Sherritt International's Governance Crisis: A Call for Board Overhaul to