Sherritt International Corp., a Canadian mining and energy company, should begin a share buyback program and investigate the work that was done on the Ambatovy mine in Madagascar, said Takota Asset Management Inc.
Sherritt’s board should form a special committee to investigate SNC-Lavalin Group Inc.’s performance at Ambatovy in light of delays and cost overruns at the nickel and cobalt project, Scott Leckie, principal at Takota, said in a statement today. SNC-Lavalin was the engineering contractor at Ambatovy.
The Toronto-based asset manager has no plans to force changes at Sherritt “at this time” and doesn’t disclose the size of specific holdings, Leckie said today in a telephone interview.
Sherritt’s board regularly reviews “all mechanisms” for returning excess capital to shareholders, including dividends and share buybacks, the Toronto-based company said today in an e-mailed statement.
Sherritt, which also has operations in Canada, Cuba, Pakistan and Spain, started finished-metal production at Ambatovy in the third quarter.
“Considering the ongoing pressure on commodity prices, as well as a continued obligation to fund Ambatovy project costs until the operation generates free cash flow, Sherritt’s board and management view a share buyback program to be inappropriate at this time,” it said.
Sherritt, which owns 40 percent of Ambatovy and operates the project, fell 0.2 percent to C$4.73 at the close in Toronto. The shares have dropped 18 percent this year, matching the decline in the 118-company Standard & Poor’s/TSX Global Mining Index.
“We maintain that we performed our work according to the contract,” Leslie Quinton, an SNC-Lavalin spokeswoman in Montreal, said today by e-mail in response to the Takota statement.
“Two factors impeded the work’s progress -- a political coup in 2008 and the economic slowdown,” Quinton said. “Both had major impacts on the project.”