SC2 RESPONDS TO SHERRITT AND REMINDS SHAREHOLDERS TO VOTE AGAINST INCUMBENT DIRECTORS

Cision Canada

30-05-2025

TORONTO, May 30, 2025 /CNW/ - SC2 Inc. (" SC2"), a significant shareholder of Sherritt International Corporation (TSX: S) (" Sherritt"), wishes to respond to Sherritt's recent letter to shareholders (the " Letter"), a summary of which appeared in Sherritt's news release dated May 26, 2025.
SC2 is disappointed, but not surprised, that Sherritt's leadership has elected to pursue a campaign of misinformation, attempting to entrench itself by distracting Sherritt shareholders from the real and pervasive issues facing Sherritt.
In the Letter, the Sherritt board states that it has made "significant progress" in delivering value to Sherritt shareholders. However, Sherritt's long-term performance tell a different story. Since September 2011, Sherritt's share price has declined by approximately 97%; Sherritt shareholders have experienced two rounds of equity dilution; Sherritt bondholders have undergone two restructurings; and both production and cash reserves have reached historic lows. In SC2's view, Sherritt's generous executive compensation arrangements do not reflect these facts. SC2 intends, therefore, to vote against all the incumbent members of the Sherritt board at the upcoming Annual and Special Meeting of Shareholders to be held on June 10, 2025 (the " Meeting"), and encourages other Sherritt shareholders to do the same.
The Letter also makes numerous false claims about SC2 and its affiliate, Seablinc Canada Inc. (" Seablinc"), and SC2 wishes to clarify two important points:
Seablinc as a long-term supplier to Moa Joint Venture ("Moa"): Seablinc is not a supplier to Sherritt; it is a proud supplier to the Moa in Cuba. Moa is owned jointly by Sherritt and its joint venture partner. Sherritt is not the operator. No independent director of Sherritt is part of Moa's leadership team or has any involvement in its procurement decisions. Furthermore, a robust bidding process has always been in place in Moa, which is required by Cuba law.
Seablinc's revenues: Sherritt claims that Seablinc's revenue from the Moa has declined significantly – from approximately US$145 million in 2022 to an expected US$50 million in 2025 – SC2's advocacy for stronger governance and long term planning at Sherritt started well before any 2025 contracts were awarded. Sherritt's claim also does not account for fluctuations based on commodity prices. In 2022, for example, sulphur and fuel prices were trading at nearly double its current price. Maritime shipping costs were also significantly higher.
The Letter fails to address several important concerns raised by SC2 regarding ongoing operational challenges, questionable corporate governance practices, and the lack of a clearly articulated long-term strategy to enhance shareholder value.
Sherritt Claim: "SC2, a shareholder affiliated with Seablinc, poses a significant conflict of interest. SC2's actions appear to prioritize Seablinc's supplier agreements over the broader interests of Sherritt shareholders."
SC2 Response: This is obfuscation. Unlike the Sherritt board, SC2 does not have a fiduciary duty to act in Sherritt's best interests. Nevertheless, SC2 believes it is acting in Sherritt's best interests by demanding improvements in Sherritt's operations, financial performance, and corporate governance practices. In addition, there are no grounds whatsoever for the assertion that SC2 seeks to prioritize Seablinc's supplier agreements over the broader interests of Sherritt shareholders. SC2 has never once raised the topic of Seablinc's supplier agreements with the Sherritt board.
Sherritt Claim: "During SC2's past investor meetings with Sherritt, a Seablinc representative and former Sherritt employee, led the meetings."
SC2 Response: There has only ever been one investor meeting between Sherritt and SC2, and a Seablinc representative was present because Seablinc and SC2 are affiliates.
Sherritt Claim: "Rather than competing fairly, SC2 and Seablinc are attempting to take control of your Company to reverse these losses while ignoring potential severe implications for other shareholders. For example, changing all or substantially all of the Board could cause defaults under key agreements and could materially affect or accelerate certain material debt obligations."
