Sherritt to sell royalties portfolio to Altius

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Canadian coal mines being sold to Westmoreland

Sherritt International Corp. said it will sell its portfolio of coal royalties and Saskatchewan development projects for $481 million cash to a group led by Altius Minerals of St. John’s.

Brian Dalton, chief executive of Altius Minerals says the company is looking forward to royalty revenue from its increased mining operations portfolio. — Telegram file photo

Sherritt chief executive David Pathe said the deal came together last Monday after months of preparatory work to focus on areas where it has special expertise

or assets that are not easily duplicated.

He said Sherritt’s board decided the company has a unique technological advantage in processing a certain type of nickel, found at its new mine in Madagascar and its Moa joint venture in Cuba.

In a separate transaction, Sherritt is selling its coal business for a total of $946 million, with Westmoreland Coal paying about half that amount to acquire the company’s operating mines in Western Canada.

“We have been looking at our suite of assets for some time and in the course of that review we have chosen to focus on those businesses where we feel we have a real differentiating expertise,” Pathe said in an interview after the announcement.

“In our quest to focus on our core businesses, and to give us the financial flexibility to do that, we made the decision to exit the coal business.”

Westmoreland, based in Englewood, Colorado, will pay a total of $465 million, including $312 million cash and the assumption of capital leases valued at $153 million, for seven mines in Alberta and Saskatchewan.

The U.S. company also expects to integrate the workforce of Sherritt’s Prairie and Mountain coal operations, which currently total nearly 1,600 employees.

Pathe said the board also decided to focus on its oil and gas production in Cuba, where the company has operated successfully for decades despite a rift between the Castro regime and the United States.

Sherritt’s seven thermal coal mines in Alberta and Saskatchewan will complement Westmoreland Coal’s six coal mines in Montana, Wyoming, North Dakota and

Texas.

‘Transformational opportunity’

Westmoreland executive chairman Keith Alessi said the Sherritt deal is a “transformational opportunity” that will allow it to double the size of its business and become North America’s sixth-largest coal producer.

Alessi told analysts on a conference call that Westmoreland has been in conversation for the better part of a year to acquire the Canadian coal assets.

“It looks exactly like the business we already have. Very good mines. Well-equipped. Great workforces. Great customers,” Alessi said.

“If you were to leave Montana or North Dakota from our mines and go directly north, these are the next groups of mines you would run into once you got north of the border.”

Westmoreland is expected to add about 1,560 employees from Sherritt, which has an administrative office in Edmonton as well as the mining operations.

Group to purchase 51 per cent

A group led by Altius Minerals, including a subsidiary of Liberty Mutual Insurance, will acquire a 51 per cent interest in a portfolio of 11 producing coal and potash royalties in Alberta and Saskatchewan.

“We will now generate royalty revenue from a well-diversified portfolio of 12 major Canadian mining operations that can grow significantly through Altius’ existing pipeline of pre-production stage royalties,” said Altius chief executive Brian Dalton.

“The addition of an extensive undeveloped mineral lands position also fits perfectly with Altius’ proven project generation and royalty creation abilities.”

Altius will also acquire Sherritt’s 50 per cent interest in a partnership that has billions of tonnes of undeveloped coal and potash resources in Saskatchewan.

Sherritt also announced one of its shareholders, Halifax-based Clarke Inc., is calling for a special shareholders meeting to remove certain independent directors from the board.

Pathe said Clarke’s requisition as Sherritt was putting together the final details of the coal deals. He said the board will address it in time, probably in the new year.

Sherritt currently has eight independent directors on a nine-member board, which includes Pathe. Its chair is Harold (Hap) Stephen, a well-known expert in corporate restructurings.

Organizations: Westmoreland Coal, Liberty Mutual Insurance, Clarke Inc.

Geographic location: Alberta, Madagascar, Cuba.In Western Canada Saskatchewan Montana North Dakota Englewood, Colorado Saskatchewan.The U.S. Cuba Wyoming Texas North America Edmonton

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