SHERRITT INTERNATIONAL $4.45 - Toronto symbol S

SHERRITT INTERNATIONAL $4.45 (Toronto symbol S; TSINetwork Rating: Speculative) (1-800-704- 6698; www.sherritt.com; Shares outstanding: 297.3 million; Market cap: $1.3 billion; Dividend yield: 0.9%) recently sold off all of its coal interests for $793 million in cash.

The company is now focused on nickel production, with operations in Cuba and Canada. As well, it has started up its 40%-owned Ambatovy nickel mine on the island nation of Madagascar, off Africa’s east coast. Sherritt also produces oil and gas in Cuba, Spain and Pakistan, and manages 506 megawatts of power generation capacity in Cuba.

In the three months ended March 31, 2014, Sherritt’s revenue rose 13.0%, to $120.9 million from $107.0 million a year earlier. Cash flow per share was unchanged at $0.10.

As of March 31, 2014, the company’s long-term debt was $2.2 billion or 169% of its market cap. However, it also held cash of $603.9 million, or $2.03 a share. Since then, the $793 million proceeds from the coal sale have increased Sherritt’s cash holdings to about $1.4 billion, or $4.71 a share.

Sherritt gets most of its revenue and earnings from Cuba, which adds risk. However, it is diversifying away from that country by investing in other nations, such as with its Ambatovy mine in Madagascar. The company needs an improving global economy to fuel commodity demand, but it’s well positioned to profit when resource markets rebound.

Sherritt International is a buy.

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