Tag Archives: Mineral Sector

CUBA COMENZARÁ A EXPLOTAR EN JULIO MILLONARIO PROYECTO MINERO EN OCCIDENTE

LA HABANA, Agencia EFE, MAY 07, 2017 3:36 PM

Original:  PROYECTO MINERO

Cuba acelera la ejecución del proyecto minero-metalúrgico Castellanos, en la provincia occidental Pinar del Río, con una inversión de $278 millones, una de las mayores que acomete actualmente el país, informaron este domingo medios locales.

Las obras del proyecto deben concluir el próximo mes de julio, cuando se pondrá en marcha la planta que producirá unas 220 toneladas anuales de concentrados de plomo y zinc, destinadas a la exportación, informó la emisora oficial Radio Reloj.

El objetivo es la explotación del yacimiento Castellanos, un sitio en el que se extrajo oro entre los años 90 y principios de los 2000 y donde ahora se pretende explotar otros minerales.

La Empresa Mixta Minera del Caribe (Emincar), encargada del proyecto, es fruto de la alianza en 2012 de la estatal cubana Geominera -que ostenta más de la mitad del capital- con una transnacional europea y una firma angoleña, cuyos nombres no se han dado a conocer.

Los análisis del lugar indican que en yacimiento hay reservas para 11 años, periodo en el que el que su explotación aportará alrededor de un millón de toneladas, según directivos del Ministerio de Energía y Minas (Minem).

Las primeras exportaciones de la compañía se prevén para octubre de 2017, aunque la plena producción de la planta se alcanzará en el primer trimestre de 2018.

Las obras también incluyen la reparación del puerto de Santa Lucía, con el fin de utilizarlo para enviar la producción terminada por vía marítima hasta la terminal de contenedores de la Zona Especial de Desarrollo del puerto Mariel (ZEDM), desde donde se enviará al exterior.

La reanimación de Santa Lucía, un poblado de tradición minera situado a unos 210 kilómetros al oeste de La Habana, supone además la generación de unos 1,000 empleos de manera directa e indirecta.

Se estima que alrededor de 480 trabajadores asumirán las operaciones de la nueva industria y de ellos, una parte serán los mismos que participan en la etapa inversionista.

La caída del precio de los metales y los altos costos de producción llevaron al cese completo de las actividades de explotación minera en Santa Lucía, entre los años noventa y principios de la década de los 2000, cuando más de 2,000 personas se quedaron sin trabajo.

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Spain’s Repsol begins Cuba offshore drilling-sources

By Jeff Franks | Reuters – 17 hrs ago; HAVANA (Reuters)

Spanish oil company Repsol YPF has begun drilling the first well in Cuba’s long-awaited exploration of offshore oilfields that the communist country says hold both billions of barrels of oil and the key to greater prosperity, industry sources told Reuters on Thursday.

The massive Scarabeo 9 drilling rig, which arrived in Cuban waters two weeks ago, began drilling into the sea floor about 30 miles northwest of Havana on Tuesday night, the sources said.

A Repsol spokesman said the company could not comment on “operational details.”

The newly built, high-tech rig is operating in 5,600 feet of water, or what the oil industry calls “ultra-deep water,” in the Straits of Florida, which separate Cuba from its longtime ideological foe, the United States.

Sources close to the project said such wells generally take about 60 days to complete.

Repsol, which is operating the rig in a consortium with Norway’s Statoil and ONGC Videsh, a unit of India’s Oil and Natural Gas Corp, has said it will take several months to determine the results of the exploration.

The well is the first of at least three that will be drilled in Cuban waters with the Scarabeo 9, which was built in China and is owned by Saipem, a unit of Italian oil company Eni.

Sources have said that Repsol will drill the first well and then the rig will go to Malaysia’s Petronas in partnership with Russia’s Gazprom Neft and then back to Repsol for the third well.

It is not clear what happens after that, although some sources have said Repsol, which is leasing the Scarabeo 9 from Saipem at a rate said to be more than $500,000 a day, will move the rig to Brazil for exploration there.

Cuba has said it may have 20 billion barrels of oil in its northern waters, which are its part of the Gulf of Mexico. The U.S. Geological Survey has estimated it may have 5 billion barrels of oil, but its study does not include the entire Cuban gulf zone.

