An investor group that includes Glencore (LSE:GLEN) has proposed a rescue deal for troubled Canadian miner Sherritt International (TSX:S), challenging a rival offer from a US family office linked to a former Trump administration official.
The consortium, which also includes London-based Kyma Capital, Brevan Howard co-founder Trifon Natsis, and an unnamed US anchor investor, is proposing an equity investment that would give the group control of at least 55% of Sherritt on a fully diluted basis, according to a statement.
Under the proposal, the consortium would invest in Sherritt at C$0.12 per share through a US-based vehicle, without a third-party debt-financing condition. Existing Sherritt shareholders would also be given an opportunity to invest at the same price.
The consortium said it submitted its proposal on 26 June, after Sherritt had already entered talks with Gillon Capital, the Texas-based family office of former Trump official and Republican fundraiser Ray Washburne.
Rival bid
Sherritt signed a non-binding term sheet with Gillon in May that could ultimately give the family office a 55% stake in the Canadian miner. Under that structure, Gillon would receive a warrant allowing it to acquire enough shares to reach the controlling position.
The Glencore consortium’s proposal offers an alternative recapitalisation route involving an immediate equity injection.
US authorities have indicated they do not object to either party negotiating with Sherritt, according to a statement by the consortium cited by the Financial Times.
However, the communications from the US State Department do not represent approval of a completed transaction, meaning any eventual deal would still have to navigate US sanctions.
The new proposal is also the same alternative recapitalisation plan disclosed last month by an ad hoc group of Sherritt bondholders, which said unidentified strategic and financial investors had submitted a competing proposal.
Cuba troubles
Sherritt’s financial problems worsened in May after the Trump administration expanded sanctions against Cuba, prompting the company to suspend its direct participation in its operations on the island.
The company holds a 50% interest in the Moa joint venture alongside Cuba’s state-owned General Nickel Company. The integrated operation includes the Moa nickel-cobalt mine and processing facilities in Cuba as well as a refinery in Fort Saskatchewan, Alberta.
Operations at the Alberta refinery stopped in June after its remaining feedstock was exhausted. Sherritt says the shutdown will continue until mining and processing at Moa resume and the refinery’s feed pipeline can be rebuilt.
Sherritt initially considered dissolving its Cuban joint venture before reversing that plan and entering the non-binding agreement with Gillon.
The company has since warned of constrained liquidity and “material uncertainty” that could cast doubt on its ability to continue as a going concern.
It remains in talks with lenders and noteholders over a broader recapitalisation aimed at stabilising its balance sheet and eventually restarting normal operations.
Sherritt is a world leader in using hydrometallurgical processes to mine and refine nickel and cobalt – metals deemed critical for the energy transition.
Write to Jackson Chen at Mining.com.au
Image: Sherritt International
