Sherritt Reports Higher Nickel Production at Moa JV and Stronger Balance Sheet for Q4 2018

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR
DISSEMINATION IN THE UNITED STATES

TORONTO–(BUSINESS WIRE)–
Sherritt International Corporation (“Sherritt” or the “Corporation”)
(TSX: S), a world leader in the mining and hydrometallurgical refining
of nickel and cobalt from lateritic ores, today reported its financial
results for the three- and 12-month periods ended December 31, 2018. All
amounts are in Canadian currency unless otherwise noted.

CEO COMMENTARY

“Sherritt ended 2018 with lower debt and more cash than we started the
year with as a result of several initiatives designed to reduce
expenses, buy back $130 million of outstanding debentures and improve
production reliability at our operations,” said David Pathe, President
and CEO of Sherritt International.

“Although concerns of international trade disputes and the impacts of
tariffs have resulted in recent commodity price volatility, we expect to
sustain our momentum through 2019 and beyond by capitalizing on the
strong market fundamentals and outlook for Class 1 nickel, completing
drilling on Block 10, and identifying opportunities where we can bring
innovations developed by our Technologies Group to market,” added Mr.
Pathe.

HIGHLIGHTS FOR Q4 AND FY2018

Sherritt’s share of finished nickel production at the Moa Joint
Venture (“Moa JV”) in Q4 2018 was 4,294 tonnes, up 4% from last year,
while finished cobalt was 428 tonnes, down 8% from Q4 2017. Production
for Q4 2018 was impacted by the disruption in the supply of hydrogen
sulphide, a key reagent used in the production of finished nickel and
cobalt at the refinery in Fort Saskatchewan, as previously disclosed.
Q4 2018 Adjusted EBITDA⁽¹⁾ was $17.7 million, down from
$49.6 million in Q4 2017. The decrease was due to a number of factors,
including lower contributions from the Oil and Gas business, lower
cobalt sales and higher input costs, including higher sulphur and
energy prices, at the Moa JV.
Received $6.7 million in distributions from the Moa JV in Q4 2018 for
a total of $11.9 million in distributions for FY2018. Q4 2018 marks
the second consecutive quarter that the Moa JV has made distributions,
indicative of improved nickel prices over the past several quarters.
Net direct cash cost (NDCC)⁽¹⁾ at the Moa JV for FY2018 was
US$2.24 per pound of finished nickel sold, in line with the US$1.90 –
$2.40 per pound guidance that Sherritt provided for the year. NDCC for
2018 ranked the Moa JV within the lowest cost quartile relative to
other producers and ranked it as the lowest cost nickel HPAL operation
according to annualized information tracked by Wood Mackenzie.
Cash from continuing operations in FY2018 was $7.4 million compared to
cash flow used of $9.6 million in FY2017. The improvement was driven
largely by the receipt of distributions from the Moa JV, lower
interest payments on debentures and increased fertilizer customer
prepayments.
Sherritt ended the year with cash, cash equivalents and short-term
investments of $207.0 million, up from $203.0 million at the end of
2017. The increase was due to a combination of factors, including the
receipt of distributions, working capital and advance repayments from
the Moa JV totaling $47.7 million, reduced interest payments of $6.3
million and reduced administrative expenses of $6.1 million, excluding
the reduction of share-based compensation. The lower administrative
expenses were due to various cost-savings initiatives, including lower
consulting fees, reduced employee costs and the relocation of the
Toronto corporate office.

DEVELOPMENTS SUBSEQUENT TO YEAR END

Reached an agreement in principle, subject to final approvals, with
Cuban partner on a payment plan to reduce overdue receivables.

Based on a decision to prudently manage drilling and exploration
costs, drilling on Block 10 has been suspended to enable the
completion of additional analysis of the geological conditions between
the upper and lower target reservoir.

To date, third-party industry experts have completed detailed lab
analysis of rock cuttings collected during previous operations on Block
10. Results of the lab analysis, which indicated that the rock formation
between the upper and lower target reservoirs has unique
characteristics, are currently being used with the assistance of other
third-party experts to adjust drilling parameters, including modifying
the drilling fluid and making use of casing while drilling technology
that addresses the challenges of well-bore degradation and fractured
zones experienced to date.

Drilling on Block 10 will resume at the end of March with the new
drilling parameters, and is expected to be completed in the second
quarter of 2019. The adoption of new drilling parameters will not result
in any increases to planned capital spending previously disclosed for
the Oil and Gas business. Any incremental capital spend at the Oil and
Gas business in 2019 will be predicated on successful drill results on
Block 10 and collections on receivables. Sherritt intends to explore
partnerships for further investment in Block 10 following completion of
the current drilling.

^{(1) For additional information see the Non-GAAP measures section of

this press release.}

Q4 2018 FINANCIAL HIGHLIGHTS

	For the three months ended						For the years ended
		2018		2017			2018		2017
$ millions, except per share amount	December 31		December 31		Change	December 31		December 31		Change

Revenue		37.1		54.8	(32%)	$	152.9	$	267.3	(43%)
Combined Revenue⁽¹⁾		166.1		223.8	(26%)		701.9		917.5	(23%)
Net earnings (loss) for the period		(53.1)		537.8	(110%)		(64.2)		293.8	(122%)
Adjusted EBITDA⁽¹⁾		17.7		49.6	(64%)		144.2		149.8	(4%)
Cash provided (used) by continuing operations		12.6		(33.9)	137%		7.4		(9.6)	177%
Combined free cash flow ⁽¹⁾		6.4		(41.2)	116%		(7.5)		(62.1)	88%
Net earnings (loss) from continuing operations per share		(0.17)		1.85	(109%)		(0.21)		1.04	(120%)

^{(1) For additional information see the Non-GAAP measures section.}

^{(2)

The amounts for the periods ended December 31, 2018 have been prepared

in accordance with IFRS 9 and IFRS 15; prior year periods amounts have

not been restated. Refer to note 3 in the audited consolidated financial

statements for the year ended December 31, 2018 for further information.}

$ millions, as at December 31	2018		2017		Change

Cash, cash equivalents and short-term investments		207.0		203.0	2%
Loans and borrowings		705.7		824.1	(14%)

Cash, cash equivalents and short-term investments at December 31, 2018
were $207.0 million, up from $203.0 million at December 31, 2017. In Q4
2018, Sherritt generated $12.6 million in cash flow from operations
largely as a result of $14.0 million in fertilizer customer prepayments
and a $6.7 million distribution received from the Moa JV.