EASE FINANCIAL WOES

Cuba, which is in the midst of reforming its Soviet-style economy, is hoping oil will ease it chronic financial woes and bring energy independence from its socialist ally Venezuela. It receives about 115,000 barrels daily from the oil-rich South American country.

But if oil is found, experts say it could take five years or so to begin production because more drilling will be needed and production infrastructure put in place.

Repsol drilled the only previous offshore well in Cuba in 2004 and said it found oil but that it was not “commercial.”

It has been difficult to find a rig for more drilling because of the 50-year-long U.S. trade embargo against Cuba, which limits the amount of U.S. technology that can be used.

The Scarabeo 9, which is of Norwegian design, has only one piece of American equipment – the blowout preventer, a key part that failed in the 2010 blowout of a BP well in the U.S. Gulf of Mexico.

The BP well, which was in more than 5,000 feet of water and spilled 5 million barrels of oil, stained hundreds of miles of U.S. coastline.

In Florida, 90 miles north of Cuba, the Cuba offshore project has raised fears that a similar accident could damage the state’s beaches and coral reefs.

Drillers in Cuban waters could get within 45 miles of Florida, while in the U.S. gulf no exploration is permitted within 125 miles of the state.

At Repsol’s invitation, a team of U.S. experts inspected the rig in December in Trinidad and Tobago and said it complied with all existing engineering and safety standards.

But the United States, which has no official diplomatic relations with Cuba, has only made safety preparations from afar and has not been otherwise involved in the project.

Countries such as Norway and Brazil have helped lead an international effort to get Cuba ready for oil exploration and the possibility of an oil spill.

The project has gone forward despite opposition in the United States from Cuban exile leaders, who have proposed legislation in the U.S. Congress to try to stop Repsol.

They fear that oil will enrich and assure the survival of the Communist government they have long opposed.

“We need to figure out what we can do to inflict maximum pain, maximum punishment to bleed Repsol of whatever resources they have if there’s a potential for a spill that would affect the U.S. coast,” U.S. Rep. David Rivera from Florida told a congressional subcommittee in Miami on Monday.

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Craig Wong of the Canadian Press: “Ian Delaney, Sherritt CEO Retires”

Ian Delaney, CEO of Sherritt International is retiring, but will remain active as Chairman of the board. Delaney’s visionary linking of Cuba’s nickel concentrate production with Sherritt’s unused refinery in Fort Saskatchewan Alberta has been of immense benefit to both Cuba and Sherritt. A fact not widely known inside or outside Cuba is that the Government of Cuba is now a foreign investor in Canada as joint owner of the Refinery in Alberta.

Ian Delaney and Raul Castro Appreciating a Comment

Long-time Sherritt chief executive Ian Delaney to retire, remains chairman

By: Craig Wong, The Canadian Press, November 24, 2011

The long-time chief executive of Sherritt International Corp., who transformed the company by flying in the face of conventional wisdom and betting big on Cuba, is retiring at the end of the year. Ian Delaney, who turned 68 last month, will remain chairman of the Toronto-based miner while Sherritt’s chief financial officer, David Pathe, will replace him as CEO on Jan. 1.

Delaney took over the struggling company — then Sherritt Gordon — in 1990 after winning a proxy battle with the help of Eric Sprott, then-president of Sprott Securities, and Bruce Walter of Delaney Walter & Co. But it was his defiance of the U.S. trade embargo and investment in the Moa joint venture in Cuba that helped Delaney, a former investment banker with a reputation as “the Smiling Barracuda of Bay Street,” make his mark.

Delaney, who was Sherritt’s CEO for much of the last two decades, was often called Fidel Castro’s favourite capitalist. His deal with the Cuban dictator provided the communist country with hundreds of millions of dollars in badly needed foreign exchange in return for mining rights that turned Sherritt into a diversified resources company. Raymond Goldie, senior mining analyst at Salman Partners, said Delaney once pronounced that he wanted to turn Sherritt into the “Canadian Pacific of Cuba,” referring the Canadian railway that once owned coal mines, hotels, ships, and oil and gas assets before it spun them all off. “He bet big on Cuba,” said Goldie, who noted Sherritt would later sell its hotel, mobile phone and other non-core investments in Cuba.

