Sherritt predicts shrinking production in Cuba

Sherritt predicts shrinking production in Cuba

Sherritt International Corp., Cuba's largest private foreign investor,
projects lower nickel, oil and electricity production on the island this
year, according to the company's annual report.

The Toronto-based energy and mining conglomerate forecasts a 2-percent
reduction in nickel and cobalt output for 2012, a 4-percent lower oil
production, and a 11-percent drop in electricity generation on the island.

According to Sherritt's fourth-quarter report, the drop in nickel
production is due to lower ore grade; the shrinking oil production is
caused by "natural reservoir decline rates," partially offset by new
production from exploratory drilling in 2011; and the drop in power
production at Sherritt's two combined-cycle plants is caused by
"increasing gas supply shortages." The company didn't elaborate.

To be sure, the company is increasing capital investments in nickel and
electricity this year. Investments in the Moa nickel joint venture will
be 33 percent higher this year than in 2011, mainly to replace machinery
and to invest in transportation of ore from longer distances. A 150-mw
expansion of the Boca de Jaruco combined-cycle power plant continues in
2012, with an expected $109 investment this year. The total cost of that
project rose from an expected $247 million to $271 million, due to
"higher cost of material," Sherritt said.

Sherritt expects to spend 7 percent less this year on Cuban oil and gas.

In 2011, Sherritt's nickel production in Cuba rose 2 percent (with a
3-percent decline in the fourth quarter), oil production declined by 1
percent (stagnation during the fourth quarter), and electricity
generation dropped 10 percent (8 percent during the fourth quarter).

For the full year, Sherritt generated revenues of CDN$1.978 billion,
18.4 percent up from 2010, mostly thanks to rising oil prices. The
company logged in a net profit of CDN$197.3 million, 36 percent up from
2010.

During the quarter, the company generated CDN$536.8 million in revenues,
up 10.6 percent from the year-ago period. Fourth-quarter net income was
CDN$28.1 million, down 34 percent.

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