SentinelOne, Inc. Price & Performance (S)

Thank you, operator, and welcome everyone to Sherritt fourth quarter twenty twenty four conference call.

We released our fourth quarter results last night. Our press release MD and A and financial statements are available our website, and on SEDAR plus During today's call, we will be referring to our presentation is available on our website and on today's webcast. As we will be making forward looking statements and references to certain non GAAP financial measures, please refer to the cautionary notes on Slide three of our presentation as well as the material assumptions and risks [indiscernible] certain forward looking statements and reconciliations of non GAAP measures to the most directly comparable IFRS measures included in the appendix of the presentation. On the call today is Leon Binadel, President Chief Executive Officer Chief Financial Officer and Chief Operating Officer. Following a review of our results, open the call to questions. It is now my pleasure pass the call over to Liam. Thank you, Tom, and good morning, everyone, and thank you for joining us today. Our fourth quarter performance was exceptionally strong despite the significant market headwinds that continue to keep nickel and cobalt prices at their lowest levels in years This capital for the year where we bolstered our sales decreased our cost, and made tough decisions around managing cash to maintain our available liquidity In metals, full year 2024 nickel sales increased 22%.

This is a testament to the dedication of our sales team. We don't often highlight their contribution enough, but their ability to make an impactful difference is demonstrated by our performance this year. Our marketing strategy has proved very successful seizing spot sales attracting new customers and developing new sales avenues. This success along with the strategic cost reduction enables us to effectively weather the current market conditions. We recorded strong operating results in 2024 Our production of both cobalt and fertilizers were significantly higher and our net direct cash cost or MDCC decreased 18% from the previous year as a result of our focused cost management initiatives despite much lower cobalt byproduct credit, Our Mo joint venture is in the final stages of Phase two of its with a processing plant scheduled for commissioning and ramp up this year. This follows the success we delivered on Phase one of the project by ramping up [indiscernible] in early twenty twenty four in line with our plans. [indiscernible] recorded a six year high in electricity production driven by operational improvements and increased gas supply from new wells, Additionally, in the fourth quarter, another new gas well was brought into production. As planned, we incurred higher maintenance costs in NRgas during 2024 to bring online an additional turbine and improve equipment availability to process gas from these new wells.

As you can see from our 2025 guidance, which was released last night, for the completion of the work in 2024, we expect maintenance costs to be significantly decreased in 2025. As a direct result of our year strategy to optimize our power division, started to receive significantly larger dividends in Canada. We received $13,000,000 in 2024 and expect this dividend to double in 2025 and remain at elevated levels going forward. We maintained our available liquidity in Canada ending the year at approximately the same level we started despite the average reference price for both nickel and cobalt each declining 22% further to reach multi year lows. In the fourth quarter, we did however receive $30,000,000 distribution under the cobalt swap despite these lower market prices. I will discuss what we're seeing in the nickel market in more detail shortly, But first, I'd like to conclude on the highlights of the year by acknowledging our team and our partners in Cuba for their exceptional performance in both metals production and power production and net direct cash costs all falling within the guidance range for the year. Our results for the year on their own were commendable but they are remarkable in the context of the operating environment which we faced.

This was especially notable in the fourth quarter where we navigated the nationwide power outages and several natural disasters in Cuba. While managing through port strikes that disrupted logistics in Canada. Again, I congratulate the team on the outstanding performance Turning to Slide five, Aside from a strengthening U. S. Dollar, were a number of notable market developments during the fourth quarter as outlined. The most significant was Indonesia weighing cut to their nickel mining quotas The news however did not offer much nickel prices reaching new lows for the year end December. The average nickel price for the fourth quarter was a four year low and for cobalt we reached the lowest price levels in almost a decade. We also see Western governments continue to evaluate various initiatives which would support critical minerals development. In January of this year, reports circulated that Canada would be advocating [indiscernible] On critical mineral pricing floors. During the upcoming G7 summit in June, While this and other support of government initiatives are promising, the current supply driven pricing environment is likely to persist in the near term. We must continue to find ways to improve our operations within this pricing environment as we did in 2024.

