1、Sherritt international Corporation2012 ANNuAl RepORT Sherritt is a world leader in the mining and refining of nickel from lateritic ores with projects and operations in Canada,Cuba,Indonesia and Madagascar.The Corporation is the largest thermal coal producer in Canada and is the largest independent
2、energy producer in Cuba,with extensive oil and power operations on the island.Sherritt licenses its proprietary technologies and provides metallurgical services to mining and refining operations worldwide.The Corporations common shares are listed on the Toronto Stock Exchange under the symbol“S”.Fin
3、ancial highlights($millions,except per share amounts,as at December 31)2012 2011 Revenue$1,840.2$1,978.3Adjusted EBITDA(1)515.5 643.2net earnings 33.2 197.3Basic earnings per share 0.11 0.67 Net working capital(2)$979.1$1,016.7total assets 6,758.3 6,497.5 Weighted-average number of shares(millions)B
4、asic 296.3 295.1 Diluted 296.8 296.3(1)Adjusted EBITDA is a non-GAAP measure.For additional information,see the Non-GAAP measures section of the MD&A.(2)Net working capital is calculated as total current assets less total current liabilities.(1)The effective transition date from Canadian GAAP to IFR
5、S was January 1,2010.As a result,the fiscal years 2008 and 2009 are stated in accordance with Canadian GAAP.(2)On May 2,2008,Sherritt acquired all of the units of the Royal Utilities Income Fund(RUIF)it did not already own.Prior to May 2,2008,Sherritt equity accounted for its interest in RUIF.(3)Rep
6、resents results from the Corporations 100%interest in Coal Valley Partnership(CVP)from July 1,2010.Prior to July 1,2010,results represent the Corporations 50%interest in CVP.03006009001,2001211100908=Metals =Coal(2)(3)=Oil and Gas =PowerREVENUE BY DIVISION(1)($millions)ADJUSTED EBITDA BY DIVISION(1)
7、($millions,excluding corporate costs)0701402102801211100908=Metals =Coal(2)(3)=Oil and Gas =Powerr 2008 2009 2010 2011 2012 metals 573.5 415.7 529.0 550.4 481.8 coal 546.0 710.7 846.3 1,050.5 975.0 Oil and gas 349.8 219.7 238.2 304.9 300.9 Power 122.8 118.1 47.0 60.0 70.0 2008 2009 2010 2011 2012met
8、als 170.6 111.2 221.8 200.4 125.8coal 141.9 187.3 159.9 224.2 181.8 oil and gas 206.1 153.5 177.0 235.9 232.7 power 87.3 80.9 29.7 25.1 22.0 Cover image:Moa plant Site,CubaSherritt international Corporation ar 2012 1TABle Of CONTeNTSMessage to Sherritt shareholders 2Global operations:Metals overview
9、 4 Coal overview 8 Oil and Gas overview 12 Power overview 12Taking responsibility:Workforce 18 Environment 19 Communities 20Financial review 22Corporate governance 145Board of Directors 146Shareholder information (inside back cover)Sherritts global assets Metals Coal Oil and Gas power Commercial ope
10、rations developed with Sherritt technologies.(1)Excluding items listed as corporate and other.ReveNue BY dIvISION(1)(%of total revenue)power4%Coal53%Metals26%Oil and gas16%CANADASPAININDONESIAMADAGASCARCUBAPAKISTAN2 Sherritt international Corporation ar 2012Message from the CEOIn 2012,your company a
11、chieved a significant milestone in its history.Ambatovy,the largest finished lateritic nickel project in the world,transitioned from a construction project to an operating business.With the successful commissioning,commencement of production and significant progress in ramping up in 2012,your compan
12、y is now well on the way to bringing Ambatovy up to full production.We are highly confident in our ability to achieve this.The completion of the largest project Sherritt has ever undertaken is a source of great pride and achievement for the thousands of people that have worked for over five years to
13、ward this goal.As a result of our success to date in Madagascar,we achieved record mixed sulphides and finished nickel production in our Metals business in 2012.More globally,2012 was a year marked by uncertainty in the global economy,and that uncertainty had a negative impact on commodity markets.P
14、rice levels for our products generally declined in 2012,while cost pressures on input commodities remained strong.Notwithstanding these challenges,for another year,our other operations achieved safe and stable production.Despite the cost pressures,margins in the domestic thermal coal business expand
15、ed slightly year-over-year.The Moa Joint Venture continues to be a low-cost,reliable producer of nickel and cobalt,and our Oil and Power businesses continue to be dependable providers of critical energy for Cuba.As ever,our focus in 2012 remained on maintaining liquidity and the strength of the bala
16、nce sheet.We finished 2012 with over$1 billion in total liquidity.In the latter part of 2012,we completed a debenture offering to add to our liquidity position and proactively manage our debt maturity profile.As a result,we have achieved the transition of Ambatovy from project to operation with our
17、balance sheet strong.In 2013,we can expect the global economic uncertainty that marked 2012 to continue.With that uncertainty will inevitably come volatility in commodity markets.But with volatility will come opportunity,and as Ambatovy continues to ramp up to full production,your company is well po
18、sitioned to capitalize on opportunities as they become available.I would like to thank our employees for their dedication,our Board and our partners for their support,and you,our shareholders,for your confidence in us as we look forward to making 2013 another year of achievement for Sherritt.dAvId v
19、.pAThePresident and Chief Executive OfficerSherritt International CorporationSherritt international Corporation ar 2012 3Message from the ChairmanThe Board of Directors of your company continues to maintain its solid foundation for the oversight of the companys governance system and management.An im
20、portant part of that responsibility includes seeing that the right people are running the business.David Pathe has completed his first year as CEO.During that year,your company further strengthened its balance sheet by adding cash and terming out its debt.Operations continued to produce at the low e
21、nd of the cost curve in all of our businesses,which continue to grow that low-cost production.As a result,your company remains well positioned to both respond to the volatility of the commodity markets and to capitalize on the opportunities they present.I would like to extend my sincere gratitude to
22、 the members of your Board,and in particular to your companys lead director,the Honourable Marc Lalonde,who retires from the Board in 2013.The foundation of your company is stronger,in large part due to Marcs wise counsel.IAN W.delANeYChairman Sherritt International Corporation4 Sherritt internation
23、al Corporation ar 2012MeTAlSSherritt Metals achieved record production of mixed sulphides,finished nickel and finished cobalt in 2012.The Moa Joint Venture continued to maintain production levels at or beyond facility capacity,and the Ambatovy Joint Venture commenced production of finished nickel in
24、 2012.Ambatovy plant Site,MadagascarSherritt international Corporation ar 2012 5=Adjusted EBITDA(1)=Spending on Capital(2)METALS ADJUSTED EBITDA AND SPENDING ON CAPITAL($millions)0751502253001211100908Sherritt Metals is a world leader in the mining and refining of nickel and cobalt from lateritic or
25、es.(1)The effective transition date from Canadian GAAP to IFRS was January 1,2010.As a result,the fiscal years 2008 and 2009 are stated in accordance with Canadian GAAP.(2)Spending on capital and intangible assets includes accruals and does not include spending on the Ambatovy Joint Venture.6 Sherri
26、tt international Corporation ar 2012INTeRNATIONAl NICkel ANd COBAlT pORTfOlIO Of BuSINeSSeSSherritts Metals portfolio contains operations and projects with similar technical characteristics,but at various stages of development.Sherritt Metals consists of three lateritic nickel and cobalt ventures:a
27、50%interest in the Moa Joint Venture,which operates a nickel and cobalt mine and processing facility in Cuba and a refinery in Fort Saskatchewan,Alberta;a 40%interest in the Ambatovy Joint Venture,which operates a fully integrated nickel and cobalt mining,processing plant and refinery in Madagascar;
28、and the option to acquire a controlling interest in the Sulawesi Project in Indonesia.When operating at full capacity,annual production of the Moa and Ambatovy Joint Ventures will exceed 100,000 tonnes(100%basis)of finished nickel and finished cobalt.MOA JOINT veNTuReThe Moa Joint Venture facilities
29、 have demonstrated the successful application of hydrometallurgical process technologies for the processing and refining of nickel and cobalt from lateritic ore for more than 50 years.In 2012,the Moa Joint Venture achieved production of 38,054 tonnes of nickel and cobalt contained in mixed sulphides
30、(100%basis);34,263 tonnes of finished nickel(100%basis);and 3,792 tonnes of finished cobalt(100%basis).The Moa Joint Venture obtains over 99%of its nickel and cobalt contained in feed from its mining facilities in Cuba.The Corporation also owns fertilizer,sulphuric acid,utilities and other assets lo
31、cated in Fort Saskatchewan.AMBATOvY JOINT veNTuReThe Ambatovy Joint Venture is the largest finished nickel and finished cobalt operation from lateritic ore in the world.The Ambatovy Joint Venture has an annual design capacity of 60,000 tonnes of finished nickel and 5,600 tonnes of finished cobalt.Mi
32、ning activities have been underway since the third quarter of 2010.Construction of Ambatovy was completed in late 2011,METAL PRODUCTION(tonnes,100%basis)=Nickel =Cobalt 09,00018,00027,00036,00045,0001211100908Metals Refinery,AlbertaSherritt international Corporation ar 2012 7and commissioning and st
33、art-up of the plant facilities were completed in 2012.In September 2012,Ambatovy received authorization to commercially operate the plant in Toamasina.Mixed sulphides production commenced in the second quarter of 2012 and first finished nickel and cobalt were produced in the third quarter of 2012.In
34、 2012,the Ambatovy Joint Venture produced 8,972 tonnes of nickel and cobalt contained in mixed sulphides(100%basis);5,695 tonnes of finished nickel(100%basis);and 493 tonnes of finished cobalt(100%basis).SulAWeSI pROJeCTIn December 2010,Sherritt signed an earn-in arrangement to acquire a 46%economic
35、 interest in a nickel and cobalt project on the island of Sulawesi in the Republic of Indonesia.Exploration drilling is expected to begin in the second quarter of 2013.The environmental and social baseline studies are scheduled for completion in 2013 and work continues to advance on the prefeasibili
36、ty study.SheRRITT hYdROMeTAlluRgICAl TeChNOlOgIeSSherritt has more than 50 years of technical and operational expertise in extracting and refining nickel and cobalt,including the extensive experience in mining and treating lateritic ores that it has gained from the operation of the Moa Joint Venture
37、s facilities in Cuba and Canada.Sherritts technology and expertise have been,and continue to be,successfully provided to and adopted by numerous other mining companies in more than 40 commercial facilities worldwide.The design of the Ambatovy facility is based on hydrometallurgical process steps tha
38、t have been commercially proven at the Moa Joint Venture as well as at other commercial operations that have implemented Sherritts technology.39,958 tonnesof nickel produced in 2012 (100%basis)4,285 tonnesof cobalt produced in 2012 (100%basis)METALS8 Sherritt international Corporation ar 2012COAlShe
39、rritt Coal is the largest thermal coal producer in Canada,accounting for approximately 98%of the countrys thermal coal production in 2012.poplar River dragline,SaskatchewanSherritt international Corporation ar 2012 9=Adjusted EBITDA(1)(2)(3)=Spending on Capital(1)(2)(3)COAL ADJUSTED EBITDA AND SPEND
40、ING ON CAPITAL($millions)0751502253001211100908 2008 2009 2010 2011 2012EBITDA 196.5 187.3 159.9 224.2 181.8Spending on cap 26.7 118.7 81.9 121.8 129.3 COAL EBITDA(1)($millions)0751502253001211100908Sherritt Coal has operations and projects in Western Canada in the provinces of Alberta and Saskatche
41、wan.(1)The effective transition date from Canadian GAAP to IFRS was January 1,2010.As a result,the fiscal years 2008 and 2009 are stated in accordance with Canadian GAAP.(2)On May 2,2008,Sherritt acquired all of the units of the Royal Utilities Income Fund(RUIF)it did not already own.Prior to May 2,
42、2008,Sherritt equity accounted for its interest in RUIF.(3)Represents results from the Corporations 100%interest in Coal Valley Partnership(CVP)from July 1,2010.Prior to July 1,2010,results represent the Corporations 50%interest in CVP.10 Sherritt international Corporation ar 2012TheRMAl COAl fOR pO
43、WeR geNeRATION ANd expORTSherritt Coal comprises three operational groups:Prairie Operations,Mountain Operations and Coal Development Assets.In 2012,Sherritt Coal produced approximately 35 million tonnes of thermal coal,generating nearly$1 billion in revenue.Sherritt Coals Prairie Operations include
