Sherritt International Corp. announced Tuesday morning that the project timeline for its massive Ambatovy lateritic nickel project in Madagascar has been delayed and that capital expenditures have shot higher. The company's stock is down 6 per cent on the news, but instead of deflecting questions, the company faced analysts on what chief executive officer Ian Delaney called an "embarrassing" conference call.
"We don't want to make a lot of conference calls like this one. We find it embarrassing and painful, and other things," Mr. Delaney said.
His tone was grim. "I wish I'd be able to deliver better news than we issued in our press release today," he added. "I wish we weren't spending as much capital, clearly, but at the end of the day it's necessary and we remain committed to the project."
The higher costs amount to about $740-million, and Sherritt is responsible for about $300-million of that because it has a 40 per cent stake in the Ambatovy project. The costs stem from things like buying more cable and pipes, which need to be air lifted to the project, and extended the life of the camp in which all the workers live.
The extension is necessary because Sherritt also pushed back its expectations of first metal production to the first quarter of 2012 from the third quarter of 2011.
The Ambatovy project is massive, with capital costs of about $5.5-billion (U.S.). To understand just how much has gone into it, Sherritt said the project's mine is ready, the tailing facility is complete, the ore preparation plant has water in it, water has been sent down the pipes and the port is "essentially done."
What remains is the power plant and the refinery, which is about 75 per cent complete.
After peaking at $9.60 (Canadian) in February, Sherritt's shares are down about 31 per cent.