U.S. sanctions on Cuba weighing on Sherritt
Bid to unsettle business in nation stifles flow of cash to Toronto miner
TORONTO Tougher U.S. sanctions on Cuba squeezed Sherritt International Corp. in the third quarter, disrupting the supply of diesel to its nickel mine on the island and casting doubt over the timing of key payments in foreign currency.
The Toronto-based firm, which operates the Moa mine as a joint venture with the Cuban government, was forced to adopt conservation measures including running fewer mining trucks as U.S. sanctions on oil shipments worsened an acute fuel shortage.
The measures reduced production of mixed sulphides, though nickel production was unaffected.
Mixed sulphides production is now back on track and access to fuel supply returned to normal in the fourth quarter, the company said in a call with investors Friday.
Meantime, the Trump administration’s attempts to unsettle business in the Communist-run nation have stifled the flow of cash Cuba needs to pay Sherritt, which has taken pains to limit its direct exposure to U.S. sanctions, including the recent activation of Title III of the Helms Burton Act.
“The U.S. sanctions continue to be a concern for us,” Sherritt chief executive David Pathe said in a call with analysts last week.
“There is potential for further sanction increases in the months ahead and that does put further difficulty on our ability to forecast the timing of Cuban receivables, receipt of cash on Cuban receivables from our Cuban partners in the oil and power business.”
The Trump administration moved in April to activate Title
III of the 1996 Helms Burton Act, the legal underpinning of the U.S. embargo on Cuba.
The long-dormant provision allows parties whose property was confiscated by the Cuban government in the 1959 revolution to sue in U.S. courts anyone who “traffics” or derives an economic benefit from that property.
The provision has been suspended by every previous U.S. president.
Though a certified claim of $88.3 million stands against Sherritt’s Moa nickel mine, the company has structured its operations to avoid having any presence in the U.S. where a claim could be pursued.
And changes made in 1996 to Canada’s Foreign Extraterritorial Measures Act (FEMA) state that any judgment made under the U.S. embargo will not be recognized or enforced in Canada.
But that hasn’t sheltered Sherritt from the increase of U.S. restrictions on everything from financial transactions, to travel and shipping.
In an effort to punish Havana for its close ties to Nicolas Maduro’s regime in Venezuela, the Trump administration has limited U.S. travel to Cuba, banned American cruise ships from entering Cuban ports, imposed sanctions on shipping companies and restricted the ability of Americans to send remittances to family in the country.
The moves have limited foreign investment in Cuba, restricted access to supplies and equipment and reduced the availability of foreign currency, Sherritt said. That’s left the Caribbean nation unable to pay Sherritt — its largest private investor — for the energy it has produced.
Sherritt also generates electricity, oil and gas in the country.
“Each one of those implemented successively does impact Cuba’s ability to draw hard currency reserves into the country and puts more pressure on their liquidity situation and hence more pressure on their ability to service our receivables,” Pathe told investors.
Sherritt’s Cuban partners are currently overdue on US$154.8 million in payments, though the Canadian miner did receive its monthly injection of US$2.5 million, National Bank Canada analyst Don DeMarco said in a note.
Cuba’s timing in paying off the debt will have implications for Sherritt’s liquidity and “ability to repay (or refinance) the Cdn $170 million first tranche of corporate debt due in 2017,” he added.
The U.S. sanctions continue to be a concern ... There is potential for further sanction increases in the months ahead.