VANCOUVER (miningweekly.com) – Canadian diversified miner Sherritt International Resources has, for the second time this year, cut the nickel guidance at the 40%-owned Ambatovy mine, in Madagascar, citing a tailings pipe blockage and total shutdown that occurred in June and July, followed by weak output in August.
The Toronto-based Sherritt, which produces nickel, cobalt, mixed sulphides, oil and gas, and electricity, lowered Ambatovy’s 2016 nickel guidance by 2 000 t from July estimates to between 40 000 t and 42 000 t. This is down 8 000 t from the initial 2016 nickel guidance of between 3 300 t and 3 800 t.
CEO David Pathe told Mining Weekly Online that Ambatovy, which accounts for about 27% of the company’s third-quarter revenue, experienced slower-than-expected ramp-up in July and August following the shutdown. He expects the operation to again reach nameplate capacity of 60 000 t/y sometime in 2017, noting that achieving the upper 20% of capacity is a complex endeavour, comprising many moving parts, which the company is working on mastering.
Meanwhile, Sherritt is engaging stakeholders regarding the future ownership structure of Ambatovy and announced an extension – until January 15, 2017 – of an agreement with joint venture (JV) partners Sumitomo and Korea Resources that allows Sherritt not to fund any portion of recent and future cash calls. By agreement among the partners, Sherritt is not considered to be a defaulting shareholder for amounts not funded.
The company has ceased funding Ambatovy cash calls due to the ‘40 for 12’ issue. “It no longer makes sense to fund 40c of every $1 capital for only an effective 12c return on Ambatovy cash distributions,” Pathe stated. In January, Sherritt booked a C$1.6-billion writedown of the value of its stake in Ambatovy.
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