44、d seven surface mines in 2012.Those mines primarily produce coal for dedicated supply to power plants in Alberta and Saskatchewan.The majority of the electricity produced in Alberta and Saskatchewan is currently generated by power plants utilizing thermal coal at mine-mouth operations.In 2012,Prairi
45、e Operations produced approximately 31 million tonnes of thermal coal.The coal is generally supplied to the power plants under long-term contracts with index-adjusted pricing provisions.In January 2013,the operation of the Highvale mine in Alberta was transferred to the customer/owner of the mine.Pr
46、airie Operations also produces coal for other domestic customers,as well as char and activated carbon,which are value-added coal products.Char is used in the production of barbeque briquettes,and activated carbon is used in the reduction of mercury in flue gas emissions of coal-fired power plants.Sh
47、erritt has a 50%interest in a joint venture that produces activated carbon and sources coal from Sherritt Coals Bienfait mine site in Saskatchewan.In 2012,the Activated Carbon plant operated at full capacity and sold nearly 15,000 tonnes(100%basis)of activated carbon products.Sherritt Coals Mountain
48、 Operations includes two surface mines in Alberta,and produces thermal coal primarily for export markets.Most of this higher value thermal coal is transported by rail to port facilities in British Columbia for shipping and delivery to customers located primarily in Pacific-Rim countries.COAL PRODUCT
49、ION(millions of tonnes,100%basis)=Prairie Operations =Mountain Operations 010203040501211100908poplar River,SaskatchewanSherritt international Corporation ar 2012 11In 2012,Mountain Operations produced approximately 3.7 million tonnes and sold approximately 3.5 million tonnes of thermal coal,mostly
50、for export.Pricing for export thermal coal contracts is driven by market reference prices.Despite a decrease in reference prices for export thermal coal in 2012 from 2011,realized prices in 2012 were comparable to 2011 levels.Sherritt Coal is well positioned to provide customers with a long-term,dep
51、endable,low-cost supply of fuel based on its large coal reserves and resource base that includes 0.6 billion tonnes of proven and probable reserves at its current mining operations and 1.1 billion tonnes of measured and indicated resources.Sherritt Coal also has potash reserves and resources in sout
52、hern Saskatchewan,which consist of 0.2 billion tonnes of proven and probable reserves as well as an extensive resource base.Sherritt Coal also has a 50%interest in the Carbon Development Partnership,which has extensive resource holdings in Western Canada.eNvIRONMeNTAl COMMITMeNTLand reclamation is a
53、n ongoing process.Sherritt Coal is a recognized leader in post-mining site reclamation.Wherever it is feasible,formerly mined land is reclaimed progressively as properties continue to be mined.In 2012,Sherritt Coals mining operations disturbed 982 hectares of land,leveled and contoured 1,182 hectare
54、s in connection with reclamation efforts,and completed reclamation of 1,098 hectares.Completion included providing the contoured land with topsoil in accordance with mining licenses.By the end of 2012,Sherritt Coal had completed reclamation of approximately 69%of the total area of land disturbed sin
55、ce mining operations began.31 million tonnesof thermal coal produced by prairie operations in 2012 (100%basis)3.7 million tonnesof thermal coal produced by Mountain Operations in 2012 (100%basis)Coal12 Sherritt international Corporation ar 2012OIl ANd gAS/pOWeRSherritt Oil is the largest independent
56、 oil producer in Cuba with 20 years of operational experience and extensive knowledge of the complex geology of Cubas northern coast.Sherritt Power pioneered the processing of raw gas and the utilization of residue natural gas to generate electricity in Cuba.Oil Rig in Yumuri,CubaSherritt internatio
57、nal Corporation ar 2012 13=Adjusted EBITDA(1)=Spending on Capital OIL AND GAS ADJUSTED EBITDA AND SPENDING ON CAPITAL($millions)0751502253001211100908=Adjusted EBITDA(1)=Spending on Capital(1)POWER ADJUSTED EBITDA AND SPENDING ON CAPITAL($millions)02550751001211100908(1)The effective transition date
58、 from Canadian GAAP to IFRS was January 1,2010.As a result,the fiscal years 2008 and 2009 are stated in accordance with Canadian GAAP.varadero power plant,Cuba14 Sherritt international Corporation ar 2012OpeRATIONS ANd pROduCTIONThe Corporation holds exploration and production rights under productio
59、n-sharing contracts with Union Cubapetroleo(CUPET),the Cuban state oil company.Since 1992,Sherritt Oil has drilled more than 200 oil wells and produced over 188 million barrels of oil in Cuba.Sherritt Oil currently operates three commercial oil fields in Cuba Puerto Escondido,Yumuri and Varadero Wes
60、t in two separate blocks along the northern coast.Approximately 94%of Sherritts oil and gas production originates in Cuba.In 2012,Sherritt Oil produced 20,164 gross working-interest barrels of oil per day in Cuba,representing approximately 50%of Cubas oil production.Sherritt also has oil and gas int
61、erests in Spain,Pakistan and the United Kingdom.In 2012,Sherritt Oils global net working-interest production was 11,336 barrels of oil equivalent per day.During 2012,Sherritts drilling activity was concentrated in Cuba,where a total of six development wells were initiated and six development wells w
62、ere completed,of which four are in production.As of December 31,2012,there were a total of 53 producing wells in Cuba.During 2012,the Corporation submitted applications for six new production-sharing contracts relating to exploration prospects in Cuba,two extensions of term for existing production-s
63、haring contracts and two development drilling proposals on lands currently operated by Cuban entities.ONgOINg pROJeCTSThe well optimization and remediation programs undertaken in Cuba in 2012 will continue in 2013.Four new development wells are planned for 2013 in addition to workover operations for
64、 several existing wells.Sherritt also continues to pursue interests outside of Cuba.In Spain,Sherritt intends to acquire seismic data over the Casablanca oil field,where it currently holds an interest,and adjacent lands.In addition,the acquisition of seismic data is planned for four offshore blocks
65、in the Alboran Sea in southern Spain.In the United Kingdom,Sherritt currently holds five exploration licenses in its central North Sea prospect,where Sherritt plans to shoot seismic in 2013.20,164 bpdgross working-interest oil production in Cuba in 2012(100%basis)OIL AND GAS PRODUCTION(100%BASIS)(ba
66、rrels of oil equivalent per day)=Gross working-interest =Net working-interest production(Cuba)production all operations(bopd)(boepd)07,00014,00021,00028,00035,0001211100908OIL AND GASOil pipes in Yumuri,CubaSherritt international Corporation ar 2012 15pOWeR geNeRATION fOR The CuBAN NATIONAl eleCTRIC
67、Al gRIdSherritt Power operates in Cuba through its one-third interest in Energas S.A.(Energas),a Cuban joint venture established to operate facilities for the processing of raw natural gas and the generation of electricity for sale and delivery to the Cuban national electrical grid system.The remain
68、ing two-thirds interest in Energas is held equally by two Cuban agencies,CUPET and Union Electrica(UNE).The use of clean gas to generate electricity realizes the economic benefit of a valuable source of energy,while mitigating the environmental impact that occurs when natural gas high in sulphur is
69、flared in producing oil fields.Sherritt has financed,constructed and commissioned each of the integrated gas treatment and power generation facilities located near the Varadero,Boca de Jaruco and Puerto Escondido oil fields.Energas facilities currently have the capacity to produce 356 MW of electric
70、ity.In 2012,Energas produced 1,884 GWh of electricity,representing approximately 11%of Cubas electricity production.Construction of a pipeline to supply additional gas to the Boca de Jaruco power generation facility is expected to be completed in September 2013.Energas will continue to investigate p
71、otential sources of fuel both inside and outside of Cuba,to secure long-term natural gas supplies for the business.BOCA de JARuCO COMBINed CYCle pROJeCTSherritt Power continued development of the 150 MW Boca de Jaruco Combined Cycle Project at Energas during 2012.When operational,the Project will in
72、crease Energas power generating capacity by 42%to 506 MW.All engineering is complete and all major equipment has been delivered to the site.The Project is expected to be completed and commissioned in the first half of 2013,ramping up to full capacity in the second half of the year.The capital costs
73、for the Project are estimated to be$271.0 million.1,884 GWhof electricity produced in 2012(100%basis)ELECTRICITY GENERATION(100%BASIS)(gigawatt hours)=Electricity 05001,0001,5002,0002,5001211100908poWerBoca de Jaruco power plant,Cuba16 Sherritt international Corporation ar 2012TAkINg ReSpONSIBIlITYS
74、herritt is committed to providing a safe and rewarding place to work,operating ethically,demonstrating environmental responsibility,engaging stakeholders and benefitting the communities where we operate,and continually improving operational performance.We will meet or exceed the standards of the jur
75、isdictions where we operate.local Market,MadagascarSherritt international Corporation ar 2012 17Sherritt provided more than$1.9 million in support of 117 local organizations in 2012.(1)Social includes Infrastructure,Social,Economic and Arts.(2)Education includes scholarship funds provided to dependa
76、nts of employees.DONATIONS AND SPONSORSHIPS($millions)=Social(1)=Education(2)=Health =Social =Education =Health =Total 2008 2009 2010 2011 2012Social 1,452,650 764,500 791,165 1,608,833 617,119Education 1,007,950 913,052 815,587 680,225 606,412Health 253,700 261,476 187,620 402,062 683,506Total 2,78
77、0,300 1,939,028 1,794,372 2,691,120 1,907,0370.00000500000.093751000000.187501500000.281251211109800.51.01.52.0121110090818 Sherritt international Corporation ar 2012TAKING RESPONSIBILITY WORKFORCESherritt maintains a strong commitment to environment,health and safety in all of its business division
78、s,affiliates and subsidiaries.Sherritts goal is zero harm,and the company strives to ensure that each worker in its global operations returns home safely after work.Sherritt Coals Paintearth mine in Forestburg,Alberta,was awarded the John T.Ryan Trophy for being the countrys safest coal mine of 2011
79、.This is the seventh time the Paintearth mine has received this honour.In Metals,the refinery in Fort Saskatchewan,Alberta,achieved 3.4 million hours of work without a lost time incident.The Corporation sets a Lost Time Injury(LTI)index target of zero and a Total Recordable Injury(TRI)index target o
80、f less than 0.75.In 2012,Sherritt achieved an average LTI index of 0.17 and a TRI index of 0.38.While achieving its TRI target,the Corporation reported a year-over-year increase in lost time and recordable injury rates.Sadly,there were four work-related fatalities at Ambatovy in 2012.As a result,man
81、agement has been actively involved in the investigation of these incidents and with development of corrective and preventative measures.Safety performance is also being addressed by the senior leadership of Sherritt,through both corporate-wide initiatives and division-specific programs,to improve he
82、alth and safety performance throughout the organization by re-emphasizing safety awareness.At Ambatovy,as construction reached completion in 2011,a program was initiated to help demobilized Malagasy construction workers in finding new vocations.The Assistance Initiatives for Demobilized Workers(AIDE
83、)is a temporary program established to provide short-term monthly payments,training in agriculture and job search assistance to transition these workers to new employment.The program was a great success,with 19,094 people registered with AIDE,which is approximately 97%of the eligible workers.By the
84、end of 2012,over 12,000 participants had completed the program and approximately US$5.4 million had been paid under AIDE.In 2012,Sherritt employed,directly or through a subsidiary or affiliate,a workforce of approximately 8,230 people.The 7%increase from 2011 is mainly a result of Ambatovys requirem
85、ent for long-term,skilled resources.WorkforceLOST TIME INJURY(LTI)INDEX(1)(2)(12-month rolling average as at December 31,2012)=Metals =Coal =Oil and Gas =Power 2008 2009 2010 2011 2012Metals 0.03 0.06 0.06 0.04 0.19Coal 0.14 0.13 0.12 0.16 0.08Oil&Gas 0.60 0 0.19 0.18 0.00Power 0 0.39 0.39 0.21 0.35
86、=Metals =Coal =Oil and Gas =Power 0.00.20.40.60.81211109800.200.400.600.801211100908TOTAL RECORDABLE INJURY(TRI)INDEX(1)(2)(12-month rolling average as at December 31,2012)=Metals =Coal =Oil and Gas =Power=Metals =Coal =Oil and Gas =Power 2008 2009 2010 2011 2012Metals 0.16 0.25 0.28 0.30 0.40Coal 0
