The $2.1-billion financing is being provided through a number of loan agreements with certain export credit agencies, development banks and commercial lenders. All loans have a 17-year term. Sherritt and the other project sponsors will provide completion guarantees for the financing until Ambatovy has satisfied the required completion tests, at which time the project debt will become non-recourse to the sponsors. Sherritt’s pro-rata share of the completion guarantees total $840 million, of which $598 million are guaranteed from the project’s other sponsors. Ambatovy’s other sponsors have also agreed to provide Sherritt with subordinated loans to an aggregate of $236 million to fund Sherritt’s equity commitments to the project.

Ambatovy is currently owned 45% by Sherritt. Upon the fulfillment of certain conditions, SNC-Lavalin Inc. will acquire a 5% interest in Ambatovy from Sherritt, reducing Sherritt’s interest to 40%. Sumitomo Corp. of Japan and Korea Resources Corp., leading a consortium of Korean business enterprises, each own a 27.5% interest in the project. Following completion of the project, a put/call arrangement will come into effect whereby SNC-Lavalin can divest of its interest to Sherritt and Sumitomo or Sherritt and Sumitomo can acquire SNC-Lavalin's interest.

Ambatovy is a large-tonnage nickel and cobalt project with estimated probable reserves of 125 million mt grading 1.04% nickel and 0.099% cobalt; annual production capacity is estimated at 60,000 mt (100% basis) of nickel, 5,600 mt (100% basis) of cobalt and approximately 190,000 mt (100% basis) of ammonium sulphate; and an estimated project life of approximately 27 years. The project has an approved Environmental Assessment, developed in line with the World Bank Guidelines and Equator Principles, and in March 2007 received certification under Madagascar’s Large Mining Investment Act.

Sherritt acquired its stake in Ambatovy when it acquired Dynatec, another Canadian mining company, in June 2007. In its second-quarter 2007 financial report, Sherritt reported that initial works for preconstruction activities commenced in the second quarter at the site of the proposed processing plant and refinery near Toamasina and at the mine site near Moramanga. According to Sherritt, based on the ongoing mobilization of personnel and resources, the advancement of preparatory work related to the project’s initial works program and progress being made on the project debt financing, the Ambatovy project ended the second quarter on track for construction to commence in the third quarter of 2007. According to the construction schedule, this would result in mechanical completion being achieved in the first half of 2010. Capital, excluding financing costs, for Ambatovy is forecasted to be approximately $3.3 billion (100% basis)—a significant increase over the previous estimate of $2.5 billion.

When production from Ambatovy commences, it will join Sherritt’s current mining and processing assets in Moa, Cuba, and refining facilities in Fort Saskatchewan, Alberta. Once Ambatovy is fully commissioned, Sherritt will operate 109,000 mt/y of nickel production split between Ambatovy (60,000 mt/y) and Moa/Fort Saskatchewan (49,000 mt/y).