Sherritt to Exit Coal With $891 Million Mining Asset Sale

Sherritt International Corp. (S), a Canadian energy and mining company, agreed to sell assets including all of its coal interests for C$946 million ($891 million) so that it can focus on nickel and oil.

A group led by Altius Minerals Corp. (ALS) will buy Sherritt’s coal-development assets and mining-royalty interests for C$481 million in cash, Toronto-based Sherritt said today in a statement. Westmoreland Coal Co. (WLB) will acquire Sherritt’s operating coal mines for C$312 million in cash and the assumption of capital leases valued at C$153 million.

Sherritt wants to focus on nickel, cobalt and oil, the commodities in which the company can offer “real differentiating expertise and experience,” Chief Executive Officer David Pathe said today in a telephone interview. The cash proceeds from today’s deal will help the company through a period of low commodity prices, he said.

“We’ve had a suite of assets that have always been high-quality assets but it’s never been clear what’s tied them all together” the CEO said.

Sherritt rose 15 percent to C$3.88 at 1:05 p.m. in Toronto, the most intraday since April 16, 2009. Before today, the stock had declined 41 percent this year.

Complex Structure

“The company’s valuation has historically traded at a discount due to its complex business structure,” Greg Barnes, an analyst at TD Securities Inc. in Toronto, wrote in a note today. “The sale of the coal assets will now allow Sherritt to be viewed as a purer nickel play.”

Separately, the company received a request from Clarke Inc. (CKI) for a special shareholder meeting to discuss removing some of its independent board members, Pathe said. Canadian law allows holders of more than 5 percent of a company’s stock to call such a meeting.

Clarke, a Halifax, Nova Scotia-based transportation and logistics company, owns about 15.5 million shares, or 5.2 percent, of Sherritt, George Armoyan, CEO of Clarke, said by phone from Montreal today. He requested the meeting because he wants Sherrit’s board to shrink to seven members from nine, Armoyan said.

Under-Delivered

Clarke is unsatisfied by progress at Sherritt’s mine under development in Madagascar and sees board members being paid too much, Armoyan said.

“They over-promised and under-delivered.” Armoyan said. “They have nothing to lose.”

Pathe said Sherritt had just received the shareholder correspondence and hadn’t had an opportunity to consider it.

Sherritt said Rothschild is advising it on the coal sale and will help the company with further opportunities. CIBC World Markets Inc. provided a fairness opinion to Sherritt’s board on the value of the proposed sale.

To contact the reporters on this story: Simon Casey in New York at scasey4@bloomberg.net; Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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