HAVANA, Nov 17 (Reuters) - Sherritt International Corp’s joint nickel venture in Cuba will return to profit next year if prices for the metal sustain themselves at the current level, the Canadian mining company’s head said in an interview.
Speaking at Sherritt’s office in Havana on Wednesday, Chief Executive David Pathe said the price, which has risen around 20 percent this year from multi-year lows, could even improve given global nickel supplies were expected to swing into a deficit.
“If prices can sustain where we are now, we will be EBITDA (earnings before interest, taxes, depreciation and amortization) positive at these prices with some upside in 2017,” Pathe said.
“It looks like the nickel market... is moving into deficit, with forecasts of deficit for few years, and we are optimistic it will be positive for pricing going forward,” Pathe said.
A Reuters poll released last week showed that analysts expected the average price of nickel would hover around current levels of around $11,000 a tonne in 2017.
Nickel is essential in the production of stainless steel and other corrosion-resistant alloys. Beyond its Cuba venture, Sherritt also has a stake in a large Madagascar nickel mine.
The Canadian company has been operating in Communist-ruled Cuba for more than two decades and says it is the most-vested foreign investor on the island.
While Pathe expected little if any profit from its Cuban nickel business in 2016, he forecast $50 million to $70 million in EBITDA from its Cuban oil and power ventures.
Sherritt has been focused in recent years on improving efficiency in existing businesses rather than undertaking new projects in Cuba, he said.
“We’ve had, in particular in this market environment, enough on our plate in existing business, but as you look ahead, there is the opportunity to do more,” he said.
Sherritt was talking with Cuba about different investment options in power generation, he said. The company already has a one-third interest in a joint-venture with production capacity of 506 megawatts, equivalent to 15 percent of the Cuban grid.
Asked about the impact of the U.S.-Cuban detente, Pathe said the key issue for businesses like his remained the embargo, which was still firmly in place.
“As and when (it is lifted), it will be good for us, in that it will give us access to U.S. suppliers and to U.S. markets,” Pathe said. “It would also help demystify our assets.”
“There are people who see the political risks of our assets being higher than it is because of the noise around the Cuban-American relationship.” (Reporting by Sarah Marsh; Editing by Alan Crosby)