Through our continued efforts to deliver on operational efficiencies, cost reduction initiatives and disciplined allocation of limited cash resources we continue to proactively set ourselves up to navigate these volatile markets and ultimately drive towards sustained growth. Alwyn will now provide more details on our '24 performance and our operational outlook 2025. Thank you, Leon. Turning to Slide seven for our metals results. Mixed sulfide production during the quarter benefited from improved feed to the processing plant with the new slurry preparation plant. As Leon mentioned, however, our operating team faced a number of external challenges in Cuba during the quarter. Including an earthquake, two hurricanes, national wide power outages, and heavy rains that required us to process lower grade stockpiles. Finished nickel and cobalt production in the quarter both increased year over year from higher mix salt As you may recall, earlier this year, we strategically built up feed inventory at the refinery to ensure operational continuity. Now moving on to sales. Finished nickel and cobalt sales were both strong. With nickel sales exceeding production due to strong spot sales, sales into strategic targeted as well as realizing sales that were deferred the third quarter as a result of the Canadian rail lockup.

Fertilizer production sales were also as a result of operational improvements and equipment availability. Particularly, ammonia was higher as a result of lower maintenance in 2024. Additionally, we saw higher sales of other byproducts specifically sulfuric acid, as we took advantage of higher As Leon mentioned, for the year, nickel production, cobalt production and NDC all met our 2024 guidance range. Now to Slide eight, for a little more detail on our NVCC. In the fourth quarter, NDCC was US5.5 dollars and per pound, representing a decrease of over 30% year over year. This reduction was mainly attributable to 14% Lower mining processing and refining costs or MPR per pound of nickel sold. The lower MPR per pound was largely due to operational improvements reduce maintenance costs lower input commodity prices, and the impact of higher fertilizer and nickel sales volume. The lower MVCC was achieved despite reduced cobalt byproduct credits resulting from lower average realized [indiscernible] Now to Slide seven, for an update on the expansion project at Maa. Phase two of the Moa joint venture expansion processing plant, is in its final stages of completion. With lower nickel and cobalt prices, and keeping with our objectives to preserve our liquidity, certain expenditures were pushed to the first quarter this year when construction will be completed.

Overall, project remains on budget and timing of the ramp up remains on schedule. During the fourth quarter, progress continued on piping installation and brick lining of vessels. Some pre commissioning activities are also now underway and concurrent with the ramp up. In addition, the Moa joint venture is undertaking a series of measures to improve some minor process debottlenecking to support the increased MSV production. We look forward to getting underway and advancing to the ramp up over the coming months. Now to Slide 10 for our guidance for 2025 for metals. Included in our guidance is the impact of our biannual Fort Site ammonia plant and purchases of sulfuric acid required during the acid plant turnaround [indiscernible] In 2025, we expect an increase in production We see production to be weighted towards the back half of the year in part because MSP inventory at the refinery is currently low as a result of the external challenges in Cuba last In the second half of the year, particularly in the fourth quarter, higher MSP production is expected to be delivered to the refinery following the ramp up of Phase two of the expansion. This is expected to lead further increases in finished nickel and cobalt production in 2026.

Now, NDCC. NDCC is expected be relatively consistent with 2024, benefiting from higher production and sales in addition to cost optimization initiatives. Offsetting this is our forecast assumptions for commodity prices. Which we expect to result in lower cobalt byproduct credits and higher input costs mainly from higher sulphuric [indiscernible] As in the past, we expect NDCC to be higher in the first quarter before benefiting from higher fertilizer byproduct credits in Q2 and Q4 in addition to the higher metal sales expected late in the year, following the ramp up of the expansion. Sustaining capital is expected to be $35,000,000 In addition to this, dollars 40,000,000 is expected to be spent on the Moa tailings project in each of 2025 and 2026. The new tailings facility expected to be commissioned in 2026 will provide a tailings solution for the mobile mine over the entirety of its mine life of approximately twenty five years. The Moa joint venture has secured a US60 million dollars equivalent loan in Cuban pesos a Cuban financial institution with a five year maturity that will be used to support the capital spend on tailings. Growth spending on capital of $5,000,000 is related to deferred spending from 2024 which is to be used for the completion of construction of Phase two.