During the year Sherritt received dividends and distributions totaling
$11.9 million from the Moa JV. These amounts were received subsequent to
the Moa JV’s repayment of $25 million on a working credit facility and
$10.8 million on advances previously made. Future dividends and
distributions from the Moa JV will vary in amount based on available
free cash generated, largely as a result of production totals and
prevailing nickel and cobalt prices.

Combined operating cash flow in Q4 2018 included contributions of $50.2
million from the Moa JV and Fort Site, $13.1 million from the Oil and
Gas business and $5.0 million from the Power business.

During Q4 2018, Sherritt received US$17.4 million on its Cuban overdue
scheduled receivables. At December 31, 2018 total overdue receivables
were US$152.5 million, up from US$147.8 million at September 30, 2018.
Sherritt has experienced variability in its Cuban receivables over the
years but has not incurred any losses related to any scheduled Cuban
receivables.

Adjusted earnings (loss) from continuing operations
⁽¹⁾

		2018				2017
For the three months ended December 31	$ millions		$/share		$ millions		$/share

Net earnings (loss) from continuing operations		(69.1)		(0.17)		552.9		1.85

Adjusting items:
Unrealized foreign exchange (gain) loss		(20.7)		(0.05)		24.1		0.08
Revaluation of expected credit losses under IFRS 9		44.1		0.11		–		–
Gain on Ambatovy restructuring		–		–		(629.0)		(2.11)
Other		24.9		0.06		1.8		0.01
Adjusted net loss from continuing operations		(20.8)		(0.05)		(50.2)		(0.17)

		2018				2017
For the year ended December 31	$ millions		$/share		$ millions		$/share

Net earnings (loss) from continuing operations		(80.2)		(0.21)		308.9		1.04

Adjusting items:
Unrealized foreign exchange (gain) loss		(33.3)		(0.09)		7.7		0.03
Revaluation of expected credit losses under IFRS 9		47.4		0.12		–		–
Gain on Ambatovy restructuring		–		–		(629.0)		(2.13)
Other		15.6		0.05		(4.7)		(0.01)
Adjusted net loss from continuing operations		(50.5)		(0.13)		(317.1)		(1.07)

^{(1) For additional information see the Non-GAAP measures section.}

Net loss from continuing operations for Q4 2018 was $69.1 million, or
$0.17 per share, compared to earnings of $552.9 million, or $1.85 per
share, for the same period of last year. Sherritt incurred a net loss
from continuing operations of $80.2 million, or $0.21 per share, for
FY2018 compared to earnings of $308.9 million, or $1.04 per share, for
FY2017. Earnings generated in the three- and 12-month periods ended
December 31, 2017 were primarily related to the gain recognized on the
Ambatovy restructuring, which offset operating losses.

Adjusted net loss from continuing operations was $20.8 million, or $0.05
per share, and $50.5 million, or $0.13 per share, for Q4 2018 and
FY2018, respectively. In 2017, Sherritt incurred an adjusted net loss
from continuing operations of $50.2 million, or $0.17 per share, for Q4
and $317.1 million, or $1.07 per share, on a full-year basis.
Significant adjustments to earnings or losses in the reporting periods
include the gain on the Ambatovy Joint Venture (“Ambatovy JV”)
restructuring in Q4 2017, a non-cash loss on the revaluation of the
Ambatovy JV subordinated loans receivable in Q4 2018 resulting from
changes in expected repayment schedule, and unrealized foreign exchange
gains and losses in both FY2018 and FY2017.

METAL MARKETS

Nickel

Nickel prices softened in Q4 2018, slowing the momentum established over
the past year when nickel reached a high of US$7.26/lb. The
average-reference price in Q4 2018 was US$5.20/lb, down from US$6.01/lb
in the preceding quarter.

The downward price pressure was driven by a number of developments. The
most notable being ongoing concerns that the international trade dispute
between the U.S. and China would weaken global demand for nickel.
Initial market reaction to news of a planned facility in Indonesia that
is expected to produce 50,000 tonnes per year of battery-grade material
also contributed to softening nickel prices. Market reaction to the
construction timelines and funding requirements to build the high
pressure acid leach facility has since become skeptical. Increased
availability of nickel pig iron supply was another contributing factor
in weakening nickel prices.

The softening of prices belied the strong underlying nickel
fundamentals. Combined nickel inventories on the London Metals Exchange
and the Shanghai Futures Exchange at the end of Q4 2018 totaled 219,804
tonnes, down 8% from the combined total of 240,066 tonnes at the end of
Q3 2018. The Class 1 nickel inventory decline in 2018 was even more
dramatic at 55%. As demand continues to exceed available supply, the
nickel market is anticipated to be in a structural deficit in the coming
years. Since the start of Q1 2019, nickel prices have risen
approximately 12%.

Demand for nickel will continue to be driven by the stainless steel
sector. According to market research by CRU, stainless steel demand is
expected to grow at an average annual rate of approximately 4% through
2022 with production emanating largely from China and Indonesia. Demand
for nickel – particularly Class 1 nickel – from non-stainless steel
sectors is also expected to accelerate given the growth of the electric
vehicle battery market. Class I nickel, along with cobalt, are key
metals needed to manufacture electric vehicle batteries.

Beyond 2018, a shortage of Class 1 nickel is anticipated over the coming
years since current market prices are below incentive levels needed to
develop new nickel projects. As a result, no new Class 1 nickel supply
is expected to come on stream in the near term.

Cobalt

Cobalt prices experienced continued softness in Q4 2018. Consistent with
developments earlier in the year, the price decline was driven by
increased supply of intermediate product from the Democratic Republic of
Congo as well as by the destocking of inventory by Chinese consumers.
The average-reference price for Q4 2018 was US$32.23/lb, down from
US$35.21/lb in the preceding quarter.

