TORONTO, June 14, 2011 – Sherritt International Corporation (TSX: S) today announced, following completion of a review of the estimated schedule and associated capital cost of the Ambatovy Project, that the Board of Directors has approved a revised schedule that anticipates first metal in first quarter 2012 and an associated capital cost estimate of US$5.5 billion, excluding financing charges, foreign exchange and working capital requirements. Sherritt will fund its 40% of the capital cost increase directly from funds on hand.
The 16% (US$740 million) increase from the prior estimate is attributable to:
• inaccurate bulk material quantity estimates (including piping and electrical materials), the additional cost to procure, ship and install the materials, as well as the impact of poor performance by certain contractors (US$300 million, or 41% of the increase);
• additional service costs associated with the extension of the schedule, including site support services (which include food and accommodation), and additional EPCM services (US$195 million, or 26% of the increase); and
• capitalization of operational costs due to construction delays that, under the previous schedule, would have been expensed (US$245 million, or 33% of the increase).
The scope, technology, and capacity of the Project remain unchanged. The cost of plant equipment remains unchanged. Sherritt assumed control of the power plant construction in December 2010 and mobilized other contractors to replace those who had been performing inadequately at both the power plant and the refinery. These changes resulted in delays in schedules and in additional spending to rectify inadequacies in order to ensure future performance of the facilities.
Ian W. Delaney, Chairman and CEO of Sherritt stated, “We are investing to ensure this project is done the right way. That means building a platform that will meet the demands of the world’s largest lateritic nickel operation for thirty years. That is a challenge because of the infrastructure and location. Making the right decisions now, and not cutting corners, will insure our productive capacity for decades.”
Sherritt will be hosting a conference call on Tuesday, June 14, 2011at 2:00 p.m. (Eastern Time) to discuss the revised estimates for the Ambatovy Project. The live audio webcast will be available on Sherritt’s website www.sherritt.com, or via teleconference at 416-644-3416 or 1-800-814-4860. An archive of the webcast will also be available on the website. A replay of the conference call will be available until July 14, 2011 and can be accessed at 416-640-1917 or 1 877-289-8525, access code 4449196#.
The Ambatovy Project has been designed for annual production capacities (100% basis) of 60,000 tonnes of nickel, 5,600 tonnes of cobalt and approximately 200,000 tonnes of ammonium sulphate and an estimated project life of approximately 30 years.
Sherritt is a world leader in the mining and refining of nickel from lateritic ores with projects and operations in Canada, Cuba, Indonesia and Madagascar. The Corporation is the largest coal producer in Canada and is the largest independent energy producer in Cuba, with extensive oil and power operations across the island. Sherritt licenses its proprietary technologies and provides metallurgical services to mining and refining operations worldwide. The Corporation’s common shares are listed on the Toronto Stock Exchange under the symbol “S”.
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