87、.33 0.34 0.32 0.16 0.21Oil&Gas 1.11 0.67 0.74 1.24 0.21Power 1.38 1.37 0.39 1.70 0.86Ambatovy 0.15 0.21 0.26 0.30 0.290.00.51.01.52.01211109800.51.01.52.01211100908(1)The TRI index is calculated by multiplying the number of TRIs by 200,000 and then dividing by the total exposure hours.This index pro
88、vides a measure that is comparable across industries and businesses of varying size.(2)Data have been restated to include contractors throughout.(1)The LTI index is calculated by multiplying the number of total LTIs by 200,000 and then dividing by total exposure hours.This index provides a measure t
89、hat is comparable across industries and businesses of varying size.(2)Data have been restated to include contractors throughout.Safety Training,Albertaelectrical Shop,Moa,CubaSherritt international Corporation ar 2012 19TAKING RESPONSIBILITY ENVIRONMENTSherritt is committed to practicing responsible
90、 and forward-looking environmental stewardship at all of its operations.Each business division works with local experts to blend their expertise with internationally recognized standards to develop and maintain an environmental framework for sustainable operations.Comprehensive policies and procedur
91、es have been implemented to ensure compliance with applicable regulations and operating licenses in all jurisdictions.At each operation,Sherritt works with external stakeholders to conserve and protect the environment.The focus of land reclamation in all operations is to return formerly mined land t
92、o traditional uses as outlined in operating licenses.This may include productive farmland,natural prairie,mixed use or new wildlife habitats.Sherritts greenhouse gas(GHG)offset project in Cuba continues to operate at Energas S.A.s Varadero facility.By the end of 2012,1,407,196 tonnes of carbon dioxi
93、de(CO2)emission reductions had been documented for the United Nations Kyoto credits.Of these,the amount for which credits have been issued remains at 343,125 tonnes.An additional total of 829,365 tonnes is in the process of being monitored or reviewed for future issuance.234,706 tonnes were document
94、ed on a preliminary basis in 2012.The Madagascar governments decree on compatibility of investments with the environment forms the basis of Ambatovys environmental program.In addition,its program follows guidelines from the International Finance Corporation of the World Bank,the Equator Principles,t
95、he Business and Biodiversity Offset Program and the Principles of the International Council on Mining and Metals.Ambatovys biodiversity program is designed to achieve no net loss,and strives for a net biodiversity gain,in areas affected by its operations.Sustainable natural resource management that
96、includes stakeholder participation is an important part of forest management that can help alleviate human pressure on forests within the mine lease designated for conservation.In 2012,Ambatovy held special sessions in villages around the mine to increase local awareness of environmental issues,show
97、ing how each person is involved in forest management.In 2012,the California Academy of Sciences formally recognized Ambatovys support for biodiversity research in Madagascar by naming a recently discovered species of ant,Tetramorium Ambatovy.EnvironmentSHERRITT COAL LAND RECLAMATION(hectares)=Levele
98、d(1)=Completed(2)02505007501,0001,25012111009081211100908(1)Leveled land has been returned to the contour specified as the provincial standard and outlined in Mining Licenses.(2)Completed land includes placement of all topsoil.lemur,Madagascarpoplar River Reclamation,Saskatchewan20 Sherritt internat
99、ional Corporation ar 2012Sherritt works with its stakeholders to maintain and develop its social license,placing a high priority on mutually beneficial relationships with local,regional and national governments.Sherritts business divisions maintain ongoing communications with local communities to en
100、sure that information is shared efficiently and transparently.Investment is directed in consultation with local authorities to facilitate the provision of assistance where it is most effective and most desired.The Corporation encourages employees to support local community initiatives.Each year,Sher
101、ritt and its workforce raise funds for local United Way campaigns.In 2012,Sherritt provided more than$1.9 million,as well as material and volunteer time,to the United Way,benefitting over 117 local organizations.Sherritt Metals continues to play a significant role in sponsoring and participating in
102、many community initiatives in Fort Saskatchewan,Alberta.With approximately 660 employees in the immediate area,Sherritt has focused its donations to provide the broadest benefit by making a$500,000 donation to the Fort Saskatchewan Community Hospital Foundation.The Foundation was instrumental in rai
103、sing funds for the construction of a new hospital in the city.In September 2012,Sherritt was recognized for its commitment towards the purchase of the hospitals computed tomography(CT)scanner the first in the community and the Health Services wing of the new hospital is now named the Sherritt Health
104、 Services Centre.In 2012,Sherritt continued to offer financial support to other community events,organizations and charities in Fort Saskatchewan such as sports teams,Boys and Girls Clubs,Canadian Cancer Society,United Way,Toys for Tots Program(Food Bank),Canada Day celebrations,and Northeast Region
105、 Community Awareness Emergency Response events.The Moa Joint Venture continued to play a significant role in Cuban communities in 2012 by assisting in the clean-up work following Hurricane Sandy in October.In addition,Sherritt committed a total of$400,000 towards the provision of materials and equip
106、ment for the rebuilding effort in the City of Moa and for public sanitation equipment in the City of Santiago de Cuba.Communities2012 DONATIONS AND SPONSORSHIPS Social Education Health 2012$617,119$606,412$683,506(these numbers are FPO)$683,506$617,119$606,412=Social =Education =Health =Social(1)=Ed
107、ucation(2)=Health$683,506$617,119$606,412(1)Social includes Infrastructure,Social,Economic and Arts.(2)Education includes scholarship funds provided to dependants of employees.local Schools Receiving donated Books,Madagascar Sherritt international Corporation ar 2012 21TAKING RESPONSIBILITY COMMUNIT
108、IESDuring 2012,Sherritt also continued to work with Cubas national,provincial and municipal government authorities to provide materials and equipment to improve the everyday lives of Cuban citizens.Social infrastructure assistance included initiatives to provide greater pumping capacity for the neig
109、hbourhoods water supply in Matanzas Province,construction materials for general repairs in the City of Moa,equipment for production of locally sourced building materials in Matanzas Province,cooling equipment for a municipal hospital,and refrigeration and chemical reagents for oncology care in Havan
110、a.At Ambatovy,Sherritt employees provided funds to initiate the construction of a library in Moramanga,to provide books for the library,and to provide training for the facilitys librarians.A four-day training program on library management was organized for 79 librarians,headmasters and principals of
111、 local primary,secondary and vocational schools.In an effort to help Madagascar realize its Education for All objectives,Ambatovy has partnered with UNICEF to bring quality education to the children of Atsinanana in a manner that respects the environment.With Ambatovys financial support and UNICEFs
112、technical expertise,the“Eco-friendly Schools”initiative provides an opportunity for the broader community to learn how to use local products and innovative technology to build sustainable schools in their communities.Construction began on three eco-friendly schools in 2012.In 2012,Ambatovy opened th
113、e Business Training Centre in Toamasina,offering training to local companies,students and entrepreneurs.Courses offered include administration,entrepreneurship,finance,health and safety,quality control and anti-corruption practices.In response to damage caused by Cyclone Giovanna,which struck Madaga
114、scar in February 2012,Ambatovy and its partners and contractors provided emergency relief to victims in the form of food,shelter materials and assistance in clearing debris from roads.Approximately US$5.4 millionpaid under the AIDE program by the end of 2012Approximately 1.4 million tonnesof carbon
115、dioxide(CO2)emission reductions documented by the end of 2012eldon Brown park,Albertavolunteer planting,CubaAmbatovy plant Site,Madagascar2012 fINANCIAl RevIeWSherritt International Corporation AR 2012 232012 Financial reviewManagements discussion and analysis 23Overview of the business 24Key financ
116、ial and operational data 28Executive summary 29Review of operations 32 Metals 32 Coal 36 Oil and Gas 40 Power 43 Other 45Consolidated financial position 46Liquidity and capital resources 47Managing risk 51Environment,health and safety 62Critical accounting estimates and judgments 67Accounting pronou
117、ncements 69Three-year trend analysis 722012 Fourth quarter results 73Summary of quarterly results 74Off-balance sheet arrangements 74Transactions with related parties 75Controls and procedures 75Supplementary information 76 Sensitivity analysis 76 Non-GAAP measures 76 Five-year financial and operati
118、ng summary 80 Forward-looking statements 81Consolidated financial statements 82Managements report 82Independent auditors report 83Consolidated statements of comprehensive income(loss)84Consolidated statements of financial position 85Consolidated statements of cash flow 86Consolidated statements of c
119、hanges in shareholders equity 87Notes to consolidated financial statements 88Managements discussion and analysisFor the year ended December 31,2012This Managements Discussion and Analysis(MD&A)is intended to help the reader understand Sherritt International Corporations operations,financial performa
120、nce and the present and future business environment.This MD&A,which has been prepared as of February 26,2013,should be read in conjunction with Sherritts audited consolidated financial statements for the year ended December 31,2012.Additional information related to the Corporation,including the Corp
121、orations Annual Information Form,is available on SEDAR at or on the Corporations website at .References to“Sherritt”or“the Corporation”refer to Sherritt International Corporation and its share of consolidated subsidiaries and joint ventures,unless the context indicates otherwise.All amounts are in C
122、anadian dollars,unless otherwise indicated.References to“US$”are to United States dollars.Securities regulators encourage companies to disclose forward-looking information to help investors understand a companys future prospects.This discussion contains statements about Sherritts future financial co
123、ndition,results of operations and business.See the end of this report for more information on forward-looking statements.MANAGEMENTS DISCUSSION AND ANALySIS24 Sherritt International Corporation AR 2012Overview of the businessSherritt is a leader in the mining and refining of nickel and cobalt from l
124、ateritic ores with projects and operations in Canada,Cuba,Indonesia and Madagascar.The Corporation is the largest thermal coal producer in Canada and is the largest independent energy producer in Cuba,with extensive oil and power operations across the island.Sherritt licenses its proprietary technol
125、ogies and provides metallurgical services to mining and refining operations worldwide.The common shares of the Corporation are listed on the Toronto Stock Exchange,trading under the symbol“S”.Sherritts operations are decentralized,having significant management autonomy at the business unit level wit
126、h certain strategic,financing,administration,consolidation and reporting activities managed from the head office in Toronto,Canada.The Corporation remains focused on the long-term objective of effectively capitalizing on opportunities to grow its asset base through the expansion of existing business
127、es and strategic acquisitions.It also remains focused on maintaining a strong financial position,enhancing capacity,managing the cost of operations,and balancing the needs of partners and shareholders.Sherritt is committed to the highest standards of environmental,health and safety practices at all
128、of its operations,while making valuable contributions to local communities.Revenue,Adjusted EBITDA(1)and Earnings from Operations by division are as follows:(1)For additional information see the Non-GAAP measures section.MetalsMetals is an industry leader in mining,processing and refining nickel and
129、 cobalt from lateritic ore bodies.Sherritt has a 50/50 partnership with General Nickel Company S.A.(GNC)of Cuba(the Moa Joint Venture or Moa JV),and a 40%indirect interest in two companies(together the Ambatovy Joint Venture)that own a significant nickel operation.The Moa Joint Venture mines,process