When Delaney took over Sherritt the company was floundering. It had a nickel refinery in Fort Saskatchewan, Alta., but nothing to refine. “Sherritt had a smelter refinery all dressed up and nothing to feed into it,” Goldie said. So Delaney turned to Cuba for supply, a move that Goldie said the company had considered before, but rejected because of the risks involved with angering the United States. The company’s investment in 1994 would eventually lead to Delaney and his family, as well as several top executives, being blacklisted by the U.S. State Department and barred from visiting the United States. “He was brave enough to say ‘I’m never going to set foot in the United States again,'” Goldie said.

While the deal turned Sherritt into a major player in Cuba, it also made him an enemy of some U.S. politicians. “Ian Delaney has made a deal with the devil,” like those who “did business with Hitler’s Germany or Stalin’s Russia,” Marc Thiessen, an aide to Senate Foreign Relations Committee chairman Jesse Helms, was quoted as saying at the time. Helms, the ultra-conservative Republican Senator from North Carolina, was the co-author of the Helms-Burton Act, which tightened U.S. sanctions against foreigners who invest in Cuba. But Delaney thumbed his nose at the insults and in 1996 Sherritt became the first foreign capitalist company to hold a board meeting in Cuba since Castro’s revolution in 1959.

Archibald Ritter, a Carleton University economics professor and expert on Cuba, said Sherritt has been a driving force in the modernization of the Cuban resource sector. “It has been mutually beneficial,” he said. Ritter said Cuba had been relying on old Soviet-era technology, but Sherritt changed all of that with modern technology for mining and drilling for oil that boosted exports and increased production for the country.

Nearly two decades after its initial investment, Sherritt’s Moa joint venture produced 33,972 tonnes of nickel and 3,706 tonnes of cobalt in 2010. The company also owns oil and gas operations in Cuba as well as a stake in power utility Energas, which has power plants across the country with a combined capacity of 356 megawatts.

Since the Cuban deal, Sherritt has also cashed in on the global commodities boom of the last decade, also betting heavily on coal, expanding its operations in Canada beyond nickel and other metals. In 2001, Delaney partnered with the Ontario Teachers’ Pension Plan and acquired the Luscar coal business in Alberta that supplies fuel to coal-fired power plants in Alberta and Saskatchewan. More recently, though, Sherritt has faced difficulties. Its shares (TSX:S) were unchanged in trading Thursday at $5.09, but down from their peak of more than $17 in 2007 during the commodities boom.

In 2009, Sherritt saw an oil production-sharing contract between the Cuban government and Sherritt’s partner Pebercan Inc. (TSX:PBC) scrapped nearly 10 years early after months of efforts to have the Cuban government catch up on missed payments to the company.

Earlier this year, Sherritt extended its work schedule and increased estimated costs for its Ambatovy project in Madagascar. It cited a litany of problems including poor performance by contractors and inaccurate estimates on the project in the island country off the east coast of Africa. The company has said the capital cost of the project will come in at US$5.5 billion, about 16 per cent more than it had previously predicted. In the quarter ended Sept. 30, Sherritt more than doubled its profits to $45.5 million or 16 cents a share. That was up from $22.5 million or seven cents a year ago. Revenues rose to $466.4 million from $412.7 million. Besides its nickel and cobalt operations, the company is the largest producer of thermal coal in Canada. It also is the largest independent energy producer in Cuba, with extensive oil and power operations across the island.

Sherritt, which has more than 6,800 employees and a stock market value of more than $1.5 billion, also licenses its nickel mining technology to other metals companies.

See also:

Bad News for Cuba’s Nickel Industry and Sherritt, June 28, 2010

Does Sherritt International Have a Future in Cuba?, October 20, 2010

From The Cuba Standard: “Piñón on Energy: Analyzing Sherritt”, February 25, 2011

Up-Date on Canadian-Cuban Economic Relations, May 27, 2011

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As Cuba plans to drill in the Gulf of Mexico, U.S. policy poses needless risks to our national interest

The Center for Democracy in the Americas’ Cuba Program has published a thorough exploration of Cuba’s petroleum exploration plans and prospects and the implications for United Sates” policy towards Cuba generally and in the oil sector more specifically.It is the most thorough and well-balanced assessment of this issue that I have seen. (Apologies for not getting some publicity out on this work earlier.)