The expansion project. Now turning to Slide 11 for our powers results in Q4. In Q4, due to the challenges involving the national power grid in Cuba, The government power agency required Energas to run the Vergero facility in frequency to reducing power generation to help support the stability of the national grid. Energas expects that the Veradero facility will operate in frequency control throughout 2025 and will continue to be fully compensated for this reduction. During the fourth quarter, we saw lower power generation and higher unit operating costs As a result of the national high power outages and the Veradero facility operating in Even though this impact, for the full year, power production within its guidance range and unit operating costs were just 1% above the top end In early October, another new gas well was brought into production. This new well quarter of twenty twenty three. And will continue to improve utilization rates and significantly higher levels of power generation as part of our multiyear strategy to maximize the use of our invested capital in GAAP, Energena Gas that we expect will drive higher dividends. Now to Slide 12 for our guidance for Power. With the new gas well now producing our production in 2025 will continue to be despite the Veradero facility operating in frequency control this year.

Which is estimated to have an impact of approximately 150 gigawatt hours in power generation. As mentioned, Energas will be fully compensated for this reduction and as such, we expect there will be no negative impact on powers adjusted EBITDA, earnings from operation or dividends from Energas to share. Unit operating costs expected to be significantly lower with the midpoint of our 2025 guidance showing an improvement of 30%. Last year, major maintenance work at Fortescondido on three gas turbines during the second and third quarter, which brought an additional gas turbine online to increase operating efficiencies and to process gas being received from the new wells. Lastly, on spending, we're expecting $2,000,000 for this year. I will now turn the call over to Yasmin for the financial results. Thanks, Alvin. I'll begin with our financial performance on Slide 14.

Our financial performance continues to be impacted by the challenging price environment for nickel and cobalt. During the fourth quarter, average realized prices for nickel and cobalt we're lower year over year by 829% respectively partially mitigated by our nickel put options with $4,700,000 received during the quarter. Conversely, we delivered considerable operational success effectively managing the aspects that were within our control which contributed positively to our financial performance.

Specifically, in the quarter, nickel sales volumes were 23% higher which was an impressive achievement considering the port strikes in Canada. In addition, mining, processing and refining costs per pound of nickel sold were 14% lower in the quarter. Combined revenue which includes revenue from the Moa joint venture on a 50% basis, and which more holistically reflects our performance with higher at $160,300,000 compared to $140,500,000 in Q4 twenty three. This resulted from higher nickel revenue at the Moa joint venture as higher sales volumes offset lower average realized prices, and with improved site fertilizer revenue, from both higher average realized prices and sales volume. Adjusted EBITDA in the fourth quarter of $15,400,000 dollars with significantly higher year over year primarily driven by the reduction in mining, and a stronger contribution from nickel and fertilizer sales. As I just mentioned. Net loss from continuing operations dollars Adjusted net loss from continuing operations was $10,200,000 dollars and excludes an $8,400,000 non cash impairment of intangible assets and a $6,900,000 non cash loss on rehabilitation provisions as a result, of updates to valuation assumptions, for rehabilitation and closure costs on legacy oil and gas assets in Spain. Turning now to Slide 15.

We ended the year with $62,400,000 of available We ended the year with $62,400,000 of available liquidity in Canada. We maintained approximately the same level from prior year despite the impact of significantly lower metal prices, and the array of external challenges in the fourth quarter, which demonstrates the effectiveness of our approach to managing our liquidity. During the fourth quarter, key changes in liquidity included $23,700,000 of cash received from the Cobalt swap.

This was in addition to the $6,100,000 received in cobalt.

Dollars 7,000,000 of dividends from Energas bringing the total dividend received during the year to $13,000,000 $4,700,000 of cash received from in the money nickel put options with a total of almost $6,000,000 received for the full year. Dollars $9,400,000 in interest paid on secondly notes dollars $3,600,000 in payments and contractual obligated rehabilitation and closure costs related to legacy oil and gas assets in Spain, and changes related to the timing of working capital receipts and payments. Looking ahead, a few reminders for 2025.

