Photo by: Bloomberg
TORONTO (miningweekly.com) – Canadian diversified resource company Sherritt International on Monday announced that it had signed and extended an existing production-sharing contract (PSC) in its oil and gas business with the Cuban government for ten years to 2028.
President and CEO David Pathe told Mining Weekly Online that the company was again making strides forward with its strategy to focus exclusively on its metals, oil and gas and electricity generation operations around the globe, following a distractive proxy battle with a dissident shareholder.
After recently completing its C$946-million divestment of its Canadian coal business, which signalled an exit from the thermal coal industry for the company, Pathe said the company was now more focused than ever on its internal core strengths.
The Toronto-based miner, which specialises in mining and refining nickel from lateritic ores at its operations in Canada, Cuba and Madagascar, is the largest independent oil producer in Cuba and currently operates three commercial oil fields under two PSCs, which contributed an average of 20 042 bbl/d of gross working-interest oil output last year.
Pathe also said Sherritt was waiting for Cuban Ministries to approve four new exploratory PSCs. Under the amended agreement, the Puerto Escondido/Yumuri PSC would be extended to allow for further development drilling in those fields.
During the new ten-year term, Sherritt would be required to drill a minimum of seven new wells within an initial two-year period. The extension applied to all new wells drilled.
The current PSC would end in March 2018.
“After more than two decades in the country, we have developed a great relationship with the Cuban government. Today’s announcement is an important milestone towards continuing long-term oil production in Cuba,” Pathe said.
The corporation is also the largest independent energy producer in Cuba.
NICKEL UPSIDE
Meanwhile, since declaring commercial operations at the Ambatovy nickel mine, in Madagascar, Sherritt was on track to reach full production during 2015.
Pathe noted that the focus at Ambatovy remained on improving the operation’s operating performance to achieve nameplate capacity of 60 000 t/y of finished nickel and 5 600 t/y finished cobalt on a 100% basis.
Ambatovy, located on the island nation, is the largest finished nickel and finished cobalt operation from lateritic ore in the world.
Pathe said Sherritt was looking towards price upside for nickel, driven by a “changed sentiment” towards the metal, which is used in modern alloys, mainly owing to Indonesia’s ban on mineral exports from the start of the year.
“We believe the nickel price will grow by between 4% and 5% a year, as the market is gradually transitioning from a surplus to a shortage,” Pathe highlighted.
The Ambatovy joint venture (JV) is a vertically integrated nickel and cobalt mining, processing, refining and marketing JV between subsidiaries of Sherritt (40% ownership), Sumitomo (27.5%), Korea Resources (27.5%) and SNC-Lavalin (5%). Sherritt is the operator of the facilities.
Sherritt also licenses its proprietary technologies and provides metallurgical services to commercial metals operations worldwide.
Sherritt shareholders early last month, in a compelling show of support for the incumbent board, voted against a proposal by activist investor George Armoyan over the composition of the miner's board.