Here is a hyperlink to the study. The Preface and the last coupleof Concluding comments are als presented beliw.

As Cuba plans to drill in the Gulf of Mexico, U.S. policy poses needless risks to our national interest

The Center for Democracy in the Americas’ Cuba Program; February 2011

PREFACE

This year Cuba and its foreign partners will begin drilling for oil in the
Gulf of Mexico. Drilling will take place as close as 50 miles from Florida
and in sites deeper than BP’s Macondo well, where an explosion in April 2010
killed 11 workers and created the largest oil spill ever in American waters.
Undiscovered reserves of approximately 5 billion barrels of oil and 9 trillion
cubic feet of natural gas lie beneath the Gulf of Mexico in land belonging
to Cuba, according to the U.S. Geological Survey, although Cuba’s estimates
contain higher figures. The amount actually recoverable remains to be seen.
Finding oil in commercially viable amounts would be transformative for
Cuba. Revenues from natural resource wealth have the potential to provide
long-sought stability for Cuba’s economy and are likely to significantly alter
its relations with Venezuela and the rest of Latin America, Asia and other
leading energy producing and consuming nations. Discoveries of commercially
viable resources would also have an enormous impact upon the Gulf
environment shared by Cuba and the United States.
The U.S. embargo against Cuba, a remnant of the Cold War, is an obstacle
to realizing and protecting our interests in the region. Not only does it prohibit
U.S. firms from joining Cuba in efforts to extract its offshore resources, thus
giving the competitive advantage to other foreign firms, but it also denies
Cuba access to U.S. equipment for drilling and environmental protection—an
especially troubling outcome in the wake of the disastrous BP spill. The embargo compels Cuba’s foreign partners to go through contortions—such
as ordering a state of the art drilling rig built in China and sailing it roughly
10,000 miles to Cuban waters—to avoid violating the content limitations
imposed by U.S. law.
Most important, due to the failed policy of isolating Cuba, the United
States cannot engage in meaningful environmental cooperation with Cuba
while it develops its own energy resources. Our government cannot even
address the threat of potential spills in advance from the frequent hurricane
activity in the Gulf or from technological failures, either of which could put
precious and environmentally sensitive U.S. coastal assets—our waters, our
fisheries, our beaches—at great peril.
The risks begin the moment the first drill bit pierces the seabed, and
increase from there. Yet, our policy leaves the Obama administration with
limited options:
• It could do nothing.
• It could try to stop Cuba from developing its oil and natural gas, an alternative
most likely to fail in an energy-hungry world, or
• It could agree to dialogue and cooperation with Cuba to ensure that drilling
in the Gulf protects our mutual interests.
Since the 1990s, Cuba has demonstrated a serious commitment to protecting
the environment, building an array of environmental policies, some based
on U.S. and Spanish law. But it has no experience responding to major
marine-based spills and, like our country, Cuba has to balance economic
and environmental interests. In this contest, the environmental side will
not always prevail.
Against this backdrop, cooperation and engagement between Cuba and
the United States is the right approach, and there is already precedent for it.
During the BP crisis, the U.S. shared information with Cuba about the
spill. The administration publicly declared its willingness to provide limited
licenses for U.S. firms to respond to a catastrophe that threatened Cuba. It also
provided visas for Cuban scientists and environmental officials to attend an
important environmental conference in Florida. For its part, Cuba permitted
a vessel from the National Oceanic and Atmospheric Administration to look for damage in Cuban waters. But these modest measures, however welcome,
are not sufficient, especially in light of Cuba’s imminent plans to drill.
Under the guise of environmental protection, Reps. Ileana Ros-Lehtinen
and Vern Buchanan, Members of the U.S. Congress from Florida, introduced
bills to impose sanctions on foreign oil companies and U.S. firms that help
Cuba drill for oil, and to punish those foreign firms by denying them the right
to drill in U.S. waters. This legislation would penalize U.S. firms and anger
our allies, but not stop Cuba from drilling, and will make the cooperation to
protect our mutual coastal environment more difficult should problems occur.
Energy policy and environmental protection are classic examples of
how the embargo is an abiding threat to U.S. interests. It should no longer
be acceptable to base U.S. foreign policy on the illusion that sanctions will
cause Cuba’s government to collapse, or to try to stop Cuba from developing
its oil resources. Nor should this policy or the political dynamic that sustains
it prevent the U.S. from addressing both the challenges and benefits of Cuba
finding meaningful amounts of oil in the Gulf of Mexico.
The path forward is clear. The Obama administration should use its
executive authority to guarantee that firms with the best equipment and
greatest expertise are licensed in advance to fight the effects of an oil spill.
The Treasury Department, which enforces Cuba sanctions, should make clear
to the private sector that efforts to protect drilling safety will not be met with
adverse regulatory actions. The U.S. government should commit to vigorous
information sharing with Cuba, and open direct negotiations with the Cuban
government for environmental agreements modeled on cooperation that
already exists with our Canadian and Mexican neighbors.
Most of all, the administration should replace a policy predicated on Cuba
failing with a diplomatic approach that recognizes Cuba’s sovereignty. Only
then will our nation be able to respond effectively to what could become a
new chapter in Cuba’s history and ours.
There is little time and much to do before the drilling begins.
Sarah Stephens; Executive Director