130、es and refines nickel and cobalt for sale worldwide(except in the United States).The Moa JV has mining operations and associated processing facilities in Moa,Cuba;refining facilities in Fort Saskatchewan,Alberta;and an international marketing and sales organization.The Corporation also owns and oper
131、ates fertilizer,sulphuric acid,utilities and storage facilities in Fort Saskatchewan,some of which provide additional sources of income and enhance the security of supply of certain inputs and services required by the Moa JVs refining operations.2012Revenue,Adjusted EBITDA(1)and Earnings from Operat
132、ions by division($millions,for the year ending December 31)-Revenue-Adjusted EBITDA-Earnings from Operations-1002005008001,1001,4001,7002,000Corporate&OtherPowerOil&GasCoalMetalsTotal02011Revenue,Adjusted EBITDA(1)and Earnings from Operations by division($millions,for the year ending December 31)Met
133、als 550.4 200.4 166.3Coal 1050.5 224.2 104.5Oil&Gas 304.9 235.9 170.0Power 60 25.1 14.5Corporate&Other 12.5-42.4-44.6Total 1840.2 515.5 241.8Metals 481.8 125.8 87.6Coal 975 181.8 30.3Oil&Gas 300.9 232.7 162.1Power 70 22 11Corporate&Other 12.5-46.8-49.2-Revenue-Adjusted EBITDA-Earnings from Operation
134、s-1002005008001,1001,4001,7002,000Corporate&OtherPowerOil&GasCoalMetalsTotal0COALMine-mouth and exportthermal coal production andcoal development projectsOIL&GASOil and gas explorationand productionPOWERPower generationCORPORATETechnology group,development projectsand head officeMETALSNickel and cob
135、altmining,processingand refining SHERRITT INTERNATIONAL CORPORATIONMANAGEMENTS DISCUSSION AND ANALySISSherritt International Corporation AR 2012 25Continuous optimization of production facilities,combined with the implementation of innovative technologies at the Moa JV assists Metals in continuing t
136、o be one of the worlds lower-cost producers of nickel and cobalt from lateritic ore.Metals experienced and knowledgeable workforce and management team,combined with consistently high on-stream time and equipment reliability,have been the key to the safe and responsible utilization of production asse
137、ts.At the Moa JV,the Phase 2 Expansion remains an important growth initiative that will continue to use proven process technologies that have successfully processed nickel and cobalt for nearly 60 years.The expansion would take advantage of the significant infrastructure in place at both Moa and For
138、t Saskatchewan.Ambatovy is expected to be one of the worlds largest nickel mining,processing and refining operations utilizing lateritic ore.Sherritt is the operator of this project and has as its partners Sumitomo Corporation,Korea Resources Corporation and SNC-Lavalin Inc.(collectively referred to
139、 as the Ambatovy Partners).Ambatovy is a large tonnage nickel and cobalt project with two nickel deposits located near Moramanga(eastern central Madagascar)which are planned to be mined over a 20-year period.Additionally,reclaim of low-grade ore stockpiles is expected to extend project life by nine
140、years.The ore from these deposits is delivered via pipeline to the processing plant and refinery located near the Port of Toamasina.Ambatovy began nickel and cobalt production in the third quarter of 2012 and has an estimated annual production capacity of 60,000 tonnes(100%basis)of nickel and 5,600
141、tonnes(100%basis)of cobalt.The Ambatovy Joint Venture is expected to reach commercial production in 2013.CoalSherritt is Canadas largest thermal coal producer,and operated nine surface mines in Alberta and Saskatchewan during 2012.Sherritt supplies domestic and international markets with thermal coa
142、l for electricity generation.Sherritt has abundant,high-quality and strategically located reserves in Canada that are suited to providing its customers with a stable,low-cost and long-term fuel supply.Coal consists of three distinct groups:Prairie Operations Mountain Operations Coal Development Asse
143、tsPrairie Operations consists of Sherritts 100%interest in Prairie Mines&Royalty Ltd.(PMRL).In June 2012,Sherritt dissolved Royal Utilities Income Fund as an income trust and transferred its shares of PMRL to a wholly owned subsidiary of Sherritt.PMRL directly owns and operates the Paintearth,Sheern
144、ess,Genesee(50%interest),Poplar River,Boundary Dam and Bienfait mines which are mine-mouth thermal coal operations.It also operated the Highvale mine under contract in 2012.PMRL directly owns a 50%joint venture interest in the Bienfait Activated Carbon Joint Venture,which produces activated carbon f
145、or the removal of mercury from flue gas.Prairie Operations also produces char for the barbeque briquette industry from the Bienfait Char facility.In addition,Prairie Operations holds a portfolio of mineral rights located in Alberta and Saskatchewan on which it earns royalties from the production of
146、coal,potash and other minerals.Mountain Operations consists of a 100%interest in Coal Valley Resources Inc.(CVRI).CVRI owns and operates the Coal Valley mine,Obed Mountain mine,Gregg River mine and Coleman properties.The Coal Valley and Obed Mountain mines were the only active mines in this group du
147、ring 2012.In November 2012,CVRI suspended operations at the Obed Mountain mine due to weak thermal export prices.The majority of coal from Mountain Operations is sold on the international market to overseas customers.Coals development assets include Carbon Development Partnership(CDP),a general part
148、nership that is 50%indirectly owned by Sherritt,whose purpose is to undertake initiatives aimed at monetizing its significant undeveloped coal reserves.The foundation of Coal is its philosophy which encourages a safe and productive work environment,enduring relationships with customers and partners,
149、and mutually beneficial relationships with the communities at each mine site.MANAGEMENTS DISCUSSION AND ANALySISOVERVIEw OF THE BUSINESS(CONTINUED)26 Sherritt International Corporation AR 2012Oil and GasSherritt explores for and produces oil and gas,primarily from fields situated in Cuba,from which
150、the Corporation produced approximately 94%of its net oil production during 2012.Sherritt holds an interest in two production-sharing contracts in Cuba.All of Sherritts oil sales in Cuba in 2012 were to an agency of the Government of Cuba.Under the production-sharing arrangements,Sherritt recovers ap
151、proved costs from gross production and the remaining production is allocated on the basis of negotiated percentages.The pricing for oil produced by Sherritt in Cuba is based on a discount to Gulf Coast Fuel Oil Number 6 reference prices.Oil and Gas has developed expertise in the exploration and deve
152、lopment of fold-and-thrust geological plays along the north coast of Cuba.Reservoirs are located offshore,but in close proximity to the coastline.As a result,specialized long reach directional drilling methods have been developed to economically exploit the reserves from land-based drilling location
153、s.Sherritt has also implemented state of the art production technology to optimize the production of heavy oil in Cuba.Sherritt also holds working-interests in several oil fields located in the Gulf of Valencia in Spain,and a working-interest in a natural gas field in Pakistan.Sherritt holds explora
154、tion permits in the United Kingdom North Sea and in the Alboran Sea off the southern coast of Spain.The Corporation is currently completing initial geological and geophysical evaluations for these exploration properties.PowerThe majority of Sherritts power generating assets are located in Cuba at Va
155、radero,Boca de Jaruco and Puerto Escondido.These assets are held by Sherritt through its one-third interest in Energas S.A.(Energas),which is a Cuban joint arrangement established to process raw natural gas and generate electricity for sale to the Cuban national electrical grid.Cuban government agen
156、cies Union Electrica(UNE)and Unin CubaPetrleo(CUPET)hold the remaining two-thirds interest in Energas.Raw natural gas that would otherwise be flared is supplied to Energas by CUPET free of charge,where it is processed and used to produce electricity.By-products produced by Energas in processing the
157、raw natural gas,including condensate and liquefied petroleum gas,are purchased by CUPET at market-based prices.All of Energas electrical generation is purchased by UNE under long-term fixed-price contracts.Sherritt provides the financing for the construction of the Energas facilities and is repaid f
158、rom the cash flows generated by the facilities.The facility at Varadero is an efficient combined cycle operation where electricity is produced from gas turbines and a steam turbine.The steam turbine produces electricity using steam generated from the waste heat captured from the gas turbines.A simil
159、ar combined cycle project is currently under construction at Boca de Jaruco and will increase Energas electrical generating capacity by 150 Mw to 506 Mw.This project is scheduled for completion in June 2013.Sherritt also owns a 25 Mw thermal power facility in Madagascar.The operation of the facility
160、 is contracted to the local electricity utility which is entitled to all of the electricity generated.Sherritt receives a fixed monthly fee which is recorded as lease revenue.Sherritt does not recognize any production or sales volumes from this facility.MANAGEMENTS DISCUSSION AND ANALySISSherritt In
161、ternational Corporation AR 2012 27Corporate and OtherTeChnologies Sherritt Technologies is focused on providing technical support to Sherritts operating divisions and in helping to identify opportunities for the Corporation as a result of the divisions international activities.The division specialis
162、es in commercializing hydrometallurgical technologies for the recovery of non-ferrous metals and in the research and development of technologies for cleaning coal prior to combustion in power stations and coal gasification plants.More than 40 commercial plants worldwide have previously adopted Techn
163、ologies non-ferrous hydrometallurgical processes.Technologies employs approximately 65 personnel including project managers,scientists,engineers,technologists and support staff.Technologies develops hydrometallurgical processes for the treatment of a wide range of ores,concentrates,mattes and other
164、feed materials for the recovery of non-ferrous and precious metals.Hydrometallurgical processes are developed,tested and demonstrated extensively at the Technologies laboratory and pilot plant facilities,the data from which forms the basis for Technologies engineers to design commercial plants.The d
165、ivision is evaluating,adapting and developing coal beneficiation and coal gasification technologies.Several cost-effective coal beneficiation technologies have been identified that could economically reduce greenhouse gas emissions.These technologies could also reduce the cost of installing carbon c
166、apture and emission reduction technologies at existing coal-fired power plants and at new gasification facilities.Emerging gasification technologies are also under evaluation.These clean energy technologies,successfully demonstrated by others,have tremendous potential to support the long-term utiliz
167、ation of Sherritts deep,currently un-mineable,coal resources.sulawesi niCkel ProjeCTIn 2010,Sherritt entered into an earn-in and shareholders agreement with a subsidiary of Rio Tinto Limited(Rio Tinto)pursuant to which Sherritt could acquire a 57.5%interest in the holding company that owns the Sulaw
168、esi Nickel Project(Sulawesi Project)in Indonesia.The Sulawesi Project is located on the island of Sulawesi in the Republic of Indonesia.Based on exploration completed to date,the project includes a large,high-grade resource.Identification of further mineralization will be achieved through additional
169、 exploration and completion of a feasibility study.Sherritt is the operator and will license its commercially proven,proprietary technology to the project.Drilling to define the resource is expected to begin in the second quarter of 2013.28 Sherritt International Corporation AR 2012MANAGEMENTS DISCU
170、SSION AND ANALySISKey financial and operational data$millions,except per share amounts,for the years ended December 31 2012 2011 ChangeFinancial highlightsRevenue$1,840.2$1,978.3 (7%)Adjusted EBITDA(1)515.5 643.2 (20%)Earnings from operations and associate 241.8 410.7 (41%)Net earnings for the year
171、33.2 197.3 (83%)Net earnings per share,basic and diluted($per share)0.11 0.67 (84%)Cash flow Cash provided by operating activities$269.9$354.8 (24%)Spending on capital and intangible assets(2)$216.2$235.6 (8%)Production volumes Finished nickel(tonnes)Moa Joint Venture(50%basis)17,132 17,286 (1%)Amba
172、tovy Joint Venture(40%basis)2,278 Finished cobalt(tonnes)Moa Joint Venture(50%basis)1,896 1,927 (2%)Ambatovy Joint Venture(40%basis)197 Coal(millions of tonnes)Prairie Operations 31.2 32.7 (5%)Mountain Operations 3.7 4.4 (16%)Oil Cuba net working-interest(barrels per day)10,653 11,286 (6%)Electricit