Low physical demand and current cobalt oversupply is likely to keep
market conditions relatively volatile in the near term. The recent
softening of prices is expected to be temporary due to the growing
demand from the electric vehicle battery market and persistent supply
risk concerns linked to the Democratic Republic of Congo, which is
currently the world’s largest source of cobalt supply.

High cobalt prices are not expected to cause supply-chain disruptions or
delay the growth of the electric vehicle market given that cobalt prices
represent a relatively small percentage of the overall battery pack
costs. As a result, the potential for removing cobalt from electric
vehicle battery production in the near term is relatively low especially
since cobalt’s unique properties give batteries energy stability. While
battery manufacturers continue to explore alternatives to existing
electric vehicle battery chemistry, particularly to increase the
battery’s energy density, the likely beneficiary of any changes is
expected to be Class I nickel.

REVIEW OF OPERATIONS

Moa Joint Venture (50% interest) and Fort Site (100%)

	For the three months ended					For the years ended
		2018		2017			2018		2017
$ millions, except as otherwise noted	December 31		December 31		Change	December 31		December 31		Change

FINANCIAL HIGHLIGHTS
Revenue	$	120.0	$	122.9	(2%)	$	498.1	$	417.0	19%
Earnings from operations		5.4		19.9	(73%)		78.9		31.3	152%
Adjusted EBITDA⁽¹⁾		17.4		32.1	(46%)		128.4		80.5	60%

CASH FLOW
Cash provided by operations	$	50.2	$	32.5	54%	$	90.7	$	58.3	56%
Adjusted operating cash flow⁽¹⁾		13.4		32.4	(59%)		106.3		72.9	46%
Free cash flow⁽¹⁾		39.3		24.9	58%		57.8		37.4	55%
Distributions and repayments to Sherritt from the Moa JV		6.7		19.9	(66%)		47.7		31.7	50%

PRODUCTION VOLUMES (tonnes)
Mixed Sulphides		4,594		4,090	12%		17,563		17,297	2%
Finished Nickel		4,294		4,134	4%		15,354		15,762	(3%)
Finished Cobalt		428		465	(8%)		1,617		1,801	(10%)
Fertilizer		64,573		61,923	4%		226,989		243,682	(7%)

NICKEL RECOVERY (%)		84%		79%	6%		83%		85%	(2%)

SALES VOLUMES (tonnes)
Finished Nickel		4,291		4,129	4%		15,273		15,679	(3%)
Finished Cobalt		392		480	(18%)		1,572		1,783	(12%)
Fertilizer		46,924		51,141	(8%)		163,698		178,491	(8%)

AVERAGE-REFERENCE PRICES (US$ per pound)
Nickel	$	5.20	$	5.25	(1%)	$	5.95	$	4.72	26%
Cobalt⁽²⁾		32.23		31.60	2%		37.35		26.53	41%

AVERAGE REALIZED PRICE
Nickel ($ per pound)	$	6.84	$	6.72	2%	$	7.75	$	6.14	26%
Cobalt ($ per pound)		38.43		38.78	(1%)		46.23		32.98	40%
Fertilizer ($ per tonne)		384		348	11%		388		361	7%

UNIT OPERATING COSTS ⁽¹⁾(US$ per pound)
Nickel – net direct cash cost	$	2.94	$	1.80	63%	$	2.24	$	2.35	(5%)

SPENDING ON CAPITAL
Sustaining	$	10.5	$	7.7	36%	$	37.0	$	20.9	77%
	$	10.5	$	7.7	36%	$	37.0	$	20.9	77%

^{(1) For additional information see the Non-GAAP measures section.}

^{(2)

Average low-grade cobalt published price per Fastmarkets MB (formerly

Metals Bulletin).}

The Moa JV produced 4,294 tonnes of finished nickel in Q4 2018, up 4%
from 4,134 tonnes produced in Q4 2017. Growth was largely driven by the
deployment of new mining equipment completed in Q3 2018 that resulted in
improved ore access and reduced equipment downtime compared to the same
period of last year. The increase in nickel production in Q4 2018 was
offset, however, by the negative impact of a disruption in the supply of
hydrogen sulphide, a key reagent used by the refinery in Fort
Saskatchewan to produce finished nickel. The supply disruption resulted
in a temporary reduction in production.

Finished nickel production for FY2018 was 15,354 tonnes, down 3% from
FY2017. The decline was largely due to the negative effects that the
highest level of rainfall in more than 20 years had on the production of
mixed sulphides at Moa and transportation delays by the railway service
provider to the refinery in Fort Saskatchewan in Q1. Year-over-year
production decline was also attributable to the disruption of hydrogen
sulphide supply in Q4 previously referenced.

The Moa JV has taken measures over the past year to mitigate the
production challenges experienced in 2018 by building its inventory of
mixed sulphides and ore stockpiles, deploying new mining equipment and
developing contingency plans for alternative supply deliveries.

Finished cobalt production for Q4 2018 was 428 tonnes, down 8% from last
year. Total finished cobalt for 2018 was 1,617 tonnes, down 10% from
2017. In addition to factors already cited, cobalt production was also
negatively impacted by a higher nickel-to-cobalt ratio in mixed
sulphides produced at Moa and in third-party feed procured by the
refinery in Fort Saskatchewan.

Revenue for Q4 2018 totaled $120.0 million, down 2% from last year. The
decline was largely due to lower cobalt sales volume of 18% from Q4
2017, which offset the impact of higher nickel sales volume.

Revenue for FY2018 was $498.1 million, up 19% from $417.0 million
generated in FY2017. The increase was driven by higher average realized
prices for nickel (+26%), cobalt (+40%) and fertilizer (+7%), which
offset lower sales volumes.

Mining, processing and refining (MPR) costs for Q4 2018 were US$5.34/lb,
up 9% from US$4.89/lb for Q4 2017. MPR costs for FY2018 increased 12%
over FY2017 to US$5.37/lb. The increases in both periods were primarily
due to higher input costs, largely as a result of increased sulphur and
energy prices. The Moa JV was required to buy sulphuric acid in Q3
during the first bi-annual maintenance shutdown of the new acid plant,
adding costs to the full-year period.