RECOMMENDATIONS (7 to 9)

Accept the Reality of Cuba’s Oil Program
7. The United States is served by an economically stable Cuba.
Cuba is currently undertaking significant economic reforms. It has announced
layoffs for 500,000 state workers and proposed economic reforms to enable
Cuba’s nascent private sector to absorb them. More Cubans working in the
private economy will provide more Cubans with greater personal autonomy.
If Cuba is able to develop its hydrocarbon reserves in a manner that places
the Cuban economy on a more sustainable footing, this could lessen the
possibility of another migration crisis or other forms of instability.
Cuba’s economic plans include its vision for oil. As Lisa Margonelli said at
the National Foreign Trade Council, “Cuba has an elaborate plan to be a port,
to be a source for refined products, to serve as a bonded warehouse for the
distribution of goods throughout the region. Despite being a small country,
they are thinking about energy and their economic future in a big way.”
Economies dependent on the extraction of natural resources are often
unsuccessful. Finding oil can be a double-edged sword. Cuba having foreign partners will help them guide the process of incorporating these resources
into its economy over time. Given the time required to monetize the oil,
Cuba should aim for having healthier economic and political institutions
operating before the oil money starts to flow.
8. Cuba’s potential contribution to the regional energy market could be valuable to the U.S.
Professor Soligo cites several benefits to the United States if Cuba is able to
realize the potential of its oil resources in the Gulf of Mexico. In his remarks
at the National Foreign Trade Council, Professor Soligo said, “Whoever
develops these resources it would be good for the United States.”
For example, Professor Soligo observed that Cuba has the potential to
develop an ethanol industry, and the U.S. cannot meet its ethanol targets
without imports. Policy changes would be required to allow Cuba access
to the U.S. market, and would provide substantial environment and energy
policy benefits were they to be made. While Cuba has opposed using corn
for ethanol, it has the resources to produce cellulosic material in its place.
Lisa Margonelli observes, “It is in U.S. interests to create fair price
competition for Cuban oil rather than forcing them into one-buyer fixed
price contracts with China. Securing the flow of more oil into the world
spot market has been one of the few effective American responses to OPEC’s
pricing power since 1979.”
9. U.S. policy should welcome the geo-political changes oil could
usher in.
Cuba is unlikely to disassociate itself from Venezuela or China regardless of
what the U.S. does. Still, Cuba’s post-revolutionary history is defined, in part,
by its dependence on the former Soviet Union and later on Venezuela, and
the development of its offshore resources could give the island’s economy
greater independence than it has enjoyed to date.
If Cuba were no longer dependent on Venezuela, and the U.S. engaged
in cooperative efforts on oil and the environment, we would be establishing
deeper and more positive ties with Cuba’s government and signal to its citizens
that we have a stake in their success.
as c uba p lans t o dr ill, u.s. p olicy p uts our nat ional interest at r isk
10. U.S. policy toward Cuba should no longer be predicated on Cuba failing.
For more than 50 years, U.S. policy toward Cuba has been predicated on
regime change; the Cuban government being overthrown, or being strangled
into submission by U.S. sanctions or the pressure of diplomatic isolation.
It should no longer be acceptable to base U.S. foreign policy on the illusion
that sanctions will cause Cuba’s government to collapse, or even stop
Cuba from developing its oil resources. Nor should the inertia exhibited by
this policy or the political dynamic that sustains it prevent the U.S. from
addressing both the challenges and benefits of Cuba finding meaningful
amounts of oil in the Gulf of Mexico.
The embargo imposes real constraints on the government’s ability to
protect our nation against the potentially grave consequences of an environmental
disaster linked to drilling for oil in the Gulf of Mexico by Cuba
and its foreign partners.
As one expert told us, “Cuba is a country with whom we have virtually
no diplomatic or commercial relations. If a well gets out of control, we have
no genuinely effective recourse if we’re waiting for a transition in Cuba’s
government to occur.”
If Cuba brings commercially viable amounts of oil out of the Gulf, the
embargo becomes even more irrelevant than it is today. How should the U.S.
respond, especially now that drilling in 2011 is a fait accompli and will take
place approximately 50 miles from our shores?
The U.S. should respond by changing the policy, in the ways we describe
here, so the national interest of the United States can be realized and protected.

