Sherritt International Corporation: Rating Report

On March 12, 2019, DBRS Limited (DBRS) downgraded the Senior Unsecured Debt of Sherritt International Corporation (Sherritt or the Company) to CCC (high) from B (low) and confirmed the Issuer Rating at B. The Senior Unsecured Debt was downgraded two notches below the Issuer Rating as a result of changing the Recovery Rating to RR6 from RR5, due largely to DBRS, on a consistent basis across sectors, including environmental and reclamation obligations into Sherritt’s recovery analysis. All trends are Stable. The downgrade and confirmation take into account higher nickel price forecasts that are expected to be offset by a lower cobalt price forecast for 2019, as the price recovers from recent lows in the USD 14 per pound (lb) range to reach USD 28 per lb by the end of 2019, or an average 2019 price of USD 23.50 per lb. Longer term, DBRS expects cobalt prices to remain in the USD 30 per lb range as both global electric vehicle and lithium ion battery production ramp up. As well, lower Cuban oil production due to natural field decline is expected to continue until the Company brings its Block 10 concession into commercial production, potentially as soon as H2 2019.