metal side of things. He thinks they have a good mine in Madagascar.

She owns very little in base metals. They have a new mine coming on and it has had some production problems. You want to see stabilization in the commodities. The strong US dollar is impacting demand for all the commodities.

Currently at an all-time low. A few years ago he was interested in this and went to their AGM. After the meeting he decided he did not have enough confidence in management. Debt load was high and management didn’t have the skill level he was looking at for a turnaround. Since then, they have been hammered by commodity prices. Nickel prices are down at a 5-6 year low. It would not surprise him to see them go bankrupt. It really needs cooperation from commodity prices. Very, very dangerous situation.

His view is that this will survive. The balance sheet has been fixed. If nickel prices stay below $5 for more than 2.5-3 years, they may have some issues. Nickel prices have been very low for a long time, but this company is at the 50^th percentile in terms of costs. Half of the world can’t produce nickel at current prices and make cash money. The thinks it is a pretty reasonable bet that nickel will be in deficit in 2016.

Just hit a record low. They had a change of management and he is not up to speed on the reasons. Between the nickel situation in Cuba and Madagascar, it is just too scary. Madagascar hasn’t gotten up to speed quite as fast as it needs to. There is a huge amount of debt. Way too difficult for him to figure out.

(A Top Pick Sept 3/14. Down 67.82%.) The story is that they are building the big mine in Madagascar. They built the mine expecting nickel prices were going to go up. That was working for a while, but then China slowed down greater than had been expected. They also have a lot of debt. A bit of a dicey situation right now. Sold his holdings at a loss.

This, with a $10 Book Value, has something like an $8-$9 asset value. The stock is cheap. This is nickel which has been getting hit, oil and gas which has been getting hit and it is coal which is getting hit. It is completely out of favour. Have had cost overruns in Madagascar, but are getting closer to getting it fixed. There are better places to be.

It has been beaten up but he does not like the debt load and is not overly impressed with the management. Maybe he will look more closely at the end of the year.

This company has always had headwinds and is underperforming its peers. Chart shows a downward channel, and he would just avoid it and consider it as dead money.

Would you buy their 8% - 2017 bond? He likes the bond side, simply because when they owned the Saskatchewan metallurgical coal deposits, if Cuba and Madagascar failed, he would at least have an asset that he could grab and would make him whole. They have since sold the Saskatchewan holdings and are now left with Madagascar and Cuba, so you are now dealing with the underlying commodity price that keeps rolling off. The bond is being offered out at around 9% in today’s market, which tells you it is distressed. High-yield bonds should be trading at around 7%. Secondly you are going to have to deal with Madagascar, where the operations seem to be coming on, but there was a big delay.

(A Top Pick May 12/14. Down 40.54%.) The thesis was based on their leverage to the nickel price. In the meantime, Indonesia decided they were not going to export raw ore to China, which is 25% of the total supply. Also, the Chinese economy has slowed down more than he thought it would. Sold his holdings, but that is not to say he won’t get back in.

Looked at this closely, but didn’t have a tremendous amount of confidence in management. This is based on the price of nickel, what is going on in Cuba and what is happening in Madagascar. It has a lot of potential.

Still an attractive company. Cuban relations seem to be improving with the US. The Ambatovy nickel project seems to be moving forward. He can’t see any reason why you wouldn’t consider a small allocation of this.