Meet Fidel's Favorite Capitalist

Ian W. Delaney, chairman of Canada's Sherritt Inc., is probably the only North American CEO who displays in his office a photo of his family with Cuban leader Fidel Castro. It's a fitting tribute to a relationship so close that Delaney is arguably Castro's best-loved capitalist. "Sherritt does business all over the world, but Cuba is my favorite," says Delaney, 51, adding that he is always warmly welcomed in Castro's offices near the Plaza de la Revolucin.

No wonder. Since Delaney's first meeting with Castro in 1991, Sherritt has become Cuba's largest foreign investor and a linchpin in Castro's plans to rebuild his economy. Now Cuba's largest oil producer, Sherritt is exploring for "very large" oil reserves there, Delaney says. In December, he also set up a joint venture with Cuba's General Nickel Co. to mine, refine, and market the island's rich nickel and cobalt reserves. The venture, which earned $14.3 million on sales of $131 million in its first quarter of operation, could become "a world leader," Delaney says.

Talk like that has landed Sherritt in the center of Washington's efforts to tighten the noose on Castro. The U.S. Treasury Dept. is shortly expected to blacklist Sherritt's Cuban ventures as "special designated nationals," meaning that they--like Cuban companies--would be barred from U.S. business dealings. On June 14, a Senate foreign relations subcommittee began hearings on a bill that would make it easier for U.S. companies to sue Sherritt for using expropriated Cuban property. Florida-based Consolidated Development Co., which once produced 40% of Cuba's crude, is preparing a suit.

Despite the U.S. trade embargo, Delaney's bet on Cuba has paid off handsomely so far. While U.S. law bars Sherritt from selling nickel or cobalt to U.S. customers, Sherritt's answer is to sell to the Japanese and Europeans. Last year, sales in Sherritt's metals unit rose 76%, pushing metals earnings up to $32.5 million from a loss the year before.

"DESPERATE." That, plus a fertilizer acquisition in Alberta, helped Sherritt earn $58 million on sales of $672 million: the best performance in its 67-year history. This year, earnings should soar 82%, says Toronto brokerage Wood Gundy Inc. Ironically, Sherritt has attracted U.S. investors, who hold some 30% of its stock and most of its bonds.

For all his admiration of Cuba, which he visits monthly, Delaney is hardly a radical. After growing up in Winnipeg, he became an investment banker and president of Merrill Lynch Canada Inc. (table). After a stint at Horsham Corp., he left in 1990 to launch a proxy fight for Sherritt. The company was near insolvency because its metals refinery had closed and it had no nickel to refine.

Even before the takeover, Delaney saw opportunity in Cuba, which was facing economic collapse. Winning control of Sherritt in Sept., 1990, he approached the Cubans about a deal to refine their nickel and cobalt. "Our financial condition was as desperate as theirs," he recalls. The Cubans were eager to exploit Sherritt's refining technology, so in a meeting with Castro in early 1991, the deal was sealed.

It was the beginning of a beautiful friendship. Sales of Cuban metal took off, and last year Delaney proposed a formalized joint venture. The 50-50 deal is the most sweeping that Cuba has signed with a foreign company. It's also a huge step for Sherritt, which allowed a Cuban engineer to serve as the venture's first CEO.

Thanks to Sherritt's technology, ore production at the venture's plant in Moa Bay, Cuba, has almost doubled, to over 20,000 tons a year. Delaney may now boost refinery capacity in Alberta. "They'll be one of the world's lowest-cost producers of nickel and largest producers of cobalt," says Terence Ortslan, president of TSO & Associates, a mining research firm.

Of course, risks remain. Sherritt could lose everything in Cuba if warnings by Cuban-American hardliners of a revolution restoring U.S.-backed nationalists come true. Even that "would not be fatal," Delaney says, because Sherritt's fertilizer business accounts for 56% of sales and has no ties to Cuba.

In any case, Delaney is betting he'll come out on top. Last fall, he notes, the U.N. General Assembly voted 101 to 2 for an end to the embargo. With such world backing, Delaney thinks Cuba will evolve toward a populist government. "The last people in the world those guys can afford to stiff," he says with a smile, "are foreign investors."


CURRENT JOB Chairman and CEO of Sherritt Inc.

BACKGROUND Born in Winnipeg, Man., in 1943. Finished high school but dropped out of university to go into business.

CAREER PATH Trained as an investment banker, he became president of Merrill Lynch Canada and later CEO of holding company Horsham Corp. He left in 1990 to wage a proxy fight to win control of Sherritt.

MOST DARING MOVE Plunged into Cuba in 1991, defying U.S. trade embargo. Sherritt is Cuba's largest foreign investor and largest oil producer.

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