SC2 Response: SC2 and Seablinc are not attempting to take control of Sherritt. First, as disclosed in its Early Warning Report dated December 10, 2024, SC2 acquired Sherritt shares for investment purposes. Second, neither SC2 nor Seablinc has nominated or has any intention of nominating any individuals to the Sherritt board at the Meeting. Third, SC2 is intending to vote against the incumbent Sherritt directors at the Meeting to express its dissatisfaction with Sherritt's poor financial and operational performance. A vote against the incumbent Sherritt directors will have no effect whatsoever on any purported attempt by SC2 or Seablinc to take control of Sherritt.
Sherritt Claim:"SC2's first act upon incorporation in April 2024 was to launch a mini-tender for Sherritt shares which was ultimately unsuccessful."
SC2 Response: SC2 made an offer to acquire up to 21,621,621 Sherritt shares, at a 19.4% premium to the then current market price. Sherritt shareholders tendered an aggregate of 19,003,570 Sherritt shares to the offer, all of which SC2 acquired upon the expiration of the one-month tender period.
Sherritt Claim: "In April 2024, a law firm acting on behalf of Seablinc emailed Sherritt stating its intention to nominate someone for election as a director. This attempt failed, with no formal nomination made."
SC2 Response: In April 2024, a law firm acting on behalf of Seablinc provided a notice of Seablinc's intention to nominate an individual to the Sherritt board at the Annual Meeting of Shareholders that was held on May 9, 2025. Seablinc withdrew the notice after learning of a support agreement between Sherritt and another Sherritt shareholder relating to the nomination of directors.
Sherritt Claim: "Seablinc first approached Sherritt as an investor during a critical time – right in the final stages of the Moa Joint Venture bid process for a major input commodity contract. This timing was not a coincidence. It appears Seablinc was using its shareholder status to pressure Sherritt into awarding them the contract, attempting to influence the decision by presenting themselves as an investor with leverage."
SC2 Response: Seablinc approached Sherritt to address the disconnect between the reality of Sherritt's "on the ground" performance and its public messaging. Seablinc also approached Sherritt to express concerns about Sherritt's misunderstanding of the sulphur market and the Panama Canal crisis, risking production losses at time when Sherritt was hemorrhaging cashflow. At no point did Seablinc attempt to influence or interfere in the bid process.
Sherritt Claim: "In January 2023, Seablinc alleged there was unlawful activity being conducted by a rival supplier. An investigation by independent third parties confirmed no unlawful activity occurred. This caused distraction and costs for Sherritt and the rival supplier."
SC2 Response: In January 2023, Seablinc informed Sherritt of a sulphur transaction involving material loaded from Saint Petersburg, Russia. The sulphur was transloaded through a European port before being shipped to Moa. Seablinc raised its concerns in good faith, given the potential consequences of the sulphur transaction under laws relating to economic sanctions and import and export controls, and broader reputational considerations, particularly in light of Sherritt's operations in Fort Saskatchewan, Alberta, a community with deep Ukrainian-Canadian ties. Seablinc maintains documentary evidence of the sulphur transaction and remains willing to share the evidence with the Sherritt board for further review.
Sherritt Claim: "SC2 knowingly made an invalid requisition of a special meeting in January 2025 and chose not to comply with the law."
SC2 Response: In January 2025, SC2 and funds managed by Ewing Morris & Co. Investment Partners Ltd. requisitioned a special meeting of shareholders. Sherritt rejected the requisition seemingly in reliance on a single, long-outdated, and entirely distinguishable legal case. The assertion that SC2 chose not to comply with the law is potentially defamatory and seriously calls into question the judgment of the Sherritt board.
Sherritt Claim: "SC2's actions are concerning as it has not disclosed its full intentions, and it effectively borrowed shares to gain influence without a long-term commitment to Sherritt. A third party holds an irrevocable option to acquire almost 75% of SC2's common shares of Sherritt at any time between August 1, 2025 and May 1, 2026, indicating SC2's short-term and opportunistic interests are not aligned with value creation for all shareholders."
SC2 Response: As disclosed in its Early Warning Report dated December 10, 2024, SC2 acquired Sherritt shares for investment purposes. The call options to which SC2 is a party are consistent with those investment purposes. Furthermore, even after excluding all the Sherritt shares that are subject to call options, SC2 still owns significantly more Sherritt shares than all of the incumbent Sherritt directors combined, a clear indication of the Sherritt board's lack of alignment with the Sherritt shareholders.
