Sherritt International Corp. said it received a rare US government license allowing it to ship fuel and sulfur to its Cuban nickel operations, a crucial step toward restarting production and securing a financial rescue.
The authorization from the US Treasury Department’s Office of Foreign Assets Control permits the purchase and delivery of fuel, fuel oil and sulfur to the struggling Canadian miner’s Moa nickel operation in Cuba, the company said Tuesday in a news release. It’s the first of a series of emergency licenses sought by Sherritt and US investment firm Gillon Capital LLC to begin mining and processing again on the island and resume refining in Canada.
“It’s extremely unique in terms of US policy towards Cuba,” Sherritt Chief Executive Officer Peter Hancock said in an interview. “This doesn’t bring us to the finish line, far from it, but it’s a clear indication of the direction of travel.”
The approval marks a significant breakthrough for Sherritt, which suspended joint venture activities on the island in May and halted refining at its Fort Saskatchewan facility in Alberta in June after President Donald Trump expanded US sanctions against foreign companies doing business in Cuba. The disruption has deepened its financial troubles, leaving the company facing severe liquidity constraints and raising substantial doubt about its ability to continue operating.
Sherritt has been working with Gillon Capital, the family office of real estate magnate and Republican Party donor Ray Washburne, which is seeking to acquire a controlling stake in the company. Sherritt initially planned to dissolve its Cuban joint ventures after Trump’s executive order, before reversing course after Washburne — a former adviser to the US president — made his approach in May.
“Gillon definitely brings skills and connection with the US government that Sherritt obviously doesn’t have,” Hancock said.
The OFAC license also covers transportation, insurance, banking and other services needed to deliver the materials to Cuba, according to Sherritt. The Treasury Department has yet to publish the license itself.
In a separate development, Sherritt said it reached an interim agreement with Moa Bay Mining Co., the holder of a certified US claim related to the Cuban nickel operations under the Helms-Burton Act, which allows certain lawsuits over property confiscated by Cuba’s communist government.
Under the Sept. 23 deal, which wasn’t announced until now, Moa Bay agreed to allow fuel shipments in exchange for “consent fees” paid by or on behalf of Sherritt. It also agreed not to pursue claims against suppliers, banks, insurers and other parties involved in the authorized shipments. The arrangement received separate OFAC authorization, according to the company.
The interim agreement addresses one of the legal obstacles facing Sherritt’s potential buyers. The claim, linked to Citigroup Inc., dates to the seizure of the mining assets by Fidel Castro’s government in 1960. Originally valued at $88 million by a US claims commission, it’s the third-largest certified claim against Cuba.
Washburne previously said he was willing to buy out the claim on the mine as part of his pursuit of Sherritt. A rival consortium that includes Glencore Plc, Texas oil billionaire Albert Huddleston and Sherritt creditor Kyma Capital Ltd. has also said it intends to address the claims within the US legal framework.
Another claim, tied to Sherritt’s power-generation business in Cuba and inherited by the owner of Office Depot, has complicated the company’s position. Atlas Holdings LLC, which acquired Office Depot’s parent company, filed an $803 million lawsuit in July against Cuba’s state electricity company and Energas SA, a power venture in which Sherritt holds a stake.
The regulatory progress could strengthen Washburne’s position in a battle for control of Sherritt, as Gillon’s exclusivity window with the Canadian miner was due to expire this month. The rival consortium, which also includes Brevan Howard co-founder Trifon Natsis, has proposed injecting fresh capital in exchange for at least 55% of the company on a fully diluted basis.
Hancock said the board “will continue to look at that group seriously” as well as any other proposal that arises. But the CEO suggested that Gillon’s role in securing US regulatory support would be difficult for rival bidders to replicate.
The fuel license doesn’t authorize Sherritt to restart production. The company is seeking a another emergency license that would allow mining and processing operations to resume, with Gillon’s support. Additional longer-term approvals would be required to allow US investors to acquire a substantial equity stake in Sherritt and provide capital for its restructuring.
Sherritt is finalizing arrangements for an initial fuel shipment, according to the company. It cautioned that the regulatory authorizations alone won’t resolve its liquidity problems or capital requirements.
The company remains in talks with lenders, government entities and other potential sources of strategic capital, including Gillon. Its ability to meet obligations to suppliers and other stakeholders depends on securing additional financing and implementing a broader recapitalization.
Hancock described discussions with senior and second-lien creditors as frequent and productive, despite public disagreements surrounding the company’s restructuring efforts. Sherritt isn’t currently negotiating potential debt haircuts with creditors, the CEO added. Instead, discussions have focused on how lenders can support the company going forward.
(By Paula Sambo)
