Canadian miner Sherritt International Corp. S-T says there is “material uncertainty” about its ability to continue as a going concern, because of its precarious financial situation stemming from U.S. sanctions on Cuba.
Toronto-based Sherritt suspended its operations in Cuba in May after U.S. President Donald Trump issued an executive order expanding sanctions on the communist island, targeting companies and individuals operating in metals and mining.
Sherritt has been heavily reliant on Cuba for decades with a 50-per-cent stake in the Moa Joint Venture, which mines, processes and refines nickel and cobalt. It also has a sizable power division in the country, with a one-third stake in Energas SA, the largest independent energy producer on the island.
The company in its latest financial results said that Mr. Trump’s May executive order is considered a “material adverse change,” which allows Sherritt’s lenders to demand immediate repayment of $79.5-million in debt. In the event lenders move forward on repayment, the miner isn’t holding enough cash to pay off that debt.
Sherritt also exceeded its borrowing limits on its credit facility by $3.2-million, meaning lenders have the right to demand repayment of that amount as well.
The Canadian company said in its financial statements released on Thursday that there is “significant doubt about its ability to continue as a going concern.”
Sherritt is undertaking various steps to try to bolster its financial position, including further cost cutting and pursuing additional equity and debt financings.
This week, the company said that it was shutting down its refinery in Fort Saskatchewan, Alta., where nickel and cobalt mined in Cuba are sent for further processing. The Canadian site is the only major cobalt refinery in North America, and one of the few that processes nickel.
Last month, three Sherritt directors, the company’s chief financial officer and its auditor stepped down.
Sherritt agreed to a provisional pact last month that could see it eventually sell a majority stake to a U.S. company with connections to Mr. Trump. Sherritt said that Gillon Capital LLC, a Texas-based family office of the Washburne family, was considering acquiring a 55-per-cent stake in the miner at a discount to its then-heavily beaten-down share price. The exact financial terms were not disclosed.
During his first presidential term, Mr. Trump appointed real estate investor Ray Washburne as president of the Overseas Private Investment Corp., a federal agency that specializes in helping U.S. businesses make politically risky deals. Mr. Washburne held that position until 2019, before joining Mr. Trump’s intelligence advisory board.
Sherritt’s shares are currently under a cease trade order, which was issued by the Ontario Securities Commission after the company missed an earlier deadline to file its quarterly results. The stock last traded on May 19, at 12 cents apiece. At that point, the company’s market value was $84-million.
The company’s market capitalization peaked in the late 2000s, reaching almost $5-billion. Sherritt was incorporated in 1927. It formed the Moa Joint Venture with General Nickel Co. SA of Cuba in 1994.
Many of the original U.S. sanctions on the island date back to the early 1960s and were ratcheted up during the Cuban missile crisis. Sherritt, which has been operating in Cuba since the 1990s, has tried to work around the sanctions by selling its metals to markets other than the U.S.
The Trump administration has been increasing pressure on the island for months in an effort to force regime change, including severely restricting its oil imports. Washington in May indicted former Cuban president Raúl Castro on murder charges.