As Alvin mentioned, we expect nickel and cobalt production to be weighted toward the back half of the year and in line with that and assuming current metals prices. We expect distributions under the cobalt swap to occur in the second half of the year and that it will not meet the annual minimum amount this year. Similar to 2024. We are anticipating much higher dividends in Canada from Energas with higher levels of production and with the completion of the 2024 maintenance program. We expect to receive between $25,000,000 to 30,000,000 step change increase from the $13,000,000 we received last year. Finally, we expect to receive a full year of savings following the cost optimizations we implemented last year. That concludes my comments. And I will turn the call back over to Leon. Thank you, Yasmin. Before we conclude, I will review our ESG highlights from the year. On Slide 17. Starting with safety, which remains a key focus for us. During 2024, we completed comprehensive safety strategy sessions with each operation developing concrete action plans, and we hired additional health and safety personnel to continue to improve our safety performance. We maintained and verified conformity with the LME's Track B responsible sourcing requirements.

We completed a greenhouse gas emissions based on fourth site and identified potential decarbonization opportunities. Lastly, we completed a climate risk assessment and opportunity assessment at Energas. Strong ESG credentials are critical for Sherritt Beyond our social license to operate, current and evolving metals market customers increasingly prioritize responsibly sourced inputs. Our strong ESG profile allows for new market opportunities and partnerships with key stakeholders and aligns with our longer term marketing strategies to mitigate the risk from Chinese driven oversupply in the market. As well as positioning us to take advantage of new customer growth segments where higher ESG criteria are being demanded and continue to evolve. Concluding on Slide 18, although conditions were challenging, our operating teams delivered a strong quarter [indiscernible] Looking to 2025, we anticipate continued market pressures. However, we look forward to a year with strong operating performance receipt of additional distributions under the Cobot swap and significantly higher dividends from Power. The ramp up of the Moa joint venture expansion will be a key catalyst this year increasing our MSP production from Moa for the remainder of its long mine life and will also benefit from a high quality long term painting facility built to international safety standards. [indiscernible] we are continuing to make progress our strategic initiatives such as our MHP project focused on refining capability in the EV value chain and we expect to provide more developments on this project in the year ahead.

And with that, operator, I'd like to open the call to questions. Thank you. Ladies and gentlemen, we will now begin Our first question comes from the line of Tony Robson from Global Mining Research. Your line is open.

Thank you, operator, and thank you for taking my question. Lots of headlines in The UK where I sit a Trump initiative against Cuba. Going back on, I think, a little bit of a list of sponsored tourism by countries, But your continued expansion in Moa suggests that at least at the operating level, just like the immigration from the country despite the power of blackouts, your the hindrance would be that Mobeys still operating in a fairly consistent manner that you're comfortable with. So could you tell us a little bit more explain please on operating conditions in country availability of skilled personnel? And any other issues that you think are relevant? Thank you. I have a follow-up to that. Sure, Tanya. Thanks for your call. [indiscernible] Operating conditions in Cuba has been much more challenging following COVID with a reduction of tourism revenue into the country. And following the initial Trump to go hard against Cuba and sort of maximum pressure We've been able to navigate those conditions successfully over the last number of years. And continue to expect that we will be able to navigate those this year and the years ahead. The conditions of are not dissimilar to what we experienced in 'twenty four and 'twenty five from access to skilled resources, We've made a number of changes in recent times in collaboration with our Cuban partners to incentivize and to retain talent.

In Cuba, which we believe will drive success there. That should see less people exit the Moa region. It is not unknown to people that Cuba has had a significant exit of talent out of the country But some of the actions that we've taken, we believe, will have a positive impact on those and the ability to retain talent. So we're confident that the actions that we have taken and continue to take will create the operating environment, albeit extremely challenging in some of the situation as where we found ourselves this year and have similar outcomes. Okay. Thank you, Glass. Further on the Trump administration, I'll take it the answer will be no given the source of materials but I'll assume that if there's any potential sanctions against Canada, nothing in terms of refined nickel cobalt or fertilizer from Fort Saskatchewan goes to The U. S. Would that be correct? So tariffs would not impact you?

