TORONTO (Reuters) - Sherritt International Corp’s (S.TO) profit fell 39 percent in its latest quarter as weaker nickel prices and lower finished metals production more than offset record oil prices.
The diversified mining and energy company also warned on Wednesday of higher costs at its Ambatovy nickel project in Madagascar and said it had abandoned its four offshore oil concessions in Cuba.
However, it maintained it forecasts for 2008 production of nickel and cobalt.
Sherritt earned C$80.3 million ($78.7 million), or 28 Canadian cents a share, in the second quarter, down from a profit of C$132.4 million, or 72 Canadian cents a share, a year ago, when it had a smaller share count.
Analysts had expected a profit of 34 Canadian cents a share, before items, according to Reuters Estimates.
The company’s shares were down 24 Canadian cents, or 2.1 percent, at C$11.06 on the Toronto Stock Exchange, underperforming other base metals miners.
The Toronto-based company, which has power, oil, metal and hotel investments in Canada, Cuba and Madagascar, said revenue grew nearly 9 percent to C$441.2 million.
Finished nickel production fell 8 percent to 7,408 tonnes as the Fort Saskatchewan refinery closed for annual maintenance. Sherritt’s realized price for the metal plunged 48 percent to $12.12 a pound.
The maintenance shutdown saw cobalt production fall 10 percent to 812 tonnes as realized prices gained 51 percent to $45.67 a pound.
The company reiterated its 2008 output forecast of 32,500 tonnes of nickel and 3,500 tonnes of cobalt, although it said processing and refining costs should be higher than last year.
Oil and gas revenue increased 34 percent to C$104.5 million, while coal revenue increased 18 percent to C$173.4 million.
The company said it expects a cost run-up at the $3.3 billion Ambatovy nickel project in Madagascar due to higher prices, and will announce a new cost estimate in early 2009. The current estimate is from 2007.
Sherritt has budgeted C$1.6 billion in 2008 capital expenditures on the project, of which it is 40 percent owner and operator. At full production, seen in 2010, Ambatovy is expected to yield 60,000 tonnes of nickel and 5,600 tonnes of cobalt annually.
Sherritt also said it had given up its offshore oil exploration blocks in the Cuban sector of the Gulf of Mexico, due to the inability to attract a partner.
Sherritt was one of several foreign companies that had signed exploration agreements with the country.
On a conference call, Chief Executive Jowdat Waheed said the company’s seismic testing did not make a case for drilling.
“If we go ahead at this time, there is a drilling obligation for the deep sea well. And, given the seismic that we shot, we don’t feel that spending $150 million at this time is merited,” he said.
(Reporting by Cameron French, additional reporting by Susan
Taylor in Ottawa and Jeff Franks in Havana; editing by Rob Wilson)