NDCC in Q4 2018 was US$2.94/lb, compared to US$1.80/lb for the same
period last year. The increase was due to the impact of higher sulphur
and energy costs and a lower cobalt credit as a result of reduced sales
volume when compared to the same period of last year.

NDCC for FY2018 was US$2.24/lb, compared to US$2.35/lb in FY2017 as
higher cobalt credits in the first months in 2018 more than offset
higher sulphur, fuel oil, and third-party feed prices. NDCC for FY2018
ranked the Moa JV within the lowest cost quartile relative to other
nickel producers and ranked it as the lowest cost nickel HPAL operation
according to annualized information tracked by Wood Mackenzie.

The Moa JV generated operating cash flow of $50.2 million in Q4 2018, up
54% from $32.5 million in the same period of 2017.

Operating cash flow for FY2018 was $90.7 million in FY2018, up 56%
compared to FY2017. The increase was largely due to the year-over-year
improvement in realized prices for nickel and cobalt that offset higher
input commodity prices.

Sustaining capital spending in Q4 2018 was $10.5 million, up from $7.7
million in Q4 2017. The increase was due to planned spending, including
the construction of the new slurry preparation plant dump pocket at Moa,
which was commissioned in January 2019.

Total capital spend for FY2018 was $37.0 million, up 77%, consistent
with planned higher spending, and included the purchase of new mining
equipment aimed at reducing ore haulage distance and reducing equipment
downtime.

Investment in Ambatovy Joint Venture (12% interest effective December
11, 2017)
⁽¹⁾

	For the three months ended					For the years ended
		2018		2017			2018		2017
$ millions, except as otherwise noted	December 31		December 31		Change	December 31		December 31		Change

FINANCIAL HIGHLIGHTS
Revenue	$	23.5	$	58.1	(60%)	$	101.2	$	279.2	(64%)
Loss from operations		(22.6)		(7.7)	(194%)		(40.8)		(109.5)	63%
Adjusted EBITDA⁽²⁾		5.3		18.1	(71%)		18.0		26.0	(31%)

CASH FLOW
Cash used by operations	$	(1.8)	$	(3.4)	47%	$	(0.8)	$	(26.7)	97%
Adjusted operating cash flow⁽²⁾		(2.8)		4.7	(160%)		2.9		(5.9)	149%
Free cash flow⁽²⁾		(6.0)		(20.7)	71%		(14.1)		(55.6)	75%

PRODUCTION VOLUMES (tonnes)⁽³⁾
Mixed Sulphides		1,316		1,171	12%		4,331		4,623	(6%)
Finished Nickel		1,253		1,105	13%		3,982		4,257	(6%)
Finished Cobalt		106		88	21%		342		366	(7%)
Fertilizer		3,187		3,504	(9%)		11,321		13,436	(16%)

NICKEL RECOVERY (%)		86%		84%	2%		86%		85%	1%

SALES VOLUMES (tonnes)⁽³⁾
Finished Nickel		1,026		897	14%		3,944		4,224	(7%)
Finished Cobalt		74		77	(4%)		324		375	(14%)
Fertilizer		2,411		2,790	(14%)		9,822		12,961	(24%)

AVERAGE-REFERENCE PRICES ⁽²⁾ (US$ per pound)
Nickel	$	5.20	$	5.25	(1%)	$	5.95	$	4.72	26%
Cobalt⁽⁴⁾		32.23		31.60	2%		37.35		26.53	41%

AVERAGE-REALIZED PRICE
Nickel ($ per pound)	$	7.59	$	6.56	16%	$	7.87	$	6.05	30%
Cobalt ($ per pound)		38.07		39.03	(2%)		45.30		33.35	36%
Fertilizer ($ per tonne)		189.00		173	9%		192.64		168	15%

UNIT OPERATING COSTS ⁽²⁾(US$ per pound)
Nickel – net direct cash cost	$	3.66	$	3.27	12%	$	3.91	$	3.83	2%

SPENDING ON CAPITAL
Sustaining	$	5.1	$	10.0	(49%)	$	15.3	$	44.2	(65%)
	$	5.1	$	10.0	(49%)	$	15.3	$	44.2	(65%)

^{(1) Sherritt’s share for Ambatovy Joint Venture reflects its

interest at 40% through December 10, 2017 and 12% thereafter.}

^{(2)

For additional information, see the Non-GAAP measures section of this

release.}

^{(3) To allow for easier comparison, Ambatovy

production and sales volume information for the periods ended December

31, 2017 are presented on a 12% basis.}

^{(4) Average

low-grade cobalt published price per Fastmarkets MB (formerly Metals

Bulletin).}

On December 11, 2017, Sherritt, along with its joint venture partners,
completed a restructuring of the Ambatovy JV which reduced Sherritt’s
ownership interest in the joint venture from 40% to 12%. In exchange for
its reduced interest, Sherritt eliminated $1.4 billion in Ambatovy
related debt. Sherritt will continue to serve as operator of the joint
venture at least through 2024. As a result of the reduction in its
ownership interest, Sherritt’s ability to direct local decision-making
at Ambatovy has diminished, however.

Sherritt’s financial results at Ambatovy are presented on a 12% basis
after December 10, 2017 and on a 40% basis prior to December 11, 2018.
For periods ending after December 11, 2017, Sherritt’s share of
financial and operating results reflect the impact of its reduced
ownership interest. Production and sales totals in this press release
are presented on a 12% for both periods for better comparison purposes.

Consistent with previous disclosure, finished nickel production at
Ambatovy in the second half of 2018 was 19% higher than the first half
of the year while finished cobalt production was up 35% over the
comparable period. The production increases were the result of efforts
aimed at improving production and increasing reliability of acid
production and PAL circuits. Specific initiatives included the
replacement of two acid plant economizers, replacement of equipment
damaged by Cyclone Ava, and efforts to improve autoclave reliability.

Finished nickel production in Q4 2018 was 1,253 tonnes and finished
cobalt production was 106 tonnes, up 13% and 21%, respectively, from Q4
2017.