173、y(gigawatt hours)(331/3%basis)628 618 2%Average-realized prices(3)Nickel Moa Joint Venture($per pound)$7.82$10.14 (23%)Cobalt Moa Joint Venture($per pound)12.94 15.82 (18%)Coal($per tonne)Prairie Operations(4)17.48 16.31 7%Mountain Operations 101.65 101.61 Oil Cuba($per barrel)72.21 68.47 5%Electric
174、ity($per megawatt hour)41.32 41.00 1%Unit operating costs(1)Nickel Moa Joint Venture(US$per pound)(5)(6)$4.94$4.35 14%Coal Prairie Operations($per tonne)(4)14.91 13.87 7%Coal Mountain Operations($per tonne)86.48 79.61 9%Oil Cuba($per barrel)12.69 12.07 5%Electricity($per megawatt hour)16.62 20.05 (1
175、7%)$millions,except as noted,as at December 31 2012 2011 ChangeFinancial conditionCurrent ratio 3.92:1 3.73:1 5%Net working capital balance$979.1$1,016.7 (4%)Cash,cash equivalents and short-term investments 526.8 631.4 (17%)Total assets 6,758.3 6,497.5 4%Total loans and borrowings 2,039.8 1,744.7 17
176、%Shareholders equity 3,672.7 3,731.7 (2%)Long-term debt to total assets(7)32%28%14%(1)For additional information see the Non-GAAP measures section.(2)Spending on capital and intangible assets includes accruals and does not include spending on the Ambatovy Joint Venture or service concession arrangem
177、ents.(3)Management uses average-realized price statistics to monitor the performance of the Corporations operating divisions.This non-GAAP measure does not have a standardized meaning under International Financial Reporting Standards(IFRS)and may not be comparable to similar measures provided by oth
178、er companies.Average-realized price is calculated by dividing revenue by sales volume for the given product.(4)Excludes royalties,activated carbon and char operating costs and revenue.(5)Unit operating costs do not include the impact of Ambatovy Joint Venture.(6)Net direct cash cost is inclusive of
179、by-product credits and third-party feed costs.(7)Calculated as total loans and borrowings divided by total assets excluding goodwill.This leverage ratio is monitored by management and lenders.MANAGEMENTS DISCUSSION AND ANALySISSherritt International Corporation AR 2012 29Executive summaryHighlightsr
180、esulTs Revenue for the year ended December 31,2012 was$1,840.2 million compared to$1,978.3 million in the prior year.Lower revenue was primarily the result of lower nickel and cobalt prices and lower export thermal coal sales volumes.These reductions were partly offset by higher fertilizer revenue a
181、nd the overall impact of a weaker Canadian dollar relative to the U.S.dollar compared to the prior year.Adjusted EBITDA(1)for the year ended December 31,2012 was$515.5 million compared to$643.2 million in the prior year.Lower Adjusted EBITDA was primarily due to lower revenue discussed above and hig
182、her mining and processing costs at Metals and operating costs at Coals Mountain Operations.The net earnings for the year ended December 31,2012 was$33.2 million compared to$197.3 million in the prior year.In addition to the impact of lower Adjusted EBITDA described above,net earnings were lower as a
183、 result of the following:Net finance expense was higher primarily due to the redemption premium paid on the 2014 debentures which was higher than the amount paid for the redemption of debentures in 2011,higher interest expense and accretion on loans and borrowings as a result of higher debt balances
184、,and a reduction in the fair value of the Ambatovy call option;Depreciation was higher as a result of various factors including a change in estimate for environmental rehabilitation obligations at Mountain Operations and higher property,plant and equipment balances;and During 2012,the Corporation wr
185、ote off$10.9 million in development costs at CDP attributable to the Dodds-Roundhill coal gasification project and$5.6 million relating to its investment on its Bow City Power project as the current economic climate does not support near term development of these projects.These higher expenses were
186、partly offset by lower income tax expense as a result of lower net earnings.Operating cash flow for the year ended December 31,2012 was$269.3 million compared to$354.8 million in the prior year.Lower operating cash flow was primarily due to lower net earnings partly offset by changes in non-cash ite
187、ms,including change in non-cash working capital;depletion,depreciation and amortization;impairments and deferred income tax recovery.aMbaTovy joinT venTure Ambatovy produced 8,972 tonnes(100%basis)of nickel and cobalt contained in mixed sulphides.Finished nickel production was 5,695 tonnes(100%basis
188、)and finished cobalt production was 493 tonnes(100%basis).Approximately 4,969 tonnes of nickel and cobalt contained in mixed sulphides were produced in the fourth quarter of 2012,compared to 3,394 tonnes in the third quarter.During the fourth quarter,Ambatovy achieved another milestone with the sale
189、 of 9,857 thousands of pounds(100%basis)of nickel and 833 thousands of pounds(100%basis)of cobalt.For accounting purposes,all revenues from the sale of nickel and cobalt will be capitalized until commercial production is reached.Ramp-up of the Ambatovy Joint Venture facilities continued to progress
190、well.Beginning in October 2012,the Pressure Acid Leach(PAL)circuit achieved a 55%ore throughput rate for a 30-day period.70%of ore throughput of nameplate capacity in the PAL circuit is required for the declaration of commercial production.During fourth-quarter 2012,total operating time in the PAL c
191、ircuit was 5,352 operating hours and the ore throughput rate was 39%,a 1,233 hour increase when compared to third-quarter 2012.In January 2013,the ore throughput rate in the PAL circuit averaged 46%.FinanCial PosiTion At December 31,2012,total available liquidity was approximately$1.1 billion.Total
192、debt at December 31,2012 was$2.0 billion,including$841.4 million related to non-recourse Ambatovy Partner Loans to Sherritt.The Corporations liquidity profile includes a current ratio of 3.92:1;a net working capital balance of$979.1 million;and cash,cash equivalents and short-term investments of$526
193、.8 million.The Corporations long-term debt to total assets ratio was 32%.(1)For additional information,see the Non-GAAP measures section.MANAGEMENTS DISCUSSION AND ANALySISExECUTIVE SUMMARy(CONTINUED)30 Sherritt International Corporation AR 2012DebenTure oFFering In September of 2012,Sherritt comple
194、ted an offering of$500.0 million principal amount of 7.5%Senior Unsecured Debentures due September 24,2020(2020 debentures).The net proceeds of$489.6 million(after agents fees and the deduction of expenses)were used to fund the repurchase and redemption of the outstanding principal amount of Sherrit
195、ts 8.25%Senior Unsecured Debentures that were due for redemption in October 2014(2014 debentures)and the remainder for general corporate purposes.This transaction improved Sherritts overall debt maturity and liquidity profile.Consolidated financial results$millions,except per share amounts,for the y
196、ears ended December 31 2012 2011 ChangeRevenue by segmentMetals$481.8$550.4 (12%)Coal 975.0 1,050.5 (7%)Oil and Gas 300.9 304.9 (1%)Power 70.0 60.0 17%Corporate and other 12.5 12.5 1,840.2 1,978.3 (7%)Adjusted EBITDA(1)by segmentMetals$125.8$200.4 (37%)Coal 181.8 224.2 (19%)Oil and Gas 232.7 235.9 (
197、1%)Power 22.0 25.1 (12%)Corporate and other (46.8)(42.4)10%515.5 643.2 (20%)Earnings(loss)from operations and associate Metals$87.6$166.3 (47%)Coal 30.3 104.5 (71%)Oil and Gas 162.1 170.0 (5%)Power 11.0 14.5 (24%)Corporate and other (49.2)(44.6)10%241.8 410.7 (41%)Net finance expense 183.1 123.0 49%
198、Income tax expense 29.9 89.2 (66%)(Earnings)loss from discontinued operation,net of tax (4.4)1.2 (467%)Net earnings$33.2$197.3 (83%)Net earnings per share Basic and diluted$0.11$0.67 (84%)Effective tax rate 51%31%65%(1)For additional information see the Non-GAAP measures section.Detailed information
199、 on the performance of each division can be found in the Review of operations sections.In summary:Metals earnings from operations and associate of$87.6 million for the year ended December 31,2012 was$78.7 million lower than in the prior year.Earnings from operations were lower primarily due to lower
200、 nickel and cobalt prices and higher mining and processing costs,partly offset by the benefit from higher fertilizer revenue and the impact of a weaker Canadian dollar relative to the U.S.dollar;Coals earnings from operations of$30.3 million for the year ended December 31,2012 was$74.2 million lower
201、 than in the prior year,primarily due to lower export sales volume in part due to shipping delays as a result of reduced shipping capacity at westshore Terminals in the fourth quarter,higher depreciation as a result of a change in estimate for environmental rehabilitation obligations and higher oper
202、ating costs in Mountain Operations,partly offset by higher margins in Prairie Operations.In addition,Coal recognized non-cash impairment charges related to the Dodds-Roundhill and Bow City Power projects in coal development assets;Oil and Gas earnings from operations of$162.1 million for the year en
203、ded December 31,2012 was$7.9 million lower than in the prior year.Earnings from operations were relatively unchanged as the impact of lower gross working-interest production was offset by lower input costs and the impact of a weaker Canadian dollar relative to the U.S.dollar;MANAGEMENTS DISCUSSION A
204、ND ANALySISSherritt International Corporation AR 2012 31 Powers earnings from operations of$11.0 million for the year ended December 31,2012 was$3.5 million lower than in the prior year primarily as a result of lower cost recoveries;Net finance expense of$183.1 million for the year ended December 31
205、,2012 was$60.1 million higher than in the prior year primarily due to the redemption premium of$27.0 million on the 2014 debentures compared to a redemption premium of$16.3 million paid on the redemption of the Corporations 7.875%Senior Unsecured Debentures due 2012(2012 Debentures)in the prior year
206、;a reduction in the fair value of the Ambatovy call option of$15.8 million compared to a$2.7 million upward fair value adjustment in the prior year;higher foreign exchange losses;and higher interest expense and accretion on loans and borrowings in the year ended December 31,2012.The Ambatovy call op
207、tion relates to the right of the Corporation and Sumitomo Corporation to acquire SNC-Lavalin Inc.s 5%equity interest in the Ambatovy Joint Venture at any time over a two-year period following the completion of construction and the satisfaction of certain completion tests.The fair value of the Ambato
208、vy call option is a result of changes in various inputs used in the Black-Scholes model,including volatility,which is based on a blend of historical commodity prices and publicly traded stock prices of companies with comparable projects,and the time to expiration of the option;and The effective cons
209、olidated tax rate for the year ended December 31,2012 was 51%compared to 31%in the prior year.The higher effective tax rate for the year ended December 31,2012 was primarily a result of higher losses incurred in lower tax rate jurisdictions relative to lower earnings in higher tax rate jurisdictions
210、 in 2012,partly offset by the recognition of tax benefits for certain tax losses in 2012 that had not previously been recognized.Significant factors influencing operating resultsAs a commodity-based,geographically diverse company,Sherritts operating results are influenced by many factors,the most si
211、gnificant of which are:commodity prices,operating costs and foreign exchange rates.CoMMoDiTy PriCesResults for the year ended December 31,2012 were significantly impacted by market-driven commodity prices for nickel,cobalt,export thermal coal,oil and gas.A significant portion of domestic coal prices
212、 and electricity prices are established at the beginning of a negotiated supply contract period and are therefore less susceptible to commodity price fluctuations during the term of the agreement.Nickel and cobalt commodity and thermal coal prices were lower and oil prices were higher in 2012 compar
213、ed to the prior year.Average reference prices for nickel and cobalt decreased in 2012 primarily as a result of global production continuing to outpace global demand.The average oil reference prices were higher due to increased demand.A sensitivity analysis of 2012 earnings to changes in significant
214、commodity prices is provided in the Supplementary information Sensitivity analysis section.oPeraTing CosTsThe main operating cost drivers for all divisions are prices for commodity inputs such as electricity,fuel oil,diesel,natural gas,sulphur and sulphuric acid and for maintenance and labour.These
215、costs are all driven by market forces.A sensitivity analysis of the 2012 earnings to changes in significant commodity input costs is provided in the Supplementary information Sensitivity analysis section.Foreign exChange raTeAs Sherritt reports its results in Canadian dollars,the fluctuation in fore
