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Introduction & Market Context
Sherritt International Corporation (TSX:S) presented its second quarter 2025 financial results on July 30, highlighting a return to positive net earnings despite ongoing production challenges and a difficult nickel pricing environment. The company reported net earnings from continuing operations of $10.4 million, a significant improvement from the $11.5 million loss in the same period last year, even as revenue declined.
The quarter was marked by continued pressure in the nickel market, with several significant developments affecting global supply and demand dynamics. These included U.S. tariff announcements, Indonesian production capacity expansion plans, and the Democratic Republic of Congo’s extension of its cobalt export ban to September.
As shown in the following chart detailing nickel and cobalt price developments:
Quarterly Performance Highlights
Sherritt’s Q2 2025 financial results revealed mixed performance across key metrics. Revenue decreased to $43.7 million from $51.4 million in Q2 2024, while combined revenue fell to $135.6 million from $163.2 million. Despite the revenue decline, the company managed to post net earnings from continuing operations of $10.4 million, compared to a loss of $11.5 million in the prior-year period.
However, adjusted metrics painted a more challenging picture, with adjusted net loss from continuing operations widening to $25.6 million from $10.0 million, and adjusted EBITDA declining to $2.6 million from $13.0 million year-over-year.
The following table summarizes the company’s financial performance for the quarter:
Production volumes were impacted by operational challenges in Cuba, with mixed sulfides production declining to 3,238 tonnes from 4,095 tonnes in Q2 2024. This affected finished nickel and cobalt production, though the company reported a slight increase in nickel production to 3,431 tonnes from 3,383 tonnes. Sales volumes for both nickel and cobalt declined compared to the prior year.
The metals production and sales data is detailed in this chart:
A bright spot in the quarterly performance was the improvement in Net Direct Cash Costs (NDCC), which decreased by 8% year-over-year to US$5.27 per pound. This improvement was driven by lower mining, processing, and refining costs, as well as higher cobalt by-product credits due to a 27% increase in average realized cobalt prices.
The breakdown of NDCC improvements is illustrated in the following graph:
Strategic Initiatives
Facing challenging market conditions, Sherritt has implemented several strategic initiatives to improve operational efficiency and financial performance. The most significant is the Moa Joint Venture expansion, with commissioning of phase two expected to be completed by mid-August 2025, followed by a ramp-up in Q3. The company anticipates that additional mixed sulfides production from this expansion will begin to be processed at the refinery in Q4 2025.
The company provided the following update on the Moa JV expansion:
In response to persistent nickel market challenges, Sherritt has also accelerated its strategic cost reduction program. The latest initiatives are expected to deliver approximately $20 million in annualized savings, in addition to the $17 million in annualized savings from 2024 initiatives. The program includes a 10% workforce reduction across Canadian operations and a reduction in the management team from six to five members.
The timeline of cost reduction measures is detailed here:
Revised Guidance
In light of operational challenges and market conditions, Sherritt has revised its 2025 guidance. The company reduced its expected finished nickel production from 31,000-33,000 tonnes to 27,000-29,000 tonnes, and cobalt production from 3,300-3,600 tonnes to 3,000-3,200 tonnes. These reductions reflect lower mixed sulfides availability to the refinery and limited profitable third-party feed.
The company also lowered its capital expenditure guidance, with sustaining capital for the Moa JV and Fort Site reduced from $35.0 million to $30.0 million, and tailings facility investments at the Moa JV reduced from $40.0 million to $35.0 million. These reductions represent spending decreases and deferrals in response to market conditions, though the company maintained its 2026 completion target for the tailings facility.
The full guidance update is presented in this table:
Financial Position
Sherritt reported available liquidity in Canada of $45.0 million at the end of Q2 2025, consisting of $30.3 million in available credit and $14.7 million in cash. This represents a decrease from the $55.7 million reported at the end of Q1 2025, reflecting ongoing financial pressures.
The quarter saw several notable financial developments, including dividends from Energas of $5.6 million, debt and equity transaction costs of $10.3 million, and interest payments on Second Lien Notes of $8.7 million. The company also incurred $6.2 million in contractually obligated rehabilitation costs related to legacy Oil and Gas assets in Spain.
Looking ahead, Sherritt expects distributions under the Cobalt Swap agreement to be limited, commencing in Q4 2025, and not meeting the annual minimum for the year. Dividends in Canada from Energas are expected to be at the low end of the previously disclosed range of $25 million to $30 million in 2025.
The breakdown of available liquidity and key financial movements is shown here:
Forward-Looking Statements
Despite the challenges, Sherritt’s management expressed confidence in the company’s ability to navigate the difficult market environment. The company has formed a task force and developed a recovery plan to mitigate operating challenges in Cuba. With the Moa JV expansion nearing completion and expected to ramp up in Q3 2025, management anticipates increased mixed sulfides production in the second half of the year.
The company also highlighted its strengthened balance sheet following debt and equity transactions that reduced outstanding debt obligations, decreased annual interest expenses, and extended debt maturity to late 2031. Combined with the significant cost reduction initiatives, management believes Sherritt is well-positioned to weather the lower nickel prices and drive long-term value.
The stock closed at $0.145 on July 30, 2025, unchanged from the previous close, according to available market data. This represents a significant discount to its 52-week high of $0.24, reflecting ongoing investor concerns about the challenging operating environment and reduced production guidance.
Full presentation:
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