NDCC in Q4 2018 was US$3.66/lb, 12% higher than in Q4 2017. NDCC for
FY2018 was US$3.91/lb, up 2% from FY2017. The increase for both periods
was attributable to lower cobalt sales volume and higher input costs.

Asset write-downs of $15.7 million based on Sherritt’s ownership
interest were recorded in Q4 2018 following a review of fixed assets and
a long-term ore stockpile re-valuation.

Capital spend at Ambatovy based on Sherritt’s ownership interest was
$5.1 million in Q4 2018 and $15.3 million for FY2018. Capital spend
throughout the course of the year was earmarked towards initiatives
aimed at improving production, increasing asset plant reliability and
replacing equipment damaged by Cyclone Ava.

Sherritt’s escrow account to cover funding requirements of the Ambatovy
JV was depleted following a cash call in October 2018. The escrow
account was established as a requirement of the Ambatovy restructuring
completed in December 2017 when Sherritt’s ownership interest was
reduced to 12% in exchange for the elimination of $1.4 billion of debt.
Any future cash funding requirements will be dependent on Ambatovy’s
production as well as prevailing commodity prices among other items. If
additional cash funding is required, Sherritt does not anticipate
providing any funding based on Ambatovy’s current debt structure.

On February 13, 2019, Sherritt filed on SEDAR an updated National
Instrument 43-101 compliant Technical Report on Ambatovy. The new report
includes mineral resource and reserve estimates that are based on an
updated block model. The new estimates, which have a lower tonnage and
higher overall grade than estimates provided in the 2014 Ambatovy
Technical Report, largely offset each other. The economics of the
updated Technical Report are based on a 10-year average weighted price
of US$6.82 per pound of nickel and US$25.50 per pound of cobalt. The
economics of the 2014 Technical Report were based on US$7.37 per pound
for nickel and US$12.12 per pound for cobalt. The updated Technical
Report is available via www.sedar
and referenced in Sherritt’s 2018 Annual Information Form.

OIL AND GAS

	For the three months ended					For the years ended
		2018		2017			2018		2017
$ millions, except as otherwise noted	December 31		December 31		Change	December 31		December 31		Change

FINANCIAL HIGHLIGHTS
Revenue	$	8.5	$	27.7	(69%)	$	44.9	$	127.0	(65%)
Earnings (loss) from operations		(10.4)		7.9	(232%)		(17.0)		33.6	(151%)
Adjusted EBITDA⁽¹⁾		(7.2)		10.5	(169%)		(5.9)		61.9	(110%)

CASH FLOW
Cash provided (used) by operations		13.1		(2.3)	670%		31.7		30.8	3%
Adjusted operating cash flow⁽¹⁾		(5.4)		10.2	(153%)		(19.9)		49.9	(140%)
Free cash flow⁽¹⁾		3.1		(9.9)	131%		3.7		8.9	(58%)

PRODUCTION AND SALES (bopd)
Gross working-interest (GWI) – Cuba		4,443		10,378	(57%)		4,839		13,479	(64%)
Total net working-interest (NWI)		1,597		6,101	(74%)		2,209		7,856	(72%)

AVERAGE EXCHANGE RATE (CAD/USD)		1.320		1.271	4%		1.296		1.299	–

AVERAGE REFERENCE PRICE (US$ per barrel)
West Texas Intermediate (WTI)	$	59.98	$	55.19	9%	$	65.20	$	50.78	28%
U.S. Gulf Coast High Sulphur Fuel Oil (USGC HSFO)⁽²⁾		62.33		52.81	18%		61.45		47.02	31%
Brent		68.13		61.77	10%		71.16		54.18	31%

AVERAGE-REALIZED PRICE ⁽¹⁾(NWI)
Cuba ($ per barrel)	$	62.72	$	48.82	28%	$	56.47	$	43.81	29%

UNIT OPERATING COSTS ⁽¹⁾(GWI)
Cuba ($ per barrel)	$	25.16	$	12.24	106%	$	20.21	$	9.78	107%

SPENDING ON CAPITAL
Development, facilities and other	$	–	$	(1.4)	100%	$	1.4	$	(1.7)	182%
Exploration		8.4		8.6	(2%)		25.0		21.1	18%
	$	8.4	$	7.2	17%	$	26.4	$	19.4	36%

^{(1) For additional information see the Non-GAAP measures section.}

^{(2)

Starting in 2018, the Oil and Gas division uses U.S. Gulf Coast High

Sulphur Fuel Oil for pricing purposes, replacing U.S. Gulf Coast Fuel

Oil #6 used previously. The comparative periods have been adjusted

accordingly.}

Gross working-interest oil production in Cuba in Q4 2018 was 4,443
barrels of oil per day (“bopd”) compared to 10,378 bopd for the
comparable period of 2017. Gross working-interest oil production in Cuba
for FY2018 was 4,839 barrels per day, down 64% from 13,479 barrels per
day for FY2017. The declines for the quarter and full year periods of
2018 were primarily due to the expiration of the Varadero West
Production Sharing Contract (PSC) in November 2017, natural reservoir
declines and the absence of new development drilling.

Revenue in Q4 2018 was $8.5 million, down 69% compared to last year. The
decline was attributable to lower total net working-interest production
due to the impact of the expiration of the Varadero West PSC and
decrease in profit oil percentage to 6% from 45% with the renewal of the
Puerto Escondido/Yumuri PSC. The decline in sales volumes was partially
offset by higher realized oil prices and by a weaker Canadian dollar
relative to the U.S. currency. Revenue for FY2018 was $44.9 million,
down 65% from last year.

Unit operating costs in Cuba in Q4 2018 were $25.16 per barrel, up 106%
from Q4 2017, driven largely by reduced production. Costs were also
negatively impacted by a stronger U.S. dollar relative to the Canadian
currency. Expenses in Cuba are generally denominated in U.S. currency.

Capital spending in Q4 2018 was $8.4 million, up 17% from the comparable
period in 2017. Total capital spending for FY2018 was $26.4 million, up
36% from last year. Capital spending for both Q4 and FY2018 increased
from last year largely due to Block 10 drilling activities.

Based on a decision to prudently manage drilling and exploration costs,
drilling on Block 10 has been suspended to enable the completion of
additional analysis of the geological conditions between the upper and
lower target reservoir.