216、ign exchange rates has the potential to cause significant volatility in those results.Most commodity prices are quoted in U.S.dollars.In addition,many of Sherritts trade accounts receivable,accounts payable and loans payable are denominated in U.S.dollars.A significant appreciation or depreciation i
217、n the exchange rate can have a significant impact on earnings and on the statement of financial position.During 2012,the Canadian dollar weakened relative to the U.S.dollar such that the average annual Canadian dollar cost to purchase one U.S.dollar increased to$1.00,compared to$0.99 in 2011.For the
218、 year ended December 31,2012,a strengthening or weakening of the Canadian dollar relative to the U.S.dollar of$0.05 would have decreased or increased 2012 annual net earnings by approximately$43 million,respectively.The majority of this decrease(increase)is related to the net impact of foreign excha
219、nge on commodity prices at the divisions.The foreign exchange losses(gains)arising from the revaluation of U.S.dollar denominated advances and loans receivable are mostly offset by foreign exchange gains(losses)arising from the revaluation of U.S.dollar denominated loans payable.32 Sherritt Internat
220、ional Corporation AR 2012MANAGEMENTS DISCUSSION AND ANALySISReview of operationsMetalsFinanCial review$millions,except as otherwise noted,for the years ended December 31 2012 2011 Change Financial highlights(1)Revenue(2)(3)$481.8$550.4 (12%)Adjusted EBITDA(4)125.8 200.4 (37%)Share of loss of associa
221、te 2.1 3.5 (40%)Earnings from operations and associate 87.6 166.3 (47%)Production volumes(tonnes)Moa Joint Venture(2)Mixed sulphides(50%basis)19,027 19,320 (2%)Finished nickel(50%basis)17,132 17,286 (1%)Finished cobalt(50%basis)1,896 1,927 (2%)Fertilizer 263,918 238,535 11%Ambatovy Mixed sulphides(4
222、0%basis)3,589 Finished nickel(40%basis)2,278 Finished cobalt(40%basis)197 Fertilizer 6,329 Sales volumes Moa Joint Venture(2)Finished nickel(thousands of pounds)(50%basis)37,754 38,088 (1%)Finished cobalt(thousands of pounds)(50%basis)4,123 4,249 (3%)Fertilizer(tonnes)183,493 165,208 11%Average-refe
223、rence prices(US$per pound)Nickel$7.95$10.36 (23%)Cobalt(5)13.48 16.44 (18%)Average-realized prices($per pound)Moa Joint Venture Nickel$7.82$10.14 (23%)Cobalt 12.94 15.82 (18%)Unit operating costs(4)(US$per pound)Moa Joint Venture Nickel net direct cash cost$4.94$4.35 14%Spending on capital Moa Joint
224、 Venture(2)$31.9$44.7 (29%)(1)Ambatovy is accounted for using the equity method of accounting which recognizes the Corporations share of loss of associate.Except as specifically provided,operating results do not include the results of Ambatovy.(2)Operating results,fertilizer volumes and spending on
225、capital for Moa Joint Venture include the Corporations 50%interest in the Moa Joint Venture and its 100%interest in the utility and fertilizer operations in Fort Saskatchewan.(3)Includes revenue of$17.1 million recognized by a subsidiary of the Corporation established to buy,market and sell certain
226、Ambatovy nickel production.(4)For additional information see the Non-GAAP measures section.(5)Average low-grade cobalt published price per Metals Bulletin.The change in earnings from operations and associated entity between 2012 and 2011 is detailed below:$millions,for the year ended December 31 201
227、2 Lower U.S.dollar denominated realized nickel prices$(92.1)Lower U.S.dollar denominated realized cobalt prices (12.8)Higher fertilizer prices 12.9 Higher fertilizer sales volumes net of lower metal sales volumes 0.6 Lower third-party feed and fertilizer costs net of higher mining and processing cos
228、ts 1.3 weaker Canadian dollar relative to the U.S.dollar 10.8 Other 0.6Change in earnings from operations,compared to 2011$(78.7)MANAGEMENTS DISCUSSION AND ANALySISSherritt International Corporation AR 2012 33Moa joinT venTure Revenue for the Moa Joint Venture is composed of the following:$millions,
229、for the years ended December 31 2012 2011 Change Nickel$295.4$386.2 (24%)Cobalt 53.4 67.2 (21%)Fertilizers 105.8 82.5 28%Other 10.1 14.5 (30%)$464.7$550.4 (16%)The average-realized nickel price decreased$2.32 per pound and the average-realized cobalt price decreased$2.88 per pound compared to the pr
230、ior year primarily due to a decrease in reference prices as global production outpaced global demand partly offset by the weaker Canadian dollar relative to the U.S.dollar.Average realized fertilizer prices were higher in 2012 reflecting increased demand.Finished nickel and cobalt sales volumes were
231、 lower compared to the prior year primarily due to lower finished metals production.Fertilizer sales volumes increased 18,285 tonnes compared to the prior year reflecting higher production of ammonia,crystalline and granular ammonium sulphate in response to higher demand.Production of 38,054 tonnes(
232、100%basis)of contained nickel and cobalt in mixed sulphides was 586 tonnes(100%basis)lower than the prior year as the mine experienced some difficulties in getting ore to the processing plant due to reduced mining equipment availability.Finished nickel production of 34,263 tonnes(100%basis)and finis
233、hed cobalt production of 3,792 tonnes(100%basis)were 308 tonnes and 62 tonnes lower respectively than in the prior year primarily due to decreased availability of Moa mixed sulphides.Availability of third-party nickel feeds restricted the refinerys ability to compensate for lower mixed sulphides vol
234、umes.Net direct cash cost is composed of the following:neT DireCT Cash CosT(1)For the years ended December 31 2012 2011 Change Mining,processing and refining costs$6.55$6.12 7%Third-party feed costs 0.10 0.15 (33%)Cobalt by-product credits (1.41)(1.78)(21%)Other(2)(0.30)(0.14)114%Net direct cash cos
235、t(US$per pound of nickel)$4.94$4.35 14%Natural gas costs($per gigajoule)2.39 3.50 (32%)Fuel oil(US$per tonne)666 617 8%Sulphur(US$per tonne)263 239 10%Sulphuric acid(US$per tonne)185 190 (3%)(1)For additional information see the Non-GAAP measures section.(2)Includes Moa Joint Venture refinery by-pro
236、duct fertilizer profit or loss and marketing costs,discounts,and other by-product credits.Mining,processing and refining costs are composed of the following:(1)Approximate breakdown of mining,processing and refining costs based on production costs for the period,excluding the impact of opening and c
237、losing inventory values on the cost of sales.2012Components of mining,processing and refining costs(1)20%Fixed costs 9%Sulphur 18%Sulphuric acid20%Other variable12%Maintenance21%Fuel oil2011Components of mining,processing and refining costs(1)20%Fixed costs 8%Sulphur 20%Sulphuric acid 23%Other varia
238、ble 11%Maintenance 18%Fuel oilMANAGEMENTS DISCUSSION AND ANALySISREVIEw OF OPERATIONS(CONTINUED)34 Sherritt International Corporation AR 2012Net direct cash cost of nickel increased US$0.59 per pound primarily due to lower cobalt by-product credits and higher mining and processing costs,partially of
239、fset by higher fertilizer prices and sales volumes and lower third-party feed costs.Increased mining and processing costs largely reflected the impact of higher fuel oil and sulphur prices.The decrease in third-party feed costs reflected the lower availability and price.Capital spending is composed
240、of the following:$millions,for the years ended December 31 2012 2011 Change Sustaining(1)(2)$30.8$40.9 (25%)Expansion 1.1 3.8 (71%)Total$31.9$44.7 (29%)(1)Spending on capital related to the Corporations 50%interest in the Moa Joint Venture and its 100%interest in the utility and fertilizer operation
241、s in Fort Saskatchewan.(2)Includes assets acquired under finance leases of$1.2 million for the year ended December 31,2012(2011$3.0 million).Capital spending for the Moa Joint Venture primarily focused on sustaining activities,and is lower than the prior year as spending was deferred in response to
242、the lower nickel price environment early in the year and more recently due to delays in the execution of capital projects.Capitalization of interest related to financing of the Phase 2 expansion and Moa Acid plant ceased during the first quarter of 2012 due to prolonged administrative delays.aMbaTov
243、y During 2012,Ambatovy produced 8,972 tonnes(100%basis)of nickel and cobalt contained in mixed sulphides.Finished nickel production was 5,695 tonnes(100%basis)and finished cobalt production was 493 tonnes(100%basis).Annual nameplate capacity is 60,000 tonnes of nickel and 5,600 tonnes of cobalt.Appr
244、oximately 4,969 tonnes of nickel and cobalt contained in mixed sulphides were produced in the fourth quarter of 2012,compared to 3,394 tonnes in the third quarter.During the fourth quarter,Ambatovy achieved another milestone with the sale of 9,857 thousands of pounds(100%basis)of nickel and 833 thou
245、sands of pounds(100%basis)of cobalt.For accounting purposes,all revenues from the sale of nickel and cobalt will be capitalized until commercial production is reached(defined as 70%of ore throughput of nameplate capacity in the PAL circuit)in 2013.In early 2012,capital spending for Ambatovy focused
246、on the construction close out activities associated with the completion of commissioning within the Refinery,addressing construction or design deficiencies and the demobilization of contractors from the site.In addition,in 2012 capital spending was directed towards continuous improvement projects at
247、 the mine site and within the Utilities and PAL areas.Total capital costs for Ambatovy are expected to remain within the US$5.5 billion(100%basis)estimate.Cumulative spending on capital at Ambatovy to December 31,2012 was US$5.3 billion(100%basis),excluding financing charges,working capital and fore
248、ign exchange,unchanged from the third quarter as construction has been completed.with respect to the ramp-up,the second acid plant was successfully put into service during the quarter,and all five autoclaves in the PAL area were operable.Total autoclave operating hours in the fourth quarter of 2012
249、were 5,352 hours,progressing from 4,119 hours in the third quarter.Also during the fourth quarter,average ore throughput of approximately 39%of nameplate capacity was achieved in the PAL circuit compared to 30%in the third quarter.The Ambatovy operations are expected to reach commercial production i
250、n 2013 at which time all operating costs,net of revenue,will cease to be capitalized.Total project costs(including operating costs,financing charges,working capital and foreign exchange)in the fourth quarter of 2012 were US$312.8 million($310.0 million)(100%basis)compared to US$170.7 million(100%bas
251、is)for the third quarter.Cumulative total project costs to December 31,2012 were US$6.8 billion(100%basis).Total project costs will vary until commercial production is declared.The most significant variability in total project costs is likely to arise from the working capital,operating cost componen
252、ts and production revenue component(which is netted from these costs).In the fourth quarter of 2012,a total of US$312.5 million(100%basis)in funding was provided by the Ambatovy Joint Venture partners,US$142.5 million higher than in the third quarter 2012.This increase is primarily due to a requirem
253、ent that Ambatovy maintain,in local bank accounts,sufficient funds to pay 90 days of local expenses and financing charges.Sherritts 40%share of the fourth quarter of 2012 funding of US$125.0 million($123.9 million)was sourced from cash on hand.MANAGEMENTS DISCUSSION AND ANALySISSherritt Internationa
254、l Corporation AR 2012 35In September 2012,Ambatovy received a six-month authorization(Operating Permit)to commercially operate the processing plant in Toamasina,Madagascar,which is to automatically convert to a life-of-mine Operating Permit on March 13,2013.The Transitional Government of Madagascar
255、continues to progress the“Roadmap”,which was designed by the Southern African Development Community to facilitate Madagascars return to democratic rule.It is currently anticipated that the Malagasy Transitional Authority will hold presidential elections in May 2013.Ambatovy continues to regularly mo
256、nitor the political climate in Madagascar and continues to engage in ongoing communication with representatives of the national,regional and local government as well as multilateral institutions and key embassies.In 2012,the Corporation established a subsidiary to buy,market and sell certain Ambatov
257、y nickel production(the Metals Marketing Company).During the year ended December 31,2012,this subsidiary recognized$17.1 million in revenue and cost of sales.ouTlook For 2013 ProDuCTion voluMes anD sPenDing on CaPiTal anD ProjeCT actual Projected For the years ended December 31 2012 2013 ProductionM
258、ixed sulphides(tonnes,100%basis):Moa Joint Venture 38,054 38,000 Ambatovy Joint Venture 8,972 40,000 47,026 78,000Finished nickel(tonnes,100%basis):Moa Joint Venture 34,263 34,000 Ambatovy Joint Venture 5,695 35,000 39,958 69,000 Finished cobalt(tonnes,100%basis):Moa Joint Venture 3,792 3,350 Ambato
