• Submitted by: manso
• Business and Economy
• 02 / 24 / 2011

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In a pessimistic outlook for its Cuban operations this year, Canadian energy and mining concern Sherritt International expects production declines in all its business areas for 2011.

Sherritt, Cuba’s largest foreign investor, said in its fourth-quarter financial report that it expects moderate production declines in nickel (-2%) and cobalt (-2.9%), and considerable declines in the production of oil (-7.1%) and electricity (-18.7%).

Even so, the company is ratcheting up capital investments on the island. Sherritt expects to invest $50 million in its Moa nickel joint venture in Cuba this year, up from $40 million in 2010. Also, Sherritt and its joint venture partner Cubaníquel are “reviewing options for the completion of the Phase 2 Expansion and the construction of the sulphuric acid plant at Moa,” the company said in its report, adding that these projects are not included in the capital spending projections for this year.

Sherritt expects to invest $100 million in Cuban oil operations, up from $53 million last year. The rise is mainly due to eight new on-shore wells planned for this year.

Investments in its power assets in Cuba will be $158 million this year, up from $20 million in 2010. All of the investment will go into the 150-mw Boca de Jaruco combined-cycle power plant.

The company, which makes the bulk of its business in Cuba, logged in a fourth-quarter profit of $73.8 million, up from $48.3 million the same quarter a year ago. For the full year of 2010, Sherritt registered net income of $222.4 million, up from $57.4 million in 2009. Revenues were $1.771.1 billion, up from $1,474.9 billion.

The boost for Sherritt came thanks to rising prices for oil, gas, nickel and cobalt, rather than rising production.

Despite efforts to increase nickel production in the face of rising prices, sales were flat in 2010 at 37.253 million pounds, compared to 37.365 million pounds in 2009. However, fourth-quarter sales were 9.791 million pounds, up from 9.268 million pounds.

Cobalt sales remained essentially flat, both during the fourth quarter and full year. All of Sherritt’s nickel and cobalt production originates in Cuba.

Oil production, most of it from Cuba, declined to 11,965 barrels in 2010, from 13,214 barrels in 2009. Due to continued gas shortages, Sherritt’s electricity generation in Cuba declined to 2,067 gw/h in 2010 from 2,167 gw/h the year before.

“Sherritt continues to work with partners in Cuba to increase future gas production,” the company said in its financial report.

Earnings were dragged down by a change in Cuban income tax provisions for oil and gas. The company included a $15.3 million fourth-quarter charge related to the change.

Source: www.cubastandard.com/2011/02/23/sherritt-expects-production-declines-in-...