Sherritt International Corp

TSX:S

Earnings Call Transcript

[Operator]

Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelly and I will be your operator today. Welcome to the Sherritt International Corporation's Fourth Quarter 2018 Results Release Conference Call. [Operator Instructions]. I would like to remind everyone today that this conference call is being recorded, Thursday, February 14, 2019 at 9 a.m. Eastern Time.I would now like to turn the conference over to Mr. Joe Racanelli, Director of Investor Relations and Communications. Please go ahead, sir.

[Joe Racanelli, Director of Investor Relations]

Good morning, everyone, and thank you for joining us. Before we begin, I'd like to remind everyone that we will be using a presentation and that presentation is available from our website at sherritt.com. We will also be making some forward-looking statements and the risks associated with these statements are detailed in our presentation. With me are David Pathe, our CEO; Andrew Snowden, our Chief Financial Officer; and Steve Wood, Chief Operating Officer of the company, who will review our financial and operating results in more detail for the fourth quarter. Copies of our MD&A, financial statements and press release are available and were released last night and our available from our website. Please go ahead, David, and I'll turn the call over to you.

[David V. Pathe, Chairman, President & CEO]

Okay. Well, thanks, Joe. Good morning, everyone. As we always do, Andrew, Steve and I have a few things that we want to just highlight for you and then we'll take your questions. Starting into it then, on Page 4, for those of you that have the presentation, 2018 was a volatile year in terms of commodity markets, a lot of up and down. We'll talk a bit about that. But from our perspective of focusing on the things we can control, we saw progress both in our balance sheet and in our operations. We finished 2018 with a stronger balance sheet than we began the year with. Our cash position -- we finished with a little more cash than we began the year with for the first time in a few years. We eliminated $130 million worth of debt from our balance sheet. Total cash contributions from Moa of over $47 million between debt repayment and distributions that started in the second half of the year certainly contributed to that. And we also made progress reducing our general corporate overhead. We're seeing over $6 million reduction on that. Our focus on operational excellence and organizational design and effective capital allocation in our businesses really contributed to that stronger performance. We delivered on the stronger and higher production that we were looking for in the second half of the year in the Moa joint venture following the heavy rains in Moa and the rail disruptions in Western Canada in the first quarter as well as the H2S disruption in supply from an external provider in the fourth quarter as well. And we're now well set up for good production in the second year with -- for this year, with higher inventories of mixed sulphide lined up at the refinery and more inventory in stockpiles in the -- lined up at the front of the processing facility in Moa. So we're feeling like we're primed for a good year in Moa as well. Our net direct cash cost at Moa was in the lowest quartile of global nickel producers for the year. That number made us the lowest-cost finished nickel HPAL facility in the world. And we saw significant improvement in our safety record as well. Steve will touch on that a bit more in his presentation. But we saw a significant reduction in lost-time incidents in our Moa joint venture, and oil and gas has been lost-time incident free since 2016. Looking at commodity prices, we saw a lot of volatility in nickel and cobalt prices over the course of 2018. Nickel got as high as about $7.25. Cobalt got as high as nearly $45 before really starting to come off in the second half of the year. And nickel finished the year at less than $5; I think