259、vy Joint Venture 493 3,000 4,285 6,350 Spending on capital($millions):Moa Joint Venture(50%basis),Fort Saskatchewan(1)32 51 Ambatovy(40%basis)29 Project capital spending(US$millions,100%basis):Ambatovy Joint Venture 73 (1)Spending on capital related to the Corporations 50%interest in the Moa Joint V
260、enture,and its 100%interest in the utility and fertilizer operations in Fort Saskatchewan.Production guidance(for mixed sulphides and finished metal)reflects the first full year of contribution from both operations,the Moa Joint Venture(Cuba/Canada)and the Ambatovy Joint Venture(Madagascar).while Mo
261、a Joint Venture production guidance is largely consistent with 2012 levels,Ambatovy production levels are expected to ramp up over the course of 2013,reaching full capacity rates by the end of the year.Spending on capital of$80 million(Sherritts share)for all operations reflects sustaining expenditu
262、res in all jurisdictions.MANAGEMENTS DISCUSSION AND ANALySISREVIEw OF OPERATIONS(CONTINUED)36 Sherritt International Corporation AR 2012CoalFinanCial review$millions,except as otherwise indicated,for the years ended December 31 2012 2011 Change Financial highlights Revenue Prairie Operations$622.4$6
263、05.7 3%Mountain Operations(1)352.6 444.8 (21%)975.0 1,050.5 (7%)Adjusted EBITDA(2)Prairie Operations$138.2$134.7 3%Mountain Operations(1)43.6 89.5 (51%)181.8 224.2 (19%)Earnings(loss)from operations Prairie Operations$75.9$70.3 8%Mountain Operations(1)(45.6)34.2 (233%)30.3 104.5 (71%)Production volu
264、mes(millions of tonnes)Prairie Operations 31.2 32.7 (5%)Mountain Operations 3.7 4.4 (16%)34.9 37.1 (6%)Sales volumes(millions of tonnes)Prairie Operations 30.8 32.0 (4%)Mountain Operations 3.5 4.4 (20%)34.3 36.4 (6%)Average-realized prices($per tonne)Prairie Operations(3)$17.48$16.31 7%Mountain Oper
265、ations 101.65 101.61 Unit operating costs(2)($per tonne)Prairie Operations$14.91$13.87 7%Mountain Operations 86.48 79.61 9%Spending on capital Prairie Operations$69.1$86.9 (20%)Mountain Operations 60.2 34.9 72%$129.3$121.8 6%(1)Includes results for coal development assets which the Corporation propo
266、rtionately consolidates its 50%interest.(2)For additional information see the Non-GAAP measures section.(3)Average-realized price is a non-GAAP measure.It is calculated by dividing revenue from by the number of tonnes sold.For purposes of this calculation,for Prairie Operations,revenue excludes roya
267、lties,activated carbon,char and other of$85.1 million for year ended December 31,2012(2011$85.8 million)and tonnes sold excludes activated carbon and char of 113.5 thousand tonnes(2011 123.5 thousand tonnes).Average-realized price may not calculate based on amounts presented due to rounding.Prairie
268、oPeraTionsPrairie Operations revenue is composed of the following:$millions,for the years ended December 31 2012 2011 Change Mining revenue$568.9$547.5 4%Coal royalties 40.2 39.3 2%Potash royalties 13.3 18.9 (30%)$622.4$605.7 3%MANAGEMENTS DISCUSSION AND ANALySISSherritt International Corporation AR
269、 2012 37The change in earnings from operations between 2012 and 2011 is detailed below:$millions,for the year ended December 31 2012 Higher mining revenue,net of cost of sales$6.2 Lower potash royalties,net of higher coal royalties (4.7)Lower depletion,depreciation and amortization 2.1 Higher define
270、d benefit pension plan recovery 1.9 Other 0.1Change in earnings from operations,compared to 2011$5.6The average-realized price increased in 2012 primarily due to higher cost recoveries earned at the Highvale and Genesee mines.Average-realized prices also increased due to the Sheerness mine earning a
271、 significant portion of fixed revenue over lower sales volumes.Production and sales volumes decreased in 2012 generally due to reduced customer demand,particularly at the Highvale and Sheerness mines.Record activated carbon production of 7,451 tonnes(50%basis)was 768 tonnes(50%basis)higher than 2011
272、 primarily due to continued improvements in plant availability.Coal royalties were slightly higher in 2012 due to the timing of mining activities in royalty assessable areas.Potash royalties were lower in 2012 due to lower production volumes from potash producers who experienced weaker market demand
273、 for their product.Unit operating cost is composed of the following:(1)Composed of rentals,subcontractors,explosives,power,taxes,tires,licenses and other miscellaneous expenses.Unit operating costs increased in 2012 primarily due to reduced production volumes as discussed above and higher mining cos
274、ts at the Highvale mine.Prairie Operations Adjusted EBITDA was 3%higher in 2012 compared to last year due to improved margin at Boundary Dam from operational initiatives that have been implemented.Spending on capital is composed of the following:$millions,for the years ended December 31 2012 2011 Ch
275、ange Sustaining Assets acquired under finance lease$35.4$54.6 (35%)Cash capital 33.7 32.3 4%$69.1$86.9 (20%)In 2012,in addition to the acquisition of$35.4 million of leased equipment,Prairie Operations spent$15.0 million for the replacement of a major dragline component at the Bienfait mine that was
276、 completed at the beginning of October 2012.Lower capital spending in 2012 reflected a combination of the timing of equipment arrivals at the mines and managements efforts to reduce capital.2012Components of operating costs 42%Labour16%Other(1)15%Fuel 27%Repairs and maintenance2011Components of oper
277、ating costs 40%Labour 16%Other(1)16%Fuel 28%Repairs and maintenanceMANAGEMENTS DISCUSSION AND ANALySISREVIEw OF OPERATIONS(CONTINUED)38 Sherritt International Corporation AR 2012MounTain oPeraTionsThe change in earnings from operations between 2012 and 2011 is detailed below:$millions,for the year e
278、nded December 31 2012 Higher mining costs$(23.8)Higher depletion,depreciation and amortization (17.4)Lost margin on reduced sales tonnage (14.1)Dodds-Roundhill and Bow City Power project impairment losses (16.5)Lower export coal prices,denominated in U.S.dollars (6.3)Other (1.7)Change in earnings fr
279、om operations,compared to 2011$(79.8)In 2012,in the fourth quarter,Mountain Operations results were negatively impacted by reduced shipping capacity at westshore Terminals following an incident on December 7,2012 that resulted in Berth 1 being out of commission for an extended period of time.During
280、this period,Mountain Operations mitigated the impact of the incident by utilizing contractual capacity at Ridley Terminals as well as at westshore Terminals through Berth 2.Even with mitigation efforts,the restricted capacity at westshore resulted in the reduction of fourth-quarter 2012 sales volume
281、s by approximately 0.4 million tonnes(or$4.5 million in Adjusted EBITDA).Berth 1 was reopened on February 8,2013.while operations at Berth 1 have resumed,the incident will have an impact on sales volumes in first quarter of 2013.Management expects any backlog of material will be sold over the course
282、 of the year.Mountain Operations production and sales volumes were also lower at the Obed Mountain mine in 2012 to achieve an optimal thermal export sales mix.In November,operations were suspended at the Obed Mountain mine due to weak thermal export prices and an expected increase in operating costs
283、 in new mining areas.Production volumes at the Coal Valley mine were higher primarily due to the impact of accessing a new mining area in May 2012 as well as additional loading equipment that arrived in the second quarter.Excluded from Adjusted EBITDA but included in earnings(loss)from operations ar
284、e a$10.9 million impairment charge to write off CDPs development costs attributable to the Dodds-Roundhill coal gasification project and a$5.6 million impairment of CDPs investment in the Bow City Power project.The current economic climate does not warrant near term development of these projects at
285、this time.Depreciation expense increased in 2012 primarily due to adjustments to the environmental rehabilitation obligation estimates that were immediately depreciated.In the third quarter,a$12.2 million upward revision was made to reflect updated cost and productivity assumptions for reclamation a
286、ctivities in response to the new reclamation bonding requirements under the Mine Financial Security Program in Alberta.In the fourth quarter,as a result of suspending operations at the Obed Mountain mine a$5.5 million upward adjustment was made to reflect increased leveling cost assumptions relating
287、 to more highwalls left standing than anticipated in the original reclamation plan.Unit operating cost is composed of the following:(1)Primarily composed of commissions,royalties,freight and port fees.(2)Composed of tires,explosives,power,taxes,licenses and other miscellaneous expenses.Unit operatin
288、g costs increased in 2012 primarily due to lower Obed Mountain mine production volumes as discussed above and higher rental and contractor costs in the first quarter at the Coal Valley mine.2012Components of operating costs 23%Labour 16%Rentals and contractors 13%Repairs and maintenance30%Ex-mine(1)
289、6%Other(2)12%Fuel2011Components of operating costs 21%Labour 15%Rentals and contractors 14%Repairs and maintenance 32%Ex-mine(1)7%Other(2)11%FuelMANAGEMENTS DISCUSSION AND ANALySISSherritt International Corporation AR 2012 39Spending on capital consists of the following:$millions,for the years ended
290、 December 31 2012 2011 Change Sustaining Assets acquired under finance lease$28.6$19.5 47%Cash capital 31.6 15.4 105%$60.2$34.9 72%Assets acquired under finance leases were primarily related to mobile equipment.In addition to the acquisition of$28.6 million of leased equipment in 2012,Coal Valley mi
291、ne spent$9.8 million related to the purchase of loading equipment in the first quarter and$15.7 million on infrastructure development for new and future production areas.highvale Mine oPeraTionsOn January 10,2013,Coals Prairie Operations and its customer,the owner of the Highvale mine,agreed to tran
292、sfer operations to the customer and terminate the Highvale mining contract.On January 17,2013 the customer assumed responsibility for direct mining activities with a transition process expected to be completed over the next six months.For the year ended December 31,2012 the mining contract contribut
293、ed$6 million to the Corporations net earnings.As part of the transition agreement the Corporation will receive an estimated$12 million in cash from the customer upon transfer of mobile equipment at net-book-value following payment of the associated finance lease obligations.No accounting gain or los
294、s will result from this net tangible asset transfer.In addition,a non-cash gain will be recognized upon transfer of the defined benefit pension obligation to the customer which will be partly offset by a non-cash write-off of approximately$17 million for intangible assets associated with this mining
295、 contract.Measurement of this gain will be based on the actuarial valuation of the plan at the time of transfer.Based on the December 31,2012 actuarial valuation performed in accordance with IAS 19(2011),which is to be adopted by the Corporation on January 1,2013,this defined pension obligation gain
296、 was estimated to be$40 million.ouTlook For 2013ProDuCTion voluMes,royalTies anD sPenDing on CaPiTal actual Projected For the years ended December 31 2012 2013 ProductionPrairie Operations(millions of tonnes)31 22Mountain Operations(millions of tonnes)3.7 3.5 Royalties($millions)Coal 40 40 Potash 13
297、 11 Spending on capital($millions)Prairie Operations 69 76Mountain Operations 60 52 In Prairie Operations,full-year 2013 production is expected to be 22 million tonnes,29%(9 million tonnes)lower than 2012,primarily due to the transfer of mining operations at the Highvale mine to the customer/owner.F
298、ull-year 2013 spending on capital at Prairie Operations is expected to be 10%($7 million)higher than the prior year,largely due to pre-strip mining equipment at the Paintearth mine.In Mountain Operations,full-year 2013 production is expected to be 5%(0.2 million tonnes)lower than 2012,primarily due
299、to the suspension of operations at the Obed Mountain mine in November 2012.Full-year 2013 spending on capital at Mountain Operations is expected to be 13%($8 million)lower than 2012,mainly due to comparatively lower loading equipment capital additions.MANAGEMENTS DISCUSSION AND ANALySISREVIEw OF OPE
300、RATIONS(CONTINUED)40 Sherritt International Corporation AR 2012Oil and GasFinanCial review$millions,except as otherwise noted,for the years ended December 31 2012 2011 ChangeFinancial highlightsRevenue$300.9$304.9 (1%)Adjusted EBITDA(1)232.7 235.9 (1%)Earnings from operations 162.1 170.0 (5%)Product
301、ion and sales(2)(net working-interest)Cuba(heavy oil)10,653 11,286 (6%)Spain(light/medium oil)332 416 (20%)Pakistan(natural gas)351 355 (1%)11,336 12,057 (6%)Average-reference prices(US$per barrel)Gulf Coast Fuel Oil No.6$99.31$95.41 4%Brent 112.44 112.14 Average-realized pricesCuba($per barrel)$72.