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Does Sherritt International Have a Future in Cuba?

By Arch Ritter

The joint venture between Sherritt International and Cuba is a cooperative masterpiece that generates great benefits for both parties.  However, when looked at from the perspective of transportation costs – shipping nickel/cobalt concentrate from Cuba to Fort Saskatchewan Alberta – together with the “Helms-Burton” status of the mine, some questions occur as to its long term viability.

The Moa mine was initially constructed by US interests – the Moa Bay Mining Company and expropriated by the government of Cuba in August, 1960. The US Foreign Claims Settlement Commission valued the company at $88,349,000 at the time of the take-over.

Sherritt’s connection with Cuba began in 1991 with purchases of Cuban nickel concentrate for its Alberta refinery.  Sherritt had had insufficient volumes of concentrate for many years and in 1990 a refining contract with INCO expired. In 1994, Sherritt International and the Compania General de Niquel of Cuba established a 50/50 joint venture, which now owns the Moa extraction, processing, and smelting operation, the Alberta refinery and the international marketing enterprise. The President of the company, Ian Delaney, also negotiated agreements with the Cuban Government, permitting Sherritt to enter other sectors of the economy, including electric energy, oil and gas, agriculture, tourism, transportation, communications, and real estate. By 2000, Sherritt International had become a major diversified conglomerate in Cuba.

Sherritt International CEO Ian Delaney and President Raul Castro appreciate a comment.

In this deal, the Cuban Government became and is currently a foreign investor in Canada, as the Compania General de Niquel owns 50% of the nickel refinery, a fact not well known in either Cuba or Canada.

I. The Nickel/Cobalt Operation

The linking of the Moa nickel deposit and part of Cuba’s processing capacity with the Alberta refinery and its access to attractive energy sources was a masterful move and has generated important benefits for Cuba and for Sherritt. Cuba has acquired a market for its nickel concentrate. It acquired access to improved production technologies relative to its older 1950s-vintage US technology and its 1960s-vintage Soviet technology which has generated improvements in productivity, energy efficiency, environmental impacts, and health and safety. The Government of Cuba is now the joint owner of a vertically integrated nickel operation, from extraction through to refining and international marketing. Cuba also has obtained new technologies and managerial skills for oil and gas extraction and utilization, as well as electricity generation.

(Click to enlarge)

The Nickel Refinery at Fort Saskatchewan Alberta, jointly owned 50/50 by Sherritt International and the Compania General de Niquel of Cuba.

Sherritt is able to utilize more fully its Canadian refinery and to use its base in nickel to enter other sectors in Cuba. Its earnings from its Cuban operations are significant. The joint venture has been able to increase metal production and achieve high net operating earnings, which have been in the area of 40 to 50 percent of the company’s gross revenues for most years, depending on international nickel prices.  The following Table presents some information on Sherritt’s Cuban operations, drawn from its Annual Reports.

