Sherritt Sees Coal as the Key to its Growth in Era of High Oil Prices

Commodity Inspector — Thu, 22 May 2008 14:25:38 +0000

Sherritt International Corp.’s [TSX:S] CEO says the company expects significant growth from its coal assets following its acquisition of Royal Utilities Income Fund, as high oil prices make coal an attractive fuel option.
“There is no way this country will leave 70% of its energy — which is in the form of coal and 25 times cheaper than oil — in the ground while its citizens have to bear dramatic cost increases to heat their homes,” Jowdat Waheed told shareholders at the company’s annual meeting in Toronto.
“Your company has placed a multi-billion dollar bet on its belief that coal, in different forms, will be one of the most important fuels in the energy mix of the future”.
Sherritt. said in March it was buying back the outstanding units of Royal Utilities Income Fund [TSX:RU.UN], owner of Canada’s largest thermal coal producer, in a C$704-million deal that will allow it to invest more money in its coal business. The deal closed last month.
The Ontario Teachers’ Pension Plan, a long-time partner with Sherritt on a number of transactions, agreed to part with its 41.2% stake in Royal Utilities in a lock-up agreement under the Sherritt plan.
Teachers has been recently selling off assets as it prepares to close a C$52-billion deal for BCE Inc. [TSX:BCE], although that plan suffered a serious setback Wednesday when Quebec’s highest court ruled that the terms of the agreement were unfair to BCE’s bondholders.
Waheed said Sherritt has been working through “the smorgasbord of sometimes conflicting regulations on carbon emissions to develop Canada’s first large-scale coal gasification project for commissioning in 2012.”
Royal Utilities indirectly held all the shares of Prairie Mines & Royalty Ltd., the largest thermal coal producer in Canada, which supplies coal-fired power plants in Alberta and Saskatchewan.
In addition to the coal assets, Sherritt also holds nickel, cobalt, oil and natural gas, and electricity holdings in Canada, Cuba and elsewhere.
Waheed said high metal prices will keep revenues high, noting that the challenges will relate to execution — building and staffing its operations to meet expansion plans.
“In our Ambatovy joint venture (in the African island nation of Madagascar), we are fully mobilized on construction activities but probably six to nine months away from having full complement of key operating personnel on the ground,” he said.
“We do need to wait a bit here as some staff can only get released from our Moa expansion (in Cuba) as key stages are completed.”
Sherritt shares traded Thursday at C$15.23, up five cents, at the Toronto Stock Exchange.

Posted on Commodity blog.

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Sherritt Sees Coal as the Key to its Growth in Era of High Oil Prices