302、21$68.47 5%Spain($per barrel)111.42 110.16 1%Pakistan($per boe)(3)8.09 8.03 1%Unit operating costs(1)($per net boe)Cuba$12.69$12.07 5%Spain 49.96 46.51 7%Pakistan 3.48 3.44 1%weighted-average 13.58 13.01 4%Spending on capital$45.2$62.6 (28%)(1)For additional information see the Non-GAAP measures sec
303、tion.(2)Oil production is stated in barrels of oil per day(bopd).Natural gas production is stated in barrels of oil equivalent per day(boepd),which is converted at 6,000 cubic feet per barrel.(3)Average-realized price for natural gas production is stated in barrels of oil equivalent(boe),which is co
304、nverted at 6,000 cubic feet per boe.Oil and Gas revenue is composed of the following:$millions,for the years ended December 31 2012 2011 Change Cuba$281.6$282.1 Spain 13.6 16.7 (19%)Pakistan 1.0 1.1 (9%)Processing 4.7 5.0 (6%)$300.9$304.9 (1%)The change in earnings from operations between 2012 and 2
305、011 is detailed below:$millions,for the year ended December 31 2012Higher realized oil and gas prices$8.6 Lower exploration and evaluation impairment losses 2.6 Lower gross working-interest volumes (10.9)Lower cost recovery revenue due to lower recoverable capital spending (4.5)Higher administrative
306、 costs (1.3)Higher depletion,depreciation and amortization (6.7)weaker Canadian dollar relative to the U.S.dollar 2.5 Other 1.8 Change in earnings from operations,compared to 2011$(7.9)The average-realized price for oil produced in Cuba increased by$3.74 per barrel compared to the prior year primari
307、ly as a result of a higher Gulf Coast Fuel Oil No.6 oil reference price and the impact of a weaker Canadian dollar relative to the U.S.dollar.The average-realized price for oil produced in Spain increased by$1.26 per barrel compared to the prior year primarily as a result of a higher Brent reference
308、 price and the impact of a weaker Canadian dollar relative to the U.S.dollar.MANAGEMENTS DISCUSSION AND ANALySISSherritt International Corporation AR 2012 41Production and sales volumes are determined as follows:Daily ProDuCTion voluMes(1)For the years ended December 31 2012 2011 Change Gross workin
309、g-interest oil production in Cuba(2)(3)20,164 20,888 (3%)Net working-interest oil productionCuba(heavy oil)Cost recovery 2,871 3,430 (16%)Profit oil 7,782 7,856 (1%)Total 10,653 11,286 (6%)Spain(light/medium oil)(4)332 416 (20%)Pakistan(natural gas)(4)351 355 (1%)Total 11,336 12,057 (6%)(1)Oil produ
310、ction is stated in barrels of oil per day(bopd).Natural gas production is stated in barrels of oil equivalent per day(boepd),which is converted at 6,000 cubic feet per barrel.(2)In Cuba,Oil and Gas delivered all of its gross working-interest oil production to CUPET at the time of production.Gross wo
311、rking-interest oil production excludes(i)production from wells for which commercial viability has not been established in accordance with production-sharing contracts,and(ii)working-interests of other participants in the production-sharing contracts.(3)Gross working-interest oil production is alloca
312、ted between Oil and Gas and CUPET in accordance with production-sharing contracts.The Corporations share,referred to as net working-interest production,includes(i)cost recovery oil(based upon the recoverable capital and operating costs incurred by Oil and Gas under each production-sharing contract)a
313、nd(ii)a percentage of profit oil(gross working-interest production remaining after cost recovery oil is allocated to Oil and Gas).Cost recovery pools for each production-sharing contract include cumulative recoverable costs,subject to certification by CUPET,less cumulative proceeds from cost recover
314、y oil allocated to Oil and Gas.Cost recovery revenue equals capital and operating costs eligible for recovery under the production-sharing contracts.(4)Net working-interest production(equivalent to net sales volume)represents the Corporations share of gross working-interest production.Gross working-
315、interest(GwI)oil production in Cuba decreased 724 bopd in 2012 primarily due to natural reservoir declines,partly offset by production increases from new wells drilled and the optimization of production from existing wells.Cost-recovery oil production in Cuba decreased 559 bopd in 2012 primarily due
316、 to higher oil prices and lower cost-recovery spending.Profit-oil production,which represents Sherritts share of production after cost recovery volumes are deducted from GwI volumes,decreased by 74 bopd in 2012.Production in Spain was lower due to natural reservoir declines and the loss of productio
317、n from a well that is shut-in and is currently being evaluated.Production in Pakistan was lower due to natural reservoir declines.uniT oPeraTing CosT(1)($Per neT boe)For the years ended December 31 2012 2011 ChangeCuba$12.69$12.07 5%Spain 49.96 46.51 7%Pakistan 3.48 3.44 1%weighted-average$13.58$13.
318、01 4%(1)For additional information see the Non-GAAP measures section.Unit operating cost for Cuba is composed of the following:Unit operating cost in Cuba increased$0.62 per barrel in 2012 due to lower net production.Unit operating cost in Spain increased$3.45 per barrel in 2012 due to lower net pro
319、duction,partly offset by the effect of a stronger Canadian dollar relative to the Euro.2012Components of operating costs Cuba 22%Labour 18%Treatment and transportation 12%Maintenance 8%Production chemicals2011Components of operating costs Cuba 22%Labour 19%Treatment and transportation 11%Maintenance
320、 8%Fuel and electricity 23%Other 3%Insurance 6%Freight and duty 8%Fuel and electricity 24%Other 4%Insurance 5%Freight and duty 7%Production chemicals MANAGEMENTS DISCUSSION AND ANALySISREVIEw OF OPERATIONS(CONTINUED)42 Sherritt International Corporation AR 2012Spending on capital is composed of the
321、following:$millions,for the years ended December 31 2012 2011 Change Development,facilities and other$40.6$59.4 (32%)Exploration 4.6 3.2 44%Total$45.2$62.6 (28%)Development and facilities capital spending was composed primarily of$26.1 million for development drilling activities,$2.1 million related
322、 to facility improvements and$9.5 million related to equipment and inventory purchases.Spending on capital was$17.4 million lower in 2012 due to reduced development drilling expenditures,and a decrease in facilities,equipment and inventory spending.During 2012,six development wells were drilled and
323、completed in Cuba,with the drilling of a seventh well in progress.Exploration spending in 2012 continued to be focused in the United Kingdom North Sea prospect area and in the Alboran Sea prospect area off the southern coast of Spain.During 2012,the Corporation relinquished three licenses in the Uni
324、ted Kingdom North Sea resulting in an impairment loss of$2.2 million.In 2011,the Corporation discontinued exploration in the Cuban Block 8 prospect area,and a Cuban production-sharing agreement related to the Varadero enhanced oil recovery project expired resulting in impairment losses of$2.0 millio
325、n and$2.8 million,respectively.ouTlook For 2013ProDuCTion voluMes anD sPenDing on CaPiTal actual Projected For the years ended December 31 2012 2013ProductionGross working-interest oil(Cuba)(bopd)20,164 18,000Net working-interest production,all operations(boepd)11,336 10,700 Spending on capital($mil
326、lions)Cuba 38 54 Other 7 18 Full-year 2013 GwI production in Cuba is expected to be lower(11%or 2,164 bopd)than in 2012,reflecting the natural reservoir decline rates and the impact of a limited drilling program in 2012 and 2013.Total net working-interest production for full-year 2013 is expected to
327、 follow the same trend.Spending on capital for 2013 is expected to increase 42%($16 million)in Cuba and 157%($11 million)in other jurisdictions,reflecting increased spending on equipment,facilities and workovers in Cuba as well as seismic work in the United Kingdom North Sea prospect area and in the
328、 Alboran Sea prospect area off the southern coast of Spain.MANAGEMENTS DISCUSSION AND ANALySISSherritt International Corporation AR 2012 43PowerFinanCial review$millions,except as otherwise noted,for the years ended December 31 2012 2011 ChangeFinancial highlightsRevenue$70.0$60.0 17%Adjusted EBITDA
329、(1)22.0 25.1 (12%)Earnings from operations 11.0 14.5 (24%)Production and sales(331/3%basis)Electricity(Gwh(2)628 618 2%Average-realized prices Electricity(per Mwh(3)$41.32$41.00 1%Unit operating costs(1)(per MWh)Base(4)$14.51$17.35 (16%)Non-base(5)2.11 2.70 (22%)$16.62$20.05 (17%)Spending on capital
330、 and service concession arrangementsCapital(331/3%basis)$6.1$5.7 7%Service concession arrangements(331/3%basis)32.0 21.7 47%$38.1$27.4 39%(1)For additional information see the Non-GAAP measures section.(2)Gigawatt hours(Gwh).(3)Megawatt hours(Mwh).(4)2012 excludes the impact of impairment of receiva
331、bles.(5)Costs incurred at the Boca de Jaruco and Puerto Escondido facilities that otherwise would have been capitalized if these facilities were not accounted for as service concession arrangements.Power revenue is composed of the following:$millions(331/3%basis),for the years ended December 31 2012
332、 2011 Change Electricity sales$25.9$25.3 2%By-products and other 7.1 7.7 (8%)Fixed-price lease contracts(1)5.0 5.3 (6%)Construction activity(2)32.0 21.7 47%$70.0$60.0 17%(1)In relation to the 25 Mw power plant in Madagascar.(2)Construction activity revenue relates to the costs of construction,enhanc
333、ement or upgrading activity of the Boca de Jaruco and Puerto Escondido facilities.The contractual arrangements related to the activities of these facilities are treated as service concession arrangements for accounting purposes.The change in earnings from operations between 2012 and 2011 is detailed below:$millions,for the year ended December 31 2012 Higher electricity volumes$0.4 Lower realized b
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