(Click to enlarge)

II. Petroleum, Natural Gas and Electric Power

Sherritt International’s petroleum and natural gas activities also have been successful. New sources of oil and gas have been discovered and extraction rates have increased through enhanced recovery techniques from 1996 to 2000. Natural gas recovery and utilization has also been improved through the construction of two processing plants, a feeder pipeline network, and a 30 Kilometer pipeline to Havana (Sherritt International, Annual Report, 1997, 13).

Sherritt invested CDN $215 million for the construction of two integrated gas processing and electrical generation systems. The natural gas feedstock previously had been flared and wasted. Commissioned in mid-2002, these operations had a combined capacity of 226 megawatts and generated a significant proportion of Cuba’s electricity. At the same time they reduced sulfur emissions, a potential problem especially at the Varadero site, which is adjacent to the hotel zone. By 2007, installed electricity generation capacity had been further increased to 375 mega watts, following an 85 MW expansion that came on stream in early 2006.

In February 1998, Sherritt acquired a 37.5 percent share of Cubacel, the cellular telephone operator in Cuba for $US 38 million, but this has been resold. “Sherritt Green,” a small agricultural branch of the company, entered market gardening, cultivating a variety of vegetables for the tourist market. Sherritt also acquired a 25 percent share of the Las Americas Hotel and golf course in Varadero and a 12.5 percent share of the Melia Habana Hotel, both of which were managed by the Sol Melia enterprise but these also have been divested.  By 2010, Sherritt’s Cuban operations were large and growing. Gross revenues reached CDN $1,040 million in 2008.

III. Energy Costs, Transport Costs and Potential Relocation

However, there are two clouds on the horizon. First, Cuban nickel concentrate is transported by ship to the East coast of Canada and then overland to the Alberta refinery. This seems to make sense economically at this time low energy prices in Alberta and the existence of the refinery there compensate for high transportation costs. However, if – or when –transportation costs rise with higher energy prices, and when the existing plant becomes obsolete or simply reaches the end of its useful life, would a different location become more attractive?   Low cost energy is also available in Venezuela for example. The Chvez factor is also of relevance. Will a future Cuban post-Raul Government still be enamored of a Chvez or post-Chvez Government in Venezuela? What will be the relative risks of relocating the refinery to another location such as Venezuela?

So far, Cuba is tied to the Canadian location through its 50% joint ownership of the Alberta refinery. Would Sherritt ever accept a transfer of the refinery to Venezuela, if pushed by its Cuban partner?  Perhaps in a more distant future that is difficult to foresee. However, Alberta will continue to have competitive energy prices and low risk for a many years to come.

IV. “Helms-Burton” Status of the Mine Properties.

The second possible problem for Sherritt is that the Moa mine and the concentration plant are “Helms-Burton” properties for which there are US claimants. US-Cuba normalization may require Sherritt to negotiate some sort of compensation package for the original US owners.  In one scenario, the US claimants would simply take over the Cuba-Sherritt operation in Cuba. But this would not be reasonable because at this time, the refinery for Cuban nickel is in Alberta and it is jointly owned by Cuba. To construct another would be costly. My guess, however, is that Sherritt, the Government of Cuba and the US claimants will negotiate an arrangement that will be reasonable for all parties.

In any case, the claim of US interests on the mine property generates uncertainties and will be problematic at some time in the future. Sherritt International may well be one of the very few economic interests that perhaps could lose from US-Cuban economic and diplomatic normalization.

V. “Nickel Pig iron”

As noted in an earlier entry in this Blog, a technological breakthrough in the production of “Nickel Pig iron” (NPI), a substitute for refined nickel is already having an impact on the nickel market and causing reductions in the price of nickel. This technology will likely put a cap on nickel prices in future a as alternate new supplies enter the market. This will likely reduce Sherrittt and Cuba’s foreign exchange earnings from nickel exports in future, and may halt any expansions in nickel nickel mining for some time to come. (See Bad News for Cuba’s Nickel Industry and Sherritt.)

Thus, while the near-future looks as bright for Sherritt International in Cuba as the last 10 years or so, these three issues raise ambiguities about its medium and longer term future – at least in the nickel sector.

Ian Delaney: a Sympatico CEO, it would appear

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