about $4.80 a pound. And cobalt was down into the $27-$28 range. On Slide 6, you can really see what's happened to nickel and cobalt prices this year, and we've really seen a tale of 2 commodity prices, as the headline says there. Nickel has recovered somewhat, we think more reflecting the fundamentals of the underlying nickel market, and we'll look at that in a moment. Cobalt, however, has continued to decline, certainly seeing continued softness in cobalt markets, and we'll talk a bit more about what's driving that. Over the course of 2018, we saw a real change in the cobalt market after a dramatic run-up in prices over the kind of preceding 18 months from as low as, I think, about $12 a pound up to close to $45. In the second half of the year, we did see more cobalt supply coming online in the form of hydroxides, often out of the Congo. And that led to a bit of a change in sentiment among cobalt consumers from a process of locking in supply and building inventories to de-stocking. And that led to a real sort of shift in supply and demand balance that has led to declining prices in the latter half of 2018, and that trend has continued on so far this year. We're seeing the typical seasonal weakness in cobalt markets that we see over the Lunar New Year as well, but we're still optimistic that we'll see some strength return to cobalt markets as the de-stocking can only run so far and the underlying cobalt fundamentals remain pretty strong. Just to highlight that, electric vehicle sales in 2018 globally grew by 67% to a little over 2 million vehicles. China represented more than half of that with 1.1 million vehicles. And to just give you a sense of how pervasive the electric vehicle theme has become, Ford has recently announced plans to introduce an all-electric F-150 pickup truck. Over on Page 8, you can see a bit more on the nickel fundamentals. The supply deficit and inventory declines that really began in earnest in 2017 really picked up steam in 2018, and we saw accelerated declines in nickel inventories on the LME and Shanghai Future Exchange, and that graph there on Slide 8 highlights that, a 48% decline in inventories. We're starting now, actually, in January 2018, inventories off by that more than 50%. We're down to the lowest inventories, around 230,000 tonnes between the 2 exchanges. That's the lowest it's been in some years and we're anticipating further deficits again this year and should continue to see that deficit decline -- or those inventories decline particularly in the context of growing demand for Class 1 nickel on the battery side. Further contributing to those ongoing declines is we are still seeing pretty robust demand growth across the board in all the segments of nickel demand. Stainless is still the single biggest consumer of nickel and we're seeing -- or anticipating to see about 4% growth stainless steel demand year-over-year. The uncertainty that we've seen in over the course of 2018 into this year around global trade wars and impact of slowing or potential for slowing growth rates as a result of that have weighed on that market in the near term, but the underlying fundamentals, we think, remain strong. Batteries is obviously a very strong growth area. It's still a relatively small segment of the market at 100,000 tonnes or so a year, but we're expecting to see 30%-35% growth on that number this year, which bodes particularly well for Class 1 pure nickel supply like we produce at both of our operations. And if we can see some of the macro uncertainty around trades and tariffs, if we can see some progress on that and some agreement come to be made between the U.S. and China on trade tranquility over the course of this year, we think that will be positive for sentiment compared to what we've seen in the latter part of 2018. And with that, I'm going to turn it over to Steve and let him give you an operational update, and Andrew will talk about a few things from finance. And I'll come back at the end before we take your questions.

[Stephen James Wood, Executive VP & COO]

Okay. Thanks, Dave, and good morning, everyone. On Slide 11, I'd like to review our safety update, as I always do. We continue to implement best practices available for safety management to ensure that people go home safe and sound every day. And from this slide, you can see that we have achieved the lowest lost-time frequency and recordable-injury frequency rates in Sherritt's history. This slide covers Moa and OGP -- I'm sorry -- and oil and gas and power. And that continues to put us firmly in the lowest quartile or the best quartile of our peer group with respect to safety statistics. Over on Slide 12, I'll cover off the Moa JV highlights. On a 50% basis, Moa produced 4,294 tonnes of nickel and 428 tonnes of cobalt in the quarter. Cobalt production was down about 8% from the previous year's quarter, fourth quarter, and that's due largely to third-party feed that was used in the Q4 having a higher nickel-to-cobalt ratio. You'll note that, just as a reminder, that we source third-party feed when the capacity at the refinery is available and when it makes economic sense. I should point out that the nickel-to-cobalt ratio in the mixed sulphides produced at Moa in the quarter was well within our normal range of around 10 to 1. Nickel production in the quarter grew by about 4% from the previous year's fourth quarter. The improvement was due largely to a number of factors, but largely driven by the new mining equipment that we deployed in the year. The new mining equipment has made it easier to access some of the high-grade areas. And, of course, we would have lower truck downtime with the new fleet and more trucks running means more production. And despite our nickel production -- our strong nickel production in the quarter, I'd like to remind everyone that our performance for the year was impacted, as Dave pointed out, by the disruption in the hydrogen supply in the fourth quarter at our refinery at Fort Saskatchewan, and that was due to the supplier's non-compliance with provincial regulations. The disruption has been addressed and we don't expect a recurrence to that. The NDCC in the quarter was $2.94 a pound sold, and that's up 63% from the previous year. And that's due largely to higher sulfur and energy costs. In fact, the sulfur costs in the quarter were up almost 40% from the previous year and fuel costs were up approximately 30%. NDCC was also up because of a decline in the cobalt sales volume of nearly 20% relative to the fourth quarter of the previous year. In the quarter, we sold 392 tonnes of cobalt compared to 480 in the same period of 2017, and that represents a decline of about $7.5 million of revenue. Sales volume decline happened even though cobalt prices were relatively flat year-over-year. Now, turning to Slide 13, with nickel prices expected to climb in the coming years, the advantages of being a low-cost, high-purity producer will become apparent in our financial results going forward. If we look at the cost curve for NDCC for the industry on this slide, you can see that Moa's NDCC was $2.24 a pound and that puts us in the lowest cost quartile and in line with the guidance that we provided earlier in the year. That also ranks Moa as the lowest-cost HPAL nickel operation in the world. This was achieved even with that Q4 challenge of the hydrogen sulphide supply that I referred to earlier and the heaviest rains in more than 20 years that we experienced in the first quarter and the rail service disruption in the first half of last year. Turning now to oil and gas on Slide 14, we produced 1,597 barrels of oil equivalent per day on a net working interest basis in the quarter. This marked a decline of approximately 75% from the previous year and that's due to a few factors, the most notable being the expiration of Varadero West production-sharing contract in November of '17 as well as the decline in profit oil percentage from 45% to 6% at the PE/Yumori operation where we extended the production-sharing contract at the beginning of the year. The decrease was also due to the natural decline of the maturing fields that we're operating in right now. The unit costs for the quarter were $25.16 per barrel, which is up from the $12.23 of the previous year not only because of the reduced production, but also because of the weakening Canadian dollar relative to the U.S. currency. On Page 15, we cover some of the power highlights. You'll notice that we produced 184 gigawatts of electricity in Q4, and that's just down marginally from the previous year Q4 when we produced about 201 gigawatts. And that's due largely to the reduced availability of natural gas in Cuba, and we use the natural gas for producing that electricity. The unit costs were also negatively impacted by the depreciation of the Canadian dollar. So those are the highlights for the operations and that concludes my formal remarks. And so I'll turn it over now to Andrew Snowden, our CFO.

[Andrew Snowden, Senior VP & CFO]

Okay. Thank you, Steve, and good morning, everyone. The few slides I'm presenting today will really be focused on cash. I'll be making some remarks trying to explain some of the drivers behind our cash movements in 2018 and also a few comments on some of the drivers looking forward and looking into 2019. So starting first on Slide 17, I wanted to just review some of the key drivers for -- behind our 2018 cash position. And you'll see from this slide that, as Dave mentioned earlier, that we ended the year with $207 million of cash, which is a slight increase from the $203 million we started the year with. And this was also relatively unchanged from our Q3 position despite the higher interest payments we have in the fourth quarter. And this strong cash position coupled with our debt reduction, again, which Dave referred to earlier, and is consistent with our focus on strengthening the balance sheet and also reflects the band that you'll see at the bottom of this slide, the reduction that we achieved in administrative costs. I mean if you look at our financial statements, administrative costs were down $31 million on last year and a key driver behind that, though, was just a revaluation of stock-based compensation, which is, of course, a non-cash item. So excluding that, we achieved a real saving from an administrative cost perspective around $6 million, which was a good achievement for us this year. I'm turning now back just to the waterfalls. I'm still on Slide 17. And the key drivers at least impacting 2018 were the interest payments of $16 million, which is the higher interest amount that we pay in the second and fourth quarter of each year and also a capital expenditure of about $14 million relating to Block 10. These uses of cash were offset by dividends that we received from Moa, and this marked the second consecutive quarter of dividends from the Moa JV and I continue to expect dividends will be received in 2019. I'll come back to that in a couple of slides' time. And also a positive change in working capital. And that was primarily driven by the timing of fertilizer receipts and so roughly about $20 million of that $30 million you see on the slide there relates to prepayments on the spring fertilizer sales. While we are discussing 2018 liquidity, I do just want to also highlight that we did renew our syndicated revolving term credit facility in December of 2018 and that was on improved terms compared to our previous facility. And you can find more details on that renewal in Note 15 of our financial statements. Turning now to Slide 18, and this slide really just provides more details. We've started to share last quarter reconciling our adjusted EBITDA to the cash balance you see in the Sherritt consolidated cash flow. In Q4, we generated an adjusted EBITDA from all of our businesses of around $17-$18 million and this includes the contributions from Moa and Ambatovy. Adjusted EBITDA is a non-GAAP measure, but should give everyone an indication of our performance and financial health. And the waterfall here really just highlights the key drivers and reconciling items between EBITDA and cash. And you can see that the main drivers of our consolidated cash balance are consistent with the slide before being the dividends from the Moa JV and the positive working capital change that primarily relates to fertilizer presales. Now in late January, I think it was January 28, we did announce our 2019 guidance for production, unit costs and capital spend. And so I do want to take the opportunity to just review a few of the items here you can see on Slide 19. Firstly, capital spend, and one comment I'll make relating to Moa and Ambatovy is the capital spend numbers you do see there just represents our proportionate ownership interest in these joint ventures and the cash for this capital will not come from Sherritt. So that's just one point I did want to highlight. Slide 20 does provide a bit more guidance on -- or a bit more detail, sorry, on capital spend for 2019. And you can see a summary here of some of the key projects that we have planned for the year. The most significant points are probably the mining equipment purchases at Moa that makes up a large portion of the $40 million there. And then oil and gas we've broken out the $21 million so it's clear the amount of capital focused on Block 10. The equipment certification point there actually relates to rig maintenance as well so that's largely related to the Block 10 drilling as well. If we turn now to Slide 21, it provides a bit more detail on our 2019 guidance from a cost perspective at the Moa joint venture. You would have noticed from our guidance our NDCC outlook is in a range of $3.40 to $3.90 a pound so at the midpoint there is an NDCC of $3.65 a pound. Although this is higher than 2018, it does reflect an expectation of lower cobalt prices, and Dave gave a bit of additional perspective on the softening in cobalt prices we've seen in the last few months, and also higher sulfur costs that we expect will be present through the course of 2019. But this slide also, as well as our NDCC of $3.65, this also illustrates some of the additional cash costs we have at the Moa JV. And really the key takeaway I wanted to leave everyone with here is that a nickel price over $5 really should result in expected dividends coming out of the Moa JV in 2019. So in addition to the NDCC cash costs, the most significant other use of cash within the Moa JV relates to capital, and you can see a breakdown on a per-unit basis on this slide. We do, of course, though, have fluctuations in some of our commodity price assumptions we've included within this guidance, and you can see some of those noted on this slide. And we've also highlighted the sensitivity both from a cobalt price perspective and a sulfur price perspective, which will impact our NDCC and cash costs into 2019. In addition, just while we talk about Moa JV cash and potential distributions, one point I did want to make is that we did end the year with a strong cash position at the Moa JV, and you can see that from Note 6 in our financial statements. And so really we ended the year and we held a bit more cash than we typically do at Moa just given the volatility in commodity prices and to make sure that Moa had sufficient cash to be able to weather the commodity price volatility. Now things have stabilized, I would expect that the cash held within Moa will be distributed through the course of 2019. So that concludes my prepared remarks and I will hand the call back over to Dave.

[David V. Pathe, Chairman, President & CEO]

All right. Lastly, I want to just give you a bit of context and color around a couple ongoing current issues for us. The first is the topic we've talked about the last few quarters and had a number of conversations with many of you over the last few months, and that's where we stand on our Cuban energy receivables in oil and gas and power. Andrew touched on it briefly. In the fourth quarter, we did actually see reasonable collections in a quarter that is historically a weaker one for collections late in the year for the Cubans. We collected about $17 million-and-change between oil and gas and power in the fourth quarter, but the receivables balance did still finish the year up a little bit at $150 million. You'll have seen the news in our release this morning that now we've had a number of trips back and forth to Havana in January and have an agreement in principle that's now going through the approval process in Cuba that will help us address this overdue receivables. And it does involve some of the solutions we've been talking about for the last few quarters in terms of the hard currency dividends that are received by the Cubans from the Moa joint venture as well as some of the hard currency that the Moa joint venture uses to buy local currency to pay local expenses in Moa. We'll be able to share more with you on the exact terms of what we think we've achieved here as we get the -- as the approvals comes through, and we'll certainly do that when we can. But I can tell you today that we think this plan gives us a path to a full recovery on the receivables as we've been expecting all along, and we think we can do that in a timeframe that is relevant to our debt maturities that are coming up in the next few years. The other subject I wanted to just touch on briefly for you is Block 10. This has been obviously a topic of conversation for us for the last few quarters as well. When we last spoke on this at the end of October in Q3, we had suspended drilling after successfully traversing the lost circulation zones that we were encountering earlier in 2018 in the upper reservoir. We were then on drilling down through the geological formations between the upper reservoir and the lower zone, which is ultimately our target destination, and we'd had to abandon the hole there due to some hole instability between the two reservoirs. As we got back in there, following October, and as we had run logs of the drilling hole before we kind of lost the stability in that hole, as we got back in there we found there was more going on in that geological formation. There's some tectonic pressures actually having some influence on that hole instability and we hadn't encountered that before in all of the drilling we had done in Cuba. That caused us to actually step back again and look at this a bit more holistically and get some external advice on what we could do to manage those additional pressures in the hole that were leading to the instability. Through that, we've identified a drag-along casing technology where we actually case the hole as you progress rather than drilling the hole and then subsequently trying to get it sealed off behind casing when the hole is instable. But we've also done some work with some outside experts on drilling mud and mud composition and density that we think will give us the ability to overcome that. We're now back to the point where we're getting some of the equipment for the drag-along casing solution that's been identified as a viable path forward here. That should all be in-country in the next few weeks and we are targeting being back drilling again sometime in the second half of March. And that puts us now then into probably sometime later in the second quarter of being able to come back and have some results for you. This hole has obviously had more than its share of challenges and we've been talking about this for quite some time. But our approach to all this all the way through has been to do this effectively and efficiently rather than as quickly as possible and that's what really was behind the prudence and the time we've been taking to make sure we have a viable path forward here before we just go back starting the rig turning again. That's what we wanted to cover off for you today. Before we take your questions, I did just want to highlight one milestone that's upcoming in Fort Saskatchewan. Sometime this month, the refinery in Fort Saskatchewan will produce its 3 billionth pound of nickel. And that's really quite an accomplishment. I want to acknowledge and congratulate all the people out in Fort Saskatchewan for that. Sherritt has operated a nickel-producing refinery in Fort Saskatchewan for 65 years and the fact that it is still operating today as one of the lower-cost Class 1 nickel producers in the world I think speaks very well of the efforts that people put in there. Over a 65-year history, that refinery and the people there have adapted to changes in the world, changes in feed and continue to be a successful operation. And 3 billion pounds is a significant milestone. Just to give you some context, 3 billion pounds of nickel would produce enough Class 1 nickel for 40 million electric vehicles, just to give you a sense of how much nickel that really is. So operator, that's what we wanted to talk about today, and if anyone on the line has any questions, we would be happy to entertain them.

[Operator]

[Operator instructions]. Your first question comes from the line of Greg Barnes from TD Securities.

[Greg Barnes, Managing Director and Head of Mining Research]

Dave, on this Block 10 drilling, the troubles you're having putting this hole in, and I don't know a lot about oil well drilling, but does this give you any cause for concern over whether ultimately you can develop this as a commercial field?

[David V. Pathe, Chairman, President & CEO]

So I mean there's obviously a lot of learning that comes out of drilling a hole like this and it won't be any great surprise to people that we have encountered more difficulties on this hole than we certainly were anticipating when we started this process 18 months ago. But we do feel that as we have learned, as we've moved through these different formations, that we have plans and understand the formation better, that subsequent drill holes will be faster and cheaper in this given what we know about the formations now that we didn't know going in. Once we get this hole drilled and assuming it is successful in producing oil, our plan will be then to spend a few months just running that well and seeing what kind of flow rates we get, what kind of reservoir pressure we see, what the decline rate looks like. And while that observation is going on, we'll be actually putting together drill plans of what future holes will look like. And after that work has been done later in the year, we'll have a much better sense of what the economics look like on subsequent drill holes as we can refine what we think capital spending for incremental holes look like and have a much better feel for what the economic return looks like on wells when we see what kind of production we can expect out of them. We've also said in the past, and we've probably had this conversation, that once we have a better feel for that, I think we'll be looking for partners that can help fund the development of some of that. We've had conversations with a number of parties that have expressed interest at a high level, but until we can actually show them some of that data in terms of what capital spending for wells looks like and what kind of return you can expect on those wells in terms of production, those conversations are relatively theoretical. But we do still believe, based on what we believe the size of the prize here can be and what we could expect out of this in production from our understanding of the formations to date and what we think we can ultimately drill wells for here, is that there is quite an attractive business to be had here.

[Greg Barnes, Managing Director and Head of Mining Research]

Okay. But ultimately, these wells are going to be more expensive than you originally thought, I would think.

[David V. Pathe, Chairman, President & CEO]

Yes. I mean these are deeper wells than some of the drilling we have done in the past so they will be. But we are also expecting higher flow, much higher flow rates out of these wells on a per-well basis than what we've seen out of most of our previous production where we'd be drilling $8, $10, $12 million wells and seeing some number of hundred barrels a day. The prize here is wells that flow some number of thousands, as low as thousands of barrels a day.

[Greg Barnes, Managing Director and Head of Mining Research]

Okay. Just secondarily, on the Cuban energy receivables, you said in the context of the debt maturity over the next few years. So what you're saying is you expect to draw that receivable down over the next 2 to 3 years, effectively then, based on this payment plan.

[David V. Pathe, Chairman, President & CEO]

Yes. I mean we can provide more clarity on timelines and what we'll expect, and ultimately it will be somewhat influenced by nickel prices to the extent that there's any tie-in to dividends. But yes, that's kind of what we'd be looking at.

[Operator]

Your next question comes from the line of Orest Wowkodaw from Scotiabank.

[Orest Wowkodaw, Senior Equity Research Analyst of Base Metals]

Just a couple things. First of all, curious on your debt. I guess the first tranche of the senior unsecured debentures mature in 2021. Should we anticipate -- are you thinking already of terming that out over the next year or so? Or would your expectation be that that's something that's going to get paid down as we get to maturity?

[David V. Pathe, Chairman, President & CEO]

So you're right that the first tranche of our public debenture debt comes due in Q4 of 2021. So we've got still just under 3 years before that first maturity comes up and that maturity is $170 million. As with the debt reduction we did in 2018, we managed to reduce that by $50 or $60 million, and we'll continue to look, depending on how cash flow unfolds this year, at continuing to chip away at that. We do obviously still have some runway before that, the maturity is upon us. But certainly it's never too soon to be looking at what options we may have to extend the life and continue to reduce that debt. And further debt reduction terming out will be a focus for us this year as it has been for the last few years.

[Orest Wowkodaw, Senior Equity Research Analyst of Base Metals]

Okay. And just on that, when I'm looking at Page 144 of your MD&A, which there's a table here called Financial Obligation Maturity Analysis, how do I interpret the -- in this table it shows that there are senior unsecured debentures maturing, $45.8 million within 1 year and $45 million within 1 to 2 years. Can you just explain what that is in relation to what I thought were 2021 maturities?

[David V. Pathe, Chairman, President & CEO]

I don't have Page 144 of the MD&A in front of me.

[Andrew Snowden, Senior VP & CFO]

Sorry, Orest, I'm looking at the MD&A now and the document itself is 65 pages long so I --

[David V. Pathe, Chairman, President & CEO]

So the table we compiled it to get [indiscernible] together with the financials.

[Andrew Snowden, Senior VP & CFO]

Oh, okay. I'm not quite clear on the page you're referring to, Orest.

[Orest Wowkodaw, Senior Equity Research Analyst of Base Metals]

Okay. It's the 6th last page of the 150-page document that we got sent out, if that helps. It looks like it's like notes to the financials.

[Andrew Snowden, Senior VP & CFO]

Oh, so maybe you're in the financial statements.

[Orest Wowkodaw, Senior Equity Research Analyst of Base Metals]

Yes.

[Andrew Snowden, Senior VP & CFO]

Okay. So I'm with you here. The $45.8 million you see there, this note disclosure includes interest, Orest. So the $45.8 million just referred to the interest due in 2019.

[Orest Wowkodaw, Senior Equity Research Analyst of Base Metals]

Oh, okay. Perfect. Okay. And then finally, just on Ambatovy. Any update there on the restructuring or potential restructuring of the debt at the project level?

[David V. Pathe, Chairman, President & CEO]

No specific update at the moment. There obviously is, after the 3-year deferral that we put in place in 2016 on the amortization schedule on that project financing down there, there is a $90-odd million principal repayment coming due for Ambatovy in mid-June of this year. There are conversations ongoing as between Ambatovy and the lenders of that and as between the 3 partners. And those will unfold, I suspect, over the next number of months towards what a solution on that is going to be. Ambatovy, at current prices, realistically isn't generating cash that would see it be in a position to make that principal repayment. That financing, of course, is now non-recourse to us since the financial completion was achieved a few months ago. But there will be conversations to be had amongst partners and lenders and those are already underway.

[Orest Wowkodaw, Senior Equity Research Analyst of Base Metals]

And with the escrow amount -- or the escrow account already consumed there, should -- you've stated last quarter that you're not going to put any more capital in. So does that then -- should we then assume that you're going to be -- your 12% potentially gets diluted further if there is no restructuring there by the time that debt payment comes due?

[David V. Pathe, Chairman, President & CEO]

It is still, given where our cash position is and where our priorities are and our focus on debt reduction, there is still -- our objective is no cash into Ambatovy. And frankly, there are a number of different routes how that could all play out and there are now lot of conversations to be had yet. But realistically a dilution is one possible outcome of that, yes.

[Operator]

[Operator instructions]. Your next question comes from the line of -- [Operator instructions}. And there are no further questions at this time. I will now turn the call back to David Pathe for closing remarks.

[David V. Pathe, Chairman, President & CEO]

All right. Well, thank you very much once again, everybody, for joining us today. I know it's another busy day and busy week for many of you with results coming out. We'll be back again to speak to you in a relatively short period of time when we release Q1 in late April. Thanks very much. Have a good day.

[Operator]

This concludes today's conference call. You may now disconnect.