That is correct. We do not currently sell any product into The United States. More have any dealings with The United States. So in any particular actions against Canada we believe will have minimal impact to our operations and our business we have refrained from speculating what the Trump administration might do or any specific actions they may target. Okay. Thank you. I'll hop on the line. Let's now let's ask a question, but I'll be back if I Thanks, Denny.

Our next question comes from the line of Gordon Lawson from Paradigm Capital. Your line is open.

Hey, good morning, everyone, and congratulations on a great quarter. On the swap agreement, I just wanted to confirm that you expect to the 2024 payments in the first half of this year, but there's a possibility to another deferment of the twenty twenty five payment to the 2026, is that correct? So Gord, just to remind everyone how the cobalt swap functions, there's a targeted minimum level per year And to the extent that that minimum threshold has not been met, it gets added to the following year. So the target for 2025 is substantially higher than the minimum for a single year. We do not anticipate that to be fully fulfilled under current market conditions. However, we continue to expect that the cobalt swap will be fulfilled in the expected timeframe by the end of twenty twenty seven. Given the significant impact of refractive interest if it's not fully repaid in the expected timeframe. Our partners are highly incentivized to ensure that the cobalt swap is fully satisfied. By the end of the term. Okay. Okay. That makes sense. Thank you. And on the ramp up, is it fair to assume or to model completion of the ramp up by the end of the first The So we are only commencing the ramp up in the first half of this year.

So I would suggest that we will start getting the volumes from the ramp up really in Q3. And we sort of reach full capacity by Q4. Okay. So it's even possible another annual increase in in guidance for 2026 then? That another great news coming out of it. Thank you very much.

Our next question comes from the line of Ethan Garber open.

Hi. Thanks for taking my call. Can you explain a little bit more detail on how the you expect the revenue increase the dividend increase from Energas? Is that related to increased output because it's quite a dramatic improvement?

In 2024, we made some significant investments in Energas, so Energas made significant investments in restoring power production capabilities to utilize the additional gas from the new wells that has driven increased production and sales and we'll continue to see the increased levels of production and sales which is ultimately driving increased availability of cash flow and the ability to pay dividends You would have seen year over year the expected maintenance is materially lower and production year over year is higher. And so we expect Asteya, as Yasmin indicated, more than doubling of in 2025 of a 2024 In our unit, thank you for explaining that. Our unit production costs or unit operating costs rather are those correlated with fuel prices in any way? Are they really more an amortization of your of your actual operating cost.

Just to remind everyone that the fuel is supplied to Energas free of charge [indiscernible] [indiscernible] So the cost of operating is purely the the transformation cost of converting gas, treating the gas and generating power.

This move cost to fuel or exposure to fuel the cost of natural gas.

Thank you.

Our next question comes from the line of Tony Robson from Global Mining Research. Your line is open.

Thank you, operator, and thank you again for taking my second set of questions.

Actually, partly answered by the previous analyst and your answer to him. So one very small matter.

Sorry, legacy oil and gas in Spain, you lost about $18,800,000 for the year for strip out depreciation and amortization. There's about a cash spend of about $8,000,000 to $9,000,000 assuming that P and L loss represents cash. How do you see that going forward into 2025 and 2026, would it stay?

At about that same level and for how long does it go? Or does it it sort of taper off over the years? Sure, Toni. A number of the adjustments that you would see that go through the rehab obligations are just normal quarterly adjustments to underpinning assumptions whether those be discount rates, interest rates or foreign currency movements. The table in the financial statements, the commitments table indicate the expected maturity of when we expect the cash flows to occur. I can't remember the exact note in the financial statements, but you'll see that in the commitment table that outlines the expected timeframe. There are some spend in 2025, but most of the spend is ended sort of in that five plus year window. Okay, great. Sounds like I have to do some more digging through the account which I haven't done yet. So thank you for this. No further questions.

There are no questions at this Thank you, operator.

Anyone has any further questions, please feel free to reach out. And we thank you all for joining us today.

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.