POWER

	For the three months ended					For the years ended
		2018		2017			2018		2017
$ millions (33 ⅓% basis), except as otherwise noted	December 31		December 31		Change	December 31		December 31		Change

FINANCIAL HIGHLIGHTS
Revenue	$	11.2	$	12.0	(7%)	$	47.2	$	51.2	(8%)
Earnings (loss) from operations		(0.3)		(0.6)	50%		2.8		5.2	(46%)
Adjusted EBITDA⁽¹⁾		6.5		5.5	18%		28.0		30.1	(7%)

CASH FLOW
Cash provided by operations		5.0		5.4	(7%)		34.3		44.5	(23%)
Adjusted operating cash flow⁽¹⁾		6.4		6.4	–		26.9		30.9	(13%)
Free cash flow⁽¹⁾		4.6		5.3	(13%)		33.4		43.0	(22%)

PRODUCTION AND SALES
Electricity (GWh)		184		201	(8%)		781		848	(8%)

AVERAGE-REALIZED PRICE ⁽¹⁾
Electricity ($/MWh)	$	55.34	$	54.01	2%	$	54.31	$	55.15	(2%)

UNIT OPERATING COSTS ⁽¹⁾($/MWh)
Base		19.19		20.66	(7%)		16.59		16.48	1%
Non-base⁽²⁾		1.90		2.77	(31%)		3.69		2.81	31%
		21.09		23.43	(10%)		20.28		19.29	5%

NET CAPACITY FACTOR (%)		57		62	(8%)		61		66	(8%)

SPENDING ON CAPITAL
Sustaining	$	0.4	$	0.1	300%	$	0.9	$	1.5	(40%)
	$	0.4	$	0.1	300%	$	0.9	$	1.5	(40%)

^{(1) For additional information see the Non-GAAP measures section.}

^{(2)

Costs incurred at the Boca de Jaruco and Puerto Escondido facilities

that otherwise would have been capitalized if these facilities were not

accounted or as service concession arrangements.}

Electricity production and sales volumes for the three- and 12-month
periods ended December 31, 2018 were each 7% and 8% lower, respectively,
compared to the same periods in FY2017, primarily as a result of lower
gas supply. The change in average-realized price of electricity for each
of the current year periods compared to the same periods of last year
was due to changes in the Canadian dollar relative to the U.S. currency.

Unit operating costs were relatively unchanged in both the three- and
12-month periods ended December 31, 2018 when compared to the same
periods of FY2017. Some maintenance activities planned for Q4 2018 have
been rescheduled for the first quarter of 2019. Costs were negatively
impacted by a weaker Canadian dollar in Q4 2018 compared to Q4 2017,
while the full year exchange rate impact was minimal year over year.

Total capital spending in Q4 2018 was negligible and relatively
unchanged from last year.

2018 REVIEW OF STRATEGIC PRIORITIES

The table below lists Sherritt’s Strategic Priorities for 2018, and
summarizes how the Corporation has performed against those priorities on
a year to date basis.

Strategic Priorities	2018 Actions	Status
PRESERVE LIQUIDITY AND BUILD BALANCE SHEET STRENGTH	Continue to emphasize de-leveraging of the balance sheet	Sherritt’s net debt at the end of 2018 was $533 million, down from almost $2 billion at the end of 2016. The reduction was driven by the restructuring of Sherritt’s ownership interest in the Ambatovy JV at the end of 2017 and the purchase of more than $130 million of debentures in 2018.
	Optimize working capital and receivables collection	Management continues to take action to expedite Cuban energy receipts and has reached an agreement in principle subject to final approvals, with Cuban partner on a payment plan to reduce overdue receivables.. Overdue scheduled receivables at quarter end were US$152.5 million.
	Operate the Metals businesses to maintain a leadership position as a low-cost producer of finished nickel and cobalt while maximizing Free Cash Flow	The Moa JV and Fort Site generated $106.3 million of adjusted operating cash flow during 2018, up 46% from 2017.
UPHOLD GLOBAL OPERATIONAL LEADERSHIP IN FINISHED NICKEL LATERITE PRODUCTION	Further reduce NDCC towards the goal of being consistently in the lowest cost quartile.	NDCC at the Moa JV was US$2.24/lb, in 2018 down 5% from last year, ranking it within the lowest cost quartile relative to other producers and the lowest cost nickel HPAL operation globally according to information tracked by Wood Mackenzie.
	Maximize production of finished nickel and cobalt and improve predictability over 2017 results	Although production was impacted throughout the year by adverse weather conditions, transportation delays and the disruption of hydrogen sulphide supply, the Moa JV produced 30,708 (100% basis) tonnes of finished nickel in 2018, in line with guidance. The Moa JV has taken measures over the past year to mitigate the production challenges of the past year by building inventory of mixed sulphides and ore stock piles, deploying new mining equipment and developing contingency plans for alternative supply deliveries.
	Achieve peer leading performance in environmental, health, safety and sustainability	Sherritt’s operations at Moa, Oil & Gas and Power had zero work-related fatalities and one lost time incident. The operations had a recordable injury frequency rate in 2018 of 0.23 and a lost time injury frequency rate of 0.08, both are in the lowest quartile of benchmark peer set data.
OPTIMIZE OPPORTUNITIES IN CUBAN ENERGY BUSINESS	Successfully execute Block 10 drilling program	Drilling on Block 10 will resume at the end of March. . Drilling has been suspended based on a decision to prudently manage exploration costs and complete an analysis of geological conditions. Third-party experts have assisted in the analysis of rock cuttings and development of new drilling parameters. Drilling on Block 10 is expected to be completed in Q2 2019 with no increase to planned capital spend for the year. Any incremental capital spend at the Oil and Gas business in 2019 will be predicated on successful Block 10 drill results and collections of receivables. The company intends to explore potential partnerships on Block 10 pending completion of current drilling.
	Review opportunities to leverage Oil and Gas experience and relationships	The Production Sharing Contract at Puerto Escondido/ Yumuri was extended for three years to 2021.

2019 STRATEGIC PRIORITIES

The table below lists Sherritt’s Strategic Priorities for 2019. As we
execute on our 2019 Strategic Priorities, protecting the health and
safety of our employees, contractors and communities will continue to be
our top priority. Sherritt’s purpose is to be a leader in the
low-cost production of finished nickel and cobalt that creates
sustainable prosperity for our employees, investors and communities.

Strategic Priorities				2019 Actions
UPHOLD GLOBAL OPERATIONAL LEADERSHIP IN FINISHED NICKEL AND COBALT PRODUCTION FROM LATERITES				Protect the health and safety of all employees in all operations. Achieve peer-leading performance in environmental, health, safety and sustainability.
				Maximize production of finished nickel and cobalt and improve predictability over 2018 results. Capitalize on growing electric vehicle market by strengthening existing relationships with battery manufacturers.
				Continue to pursue reductions in controllable costs towards the goal of being consistently in the lowest cash cost quartile. Leverage technical innovation for the purposes of reducing operating costs and identifying new market opportunities.

PRESERVE LIQUIDITY AND BUILD BALANCE SHEET STRENGTH				Continue to emphasize de-leveraging of the balance sheet. Optimize working capital and maximize Cuban energy receivables collection. Maintain a leadership position as a low-cost producer of finished nickel and cobalt while maximizing free cash flow.

OPTIMIZE OPPORTUNITIES IN CUBAN ENERGY BUSINESS				Successfully execute on current Block 10 drilling. Review opportunities to leverage Oil and Gas experience and relationships. Continue to maintain strong relationships in Cuba.

OUTLOOK

2019 PRODUCTION, UNIT OPERATING COST AND CAPITAL SPENDING GUIDANCE

The guidance for 2019 reflects Sherritt’s targets for production, unit
costs and capital spending announced on January 28, 2019.

		Year-to-date
	2018	actual at	2019
Production volumes, unit operating costs and spending on capital	Guidance	December 31, 2018	Guidance

Production volumes
Moa Joint Venture (tonnes, 100% basis)
Nickel, finished ⁽¹⁾	30,500 – 31,000	30,708	31,000 – 33,000
Cobalt, finished⁽¹⁾	3,250 – 3,400	3,234	3,300 – 3,600
Ambatovy Joint Venture (tonnes, 100% basis)
Nickel, finished⁽²⁾	35,000 – 38,000	33,183	40,000 – 45,000
Cobalt, finished⁽²⁾	3,100 – 3,400	2,850	3,500 – 4,000

Oil – Cuba (gross working-interest, bopd)	4,300 – 4,800	4,839	3,800 – 4,100
Oil and Gas – All operations (net working-interest, boepd)⁽³⁾	2,300-2,600	2,209	1,800 – 2,100
Electricity (GWh, 33⅓% basis)	750 – 800	781	650 – 700

Unit operating costs
NDCC (US$ per pound)
Moa Joint Venture⁽¹⁾⁽³⁾	$1.90 – $2.40	$2.24	$3.40 – $3.90
Ambatovy Joint Venture⁽¹⁾⁽²⁾	$3.75 – $4.25	$3.91	$3.80 – $4.30

Oil and Gas – Cuba (unit operating costs, $ per barrel)	$22.00 – $23.50	$20.21	$25.00 – $26.50
Electricity (unit operating cost, $ per MWh)	$20.75 – $21.50	$20.28	$25.25 – $26.75

Spending on capital (US$ millions)
Moa Joint Venture (50% basis), Fort Site (100% basis)⁽⁴⁾⁽¹⁾	US$31 (CDN$40)	US$29 (CDN$37)	US$40 (CDN$54)
Ambatovy Joint Venture (12% basis)	US$13 (CDN$17)	US$12 (CDN$15)	US$10 (CDN$14)
Oil and Gas⁽¹⁾⁽²⁾	US$29 (CDN$37)	US$20 (CDN$26)	US$21 (CDN$28)
Power (33⅓% basis)	US$1 (CDN$1)	US$1 (CDN$1)	US$1 (CDN$1)
Spending on capital (excluding Corporate)	US$74 (CDN$95)	US$62 (CDN$79)	US$72 (CDN$97)

^{(1) 2018 guidance was updated September 30, 2018.}

^{(2)

2018 guidance was updated June 30, 2018.}

^{(3) 2018

guidance was updated March 31, 2018.}

^{(4) Spending is 50%

of US$ expenditures for Moa JV and 100% expenditures for Fort Site

fertilizer and utilities.}

NON-GAAP MEASURES

The Corporation uses combined results, Adjusted EBITDA, average-realized
price, unit operating cost, adjusted operating cash flow and free cash
flow to monitor the performance of the Corporation and its operating
divisions. Management believes these measures enable investors and
analysts to compare the Corporation’s financial performance with its
competitors and/or evaluate the results of its underlying business.
These measures do not have a standard definition under IFRS and should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. As these measures do not
have a standardized meaning, they may not be comparable to similar
measures provided by other companies. See Sherritt’s Management’s
Discussion and Analysis for the year ended December 31, 2018 for further
information and reconciliation of non-GAAP measures to the most directly
comparable IFRS measure.

CONFERENCE CALL AND WEBCAST

Sherritt will hold its conference call and webcast February 14^th,
2019 at 9:00 a.m. Eastern Time to review its Q4 and 2018 results.
Dial-in and webcast details are as follows:

North American callers, please dial:				1-866-521-4909
International callers, please dial:				647-427-2311
Live webcast:				www.sherritt.com

Please dial-in 15 minutes before the start of the call to secure a line.
The conference call discussion will include a presentation that will be
available from Sherritt’s website.

An archive of the webcast and replay of the conference call will also be
available on the website.

COMPLETE FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS

Sherritt’s complete audited consolidated financial statements and MD&A
for the year ended December 31, 2018 are available at www.sherritt.com
and should be read in conjunction with this news release. Financial and
operating data can also viewed in the investor relations section of
Sherritt’s website.

ABOUT SHERRITT

Sherritt is a world leader in the mining and refining of nickel and
cobalt from lateritic ores with projects and operations in Canada, Cuba
and Madagascar. The Corporation is the largest independent energy
producer in Cuba, with extensive oil and power operations across the
island. Sherritt licenses its proprietary technologies and provides
metallurgical services to mining and refining operations worldwide. The
Corporation’s common shares are listed on the Toronto Stock Exchange
under the symbol “S”.

FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements.
Forward-looking statements can generally be identified by the use of
statements that include such words as “believe”, “expect”, “anticipate”,
“intend”, “plan”, “forecast”, “likely”, “may”, “will”, “could”,
“should”, “suspect”, “outlook”, “potential”, “projected”, “continue” or
other similar words or phrases. Specifically, forward-looking statements
in this document include, but are not limited to, statements set out in
the “Outlook” sections of this press release and certain expectations
regarding production volumes, operating costs and capital spending;
supply, demand and pricing outlook in the nickel and cobalt markets;
anticipated payments of outstanding receivables; future distributions
from the Moa Joint Venture, funding of future Ambatovy cash calls, drill
plans and results on exploration wells and amounts of certain other
commitments.

Forward looking statements are not based on historical facts, but rather
on current expectations, assumptions and projections about future
events, including commodity and product prices and demand; the level of
liquidity and access to funding; share price volatility; production
results; realized prices for production; earnings and revenues;
development and exploration wells and enhanced oil recovery in Cuba;
environmental rehabilitation provisions; availability of regulatory
approvals; compliance with applicable environmental laws and
regulations; debt repayments; collection of accounts receivable; and
certain corporate objectives, goals and plans. By their nature, forward
looking statements require the Corporation to make assumptions and are
subject to inherent risks and uncertainties. There is significant risk
that predictions, forecasts, conclusions or projections will not prove
to be accurate, that those assumptions may not be correct and that
actual results may differ materially from such predictions, forecasts,
conclusions or projections.

The Corporation cautions readers of this press release not to place
undue reliance on any forward looking statement as a number of factors
could cause actual future results, conditions, actions or events to
differ materially from the targets, expectations, estimates or
intentions expressed in the forward looking statements. These risks,
uncertainties and other factors include, but are not limited to, changes
in the global price for nickel, cobalt, oil and gas, fertilizers or
certain other commodities; security market fluctuations and price
volatility; level of liquidity; access to capital; access to financing;
risks related to the liquidity and funding of the Ambatovy Joint
Venture; the risk to Sherritt’s entitlements to future distributions
from the Moa and Ambatovy joint ventures; risk of future non-compliance
with debt restrictions and covenants and mandatory repayments;
uncertainty of exploration results and Sherritt’s ability to replace
depleted mineral and oil and gas reserves; risks associated with the
Corporation’s joint venture partners; variability in production at
Sherritt’s operations in Cuba and Madagascar; risks related to
Sherritt’s operations in Cuba; risks related to the U.S. government
policy toward Cuba, including the U.S. embargo on Cuba and the
Helms-Burton legislation; potential interruptions in transportation;
uncertainty of gas supply for electrical generation; the Corporation’s
reliance on key personnel and skilled workers; the possibility of
equipment and other failures; risks associated with mining, processing
and refining activities; uncertainty of resources and reserve estimates;
the potential for shortages of equipment and supplies; risks related to
environmental liabilities including liability for reclamation costs,
tailings facility failures and toxic gas releases; risks related to the
Corporation’s corporate structure; political, economic and other risks
of foreign operations; risks related to Sherritt’s operations in
Madagascar; risks associated with Sherritt’s operation of large projects
generally; risks related to the accuracy of capital and operating cost
estimates; foreign exchange and pricing risks; compliance with
applicable environment, health and safety legislation and other
associated matters; risks associated with governmental regulations
regarding climate change and greenhouse gas emissions; risks relating to
community relations and maintaining the Corporation’s social license to
grow and operate; credit risks; shortage of equipment and supplies;
competition in product markets; future market access; interest rate
changes; risks in obtaining insurance; uncertainties in labour
relations; uncertainty in the ability of the Corporation to enforce
legal rights in foreign jurisdictions; uncertainty regarding the
interpretation and/or application of the applicable laws in foreign
jurisdictions; legal contingencies; risks related to the Corporation’s
accounting policies; identification and management of growth
opportunities; uncertainty in the ability of the Corporation to obtain
government permits; risks to information technologies systems and
cybersecurity; failure to comply with, or changes to, applicable
government regulations; bribery and corruption risks, including failure
to comply with the Corruption of Foreign Public Officials Act or
applicable local anti-corruption law; the ability to accomplish
corporate objectives, goals and plans for 2019; and the Corporation’s
ability to meet other factors listed from time to time in the
Corporation’s continuous disclosure documents. Readers are cautioned
that the foregoing list of factors is not exhaustive and should be
considered in conjunction with the risk factors described in this press
release and in the Corporation’s other documents filed with the Canadian
securities authorities, including without limitation the Annual
Information Form of the Corporation dated February 13, 2019 for the
period ending December 31, 2018, which is available on SEDAR at www.sedar.com.

The Corporation may, from time to time, make oral forward-looking
statements. The Corporation advises that the above paragraph and the
risk factors described in this press release and in the Corporation’s
other documents filed with the Canadian securities authorities should be
read for a description of certain factors that could cause the actual
results of the Corporation to differ materially from those in the oral
forward-looking statements. The forward-looking information and
statements contained in this press release are made as of the date
hereof and the Corporation undertakes no obligation to update publicly
or revise any oral or written forward-looking information or statements,
whether as a result of new information, future events or otherwise,
except as required by applicable securities laws. The forward-looking
information and statements contained herein are expressly qualified in
their entirety by this cautionary statement.

View source version on businesswire.com:

https://www.businesswire.com/news/home/20190213005887/en/

For further investor information contact:
Joe Racanelli, Director
of Investor Relations
Telephone: 416.935.2457
Toll-free:
1.800.704.6698
E-mail: investor@sherritt.com

Sherritt international Corporation
Bay Adelaide Centre, East Tower
22
Adelaide St. West, Suite 4220
Toronto, ON M5H 4E3
www.sherritt.com

Source: Sherritt International Corporation

Sherritt Reports Higher Nickel Production at Moa JV and Stronger Balance Sheet for Q4 2018

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