Sherritt Claim: "Since 2022, Sherritt has completed two modified Dutch auction transactions to repurchase an aggregate of approximately $150 million of notes at a discount to par, reducing outstanding principal by 35%."
SC2 Response: The modified Dutch auctions did not result in any material improvements to Sherritt's balance sheet since the reduction in Sherritt's long-term liabilities was matched by a corresponding decrease in cash. Since the interim period ended June 30, 2020, Sherritt's net debt (calculated using cash held in Canada) has remained relatively unchanged.
Sherritt Claim: "The Slurry Preparation Plant, completed under budget in early 2024, has reduced ore haulage distances, lowered carbon intensity, and increased throughput over the life of mine."
SC2 Response: Production during the most recent interim period ended March 31, 2025, was the worst in well over a decade.
Sherritt Claim: "The Processing Plant, now in the commissioning phase, is expected to ramp up in 2025, increasing mixed sulphide precipitate production by 20% and filling the refinery to nameplate capacity. This will maximize profitability by displacing lower margin third-party feed and increasing overall finished nickel and cobalt production."
SC2 Response: Sherritt has already substantially reduced third party feed. Sherritt also projected the expansion to yield 40.3kt of contained nickel in 2025, which is significantly different than current guidance and production during the most recent interim period ended March 31, 2025.
Sherritt Claim: "[Sherritt has enhanced] bidding processes for input commodities, reducing costs and improving supplier competitiveness."
SC2 Response: On the one hand, Sherritt claims to have optimized procurement processes, but on the other hand, blames recent poor production on "supply chain delays". We also highlight the sharp increase in costs since 2022.
Sherritt Claim: "The Sherritt board has undergone significant renewal, with five of six independent directors joining in the past four years including three who joined since March of last year. The Board brings critical expertise in mining, finance, diplomacy, ESG, and governance."
SC2 Response: Recent changes to the Sherritt board raises legitimate corporate governance concerns. Two independent directors recently stepped down, one after less than a year, and the other after less than two years. Sherritt shareholders deserve to know why.
Additional Information
The information in this news release may constitute a solicitation of a proxy under corporate and securities laws. Accordingly, SC2 is providing the disclosure required under the Canada Business Corporations Act and section 9.2(4) of National Instrument 51-102 – Continuous Disclosure Obligations in accordance with securities laws applicable to public broadcast solicitations.
This news release and any solicitation made by SC2 in advance of the Meeting is, or will be, as applicable, made by SC2, and not by or on behalf of the management of Sherritt. All costs incurred for any solicitation will be borne by SC2, except that, subject to corporate and securities laws, SC2 may seek reimbursement from Sherritt for its out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with the solicitation.
SC2 is not soliciting proxies in connection with the Meeting at this time. SC2 may solicit proxies pursuant to an information circular sent to shareholders, after which solicitations may be made by or on behalf of SC2, by mail, telephone, fax, email or other electronic means as well as by newspaper or other media advertising, and in person by directors, officers and employees of SC2, who will not be specifically remunerated for the solicitation. SC2 may also solicit proxies in reliance upon the public broadcast exemption to the solicitation requirements under corporate and securities laws, conveyed by way of public broadcast, including through news releases, speeches, or publications, and by any other manner permitted under Canadian corporate and securities laws. SC2 may engage the services of one or more agents and authorize other persons to assist in soliciting proxies on its behalf.
SC2 is not requesting that shareholders submit proxies at this time. If SC2 commences a formal solicitation of proxies in connection with the Meeting, any proxy may be revoked by instrument in writing by the shareholder giving the proxy or by its duly authorized officer or attorney, or in any other manner permitted by law and the articles of Sherritt. None of SC2 or, to its knowledge, any of its associates or affiliates, has any material interest, direct or indirect, (a) in any transaction since the beginning of Sherritt's most recently completed financial year or in any proposed transaction that has materially affected or would materially affect Sherritt or any of its subsidiaries, or (b) by way of beneficial ownership of securities or otherwise, in any matter proposed to be acted on at the Meeting other than the election of directors or the appointment of auditors.
Sherritt's head office address is Bay Adelaide Centre, East Tower, 22 Adelaide Street West, Suite 4220, Toronto, ON M5H 4E3. A copy of this news release may be obtained on Sherritt's SEDAR+ profile at www.sedarplus.ca.
Cuba.