Sherritt International Corp. (S.TO)

It took a while for Cuba to start opening up with the US. On today’s news, this stock went up over 25%. However, they are still not out of the woods. There is going to be tremendous opposition from the Republicans in Congress, particularly the 3 Republicans of Cuban-American heritage. It is far from clear whether Obama will have the clout, as a lame-duck president, to do what he really wants to do, which is to end the embargo. If he ends the embargo, then there can be trade between the 2 countries of all kinds of assets, and not just this opening salvo of $100 worth of cigars and a trip to a resort.

Copper’s outlook in the next 6-12 months is a challenge. Zinc and nickel have better looking outlooks. This company is a pure play nickel producer, but they haven’t been a terrific operator. Wouldn’t be his 1^st choice.

Thoughts on the 2018 and 2020 bonds considering the recent events? The company just redeemed a lot of its earlier bonds and issued the bond in 2022, to put out the maturity date so there is less pressure for the company to meet any principal maturities short term. If you own, he would Hold. This company has always had a good rapport with the street.

7.5% Sept 24/2020 bond? This is one of the better firms that is dealing with the street. Just redeemed a lot of their bonds early and replaced them with a longer term bond. They have a balance sheet where there are no forthcoming principal maturities that will cause them any anxiousness in the bond market.

Never had the stomach to go in and buy it. Does not have as much confidence in management as he would like. Has always seen a lot of risk with it. At the last AGM he was not encouraged by their strategy.

It is more than the commodity price itself. The Madagascar facility is mostly to blame. Costs are coming in quite high. 2015 will be seen as a period of difficulty for them.

2018 & 2020 Bonds. They missed earnings and cut jobs. He has held the bonds for a long time. He exited about a year ago because they sold off their Saskatchewan coal assets. You would have always had the ability to grab the Saskatchewan assets if things went wrong so he sold the bonds since they sold the Canadian assets. He exited the stock as well.

Sherrit 8% bonds maturing Nov. 15, 2018. Sold their coal business and restructured their balance sheet. This is the shortest term maturity the company has. It is a good time to take a look at them because of the balance sheet restructuring.

A leverage play on nickel prices. Lowered the amount of production coming out of the Madagascar mine, and pushed out and lengthened the life of the mine. Also, the ban on iron ore in Indonesia affected the price. There will be a lot of torque to the upside when nickel prices get back on firm ground. Believes there are better names and better sectors to be.

Never had the courage to buy this. Went to their AGM this year, but management did not give him enough confidence to buy into the company. Doesn’t particularly like the financials. There is a lot of debt there. A lot of this company is based on the Madagascar play, which could turn out to be very good for them. On his Watch List.

We are testing a multi-year low. The trend is down. These are not good signs. Performance relative to market is negative and it is trading below its 20 day moving average.

Failed in cash flow and earnings per share and did not have a great quarter at all. Thinks there will be planned outages on the Madagascar mine. Once that is up and running he thinks they can cut costs. His exposure to miners is minimal right now.

He used to own it as well as the bonds. There is zinc and coal. The commodities have come off. He would stay away from these companies now.

Nickel prices have gone to $9, but doesn’t seem to drag this one along. Right now they are in the midst of refinancing and rejigging their balance sheet. Sold their coal assets for roughly $900 million. They are just restructuring. Have 3 debt issues that mature 2015, 2018 and 2020, and they are changing that to 2018, 2020 and 2022, and taking enough in that they’ll fix the balance sheet. NAV is over $10. It should be higher, but there is no US involvement because of Cuba. He prefers HudBay Minerals (HBM-T). If you have some patience, it is super cheap and should move over the next few quarters when they demonstrate higher earnings.

Has been a chronic underperformer for many reasons. They are in nickel, which is the right place to be for the next 6 months and probably for the next 2 years. Indonesia banned the export of nickel 100% from the beginning of this year. Also, the Philippines are talking about banning it. That takes about 40% of the supply out of the market. He expects nickel prices to maintain and even grow higher from here. The most leveraged, pure play you can find is this company.