March 6, 2008 / 1:48 PM / in 10 years

UPDATE 3-Sherritt profit climbs on strong commodity prices

(Adds details from conference call, analyst comments, closing stock price)

Susan Taylor

OTTAWA, March 6 (Reuters) - Sherritt International (S.TO) posted a 6 percent rise in fourth-quarter profit on Thursday, as robust commodity prices more than offset the impact of a strong Canadian dollar on the mining and energy company.

Sherritt, which has power, oil and metal investments in Canada, Cuba and Madagascar, also forecast big spending in 2008, with C$2.2 billion ($2.2 billion) earmarked for development and expansion projects.

“We are in a very good state, both in terms of our operating segments and our capacity to execute our capital projects,” Chief Executive Jowdat Waheed said on a conference call.

“Our metals expansion in Moa Cuba, Cuba, and Fort Saskatchewan, Canada, and (Ambatovy) Madagascar will ensure that we deliver incremental production capacity in each and every year over the next three years”

For the quarter ended Dec. 31, Sherritt said net earnings rose to C$83.5 million, or 36 Canadian cents a share, from C$78.6 million, or 47 Canadian cents a share, in the same period last year, when it had a lower share count.

Analysts had expected earnings of 36 Canadian cents a share before exceptions, according to Reuters Estimates.

Earnings before interest, tax, depreciation and amortization grew 10 percent to C$175.5 million.

Revenue rose to C$323.6 million from C$304.2 million.

BMO analyst Jay Turner said the results, largely in line with his expectations, were “slightly positive.”

Sherritt shares rose 15 Canadian cents, or 1 percent, on the Toronto Stock Exchange to close at C$15.48. So far this year, the stock has gained about 14 percent.

Toronto-based Sherritt will put the lion’s share of its capital spending toward Ambatovy, a big nickel and cobalt project in Madagascar, which is on target for completion in 2010. Total spending on the project, of which Sherritt has a 40 percent stake, is expected to be C$1.6 billion in 2008.

At quarter’s end, Sherritt had assets of C$5.46 billion, including C$490 million in cash. The company recorded a fair value adjustment of C$14.9 million, or 6 Canadian cents a share, on its C$59.5 million of asset-backed commercial paper.

For 2008, it forecast production of 32,500 tonnes of nickel and 3,500 tonnes of cobalt. That compares with 2007 nickel output of 31,392 tonnes and 3,573 tonnes of cobalt.

Coal Valley output is forecast at about 4 million tonnes, a 17 percent increase over 2007, as new equipment is seen boosting production. About 75 percent of its contracts are up for renewal in 2008, with prices expected to be “materially higher” than the average realized price for 2007.

Sherritt also said it expects to submit an environmental impact assessment to Alberta regulators on its Dodds-Roundhill coal gasification project in the second quarter. If approved, construction of the plant and coal mine would start in 2010 and it would be in operation in 2012.

Production volumes for oil and gas in 2008 are not expected to change from 2007 levels. Power production in 2008 is forecast at 2,400 gigawatt-hours (GWh), with net capacity at about 80 percent, up from 2,288 GWh in 2007.

During the fourth quarter, Sherritt said the average realized price for cobalt rose to C$30.41 a pound from C$20.85. Nickel prices fell to C$12.63 a pound from C$16.88.

Nickel production in the quarter rose 3 percent to 4,344 tonnes and cobalt output was up 5 percent to 483 tonnes.

Sherritt operations include nickel and cobalt mining, coal production, oil and gas production, and electricity generation. In 2006, it spun out the thermal coal business it co-owns with the Ontario Teachers’ Pension Plan into Royal Utilities Income Fund RU_u.TO.

$1=$0.99 Canadian Reporting by Susan Taylor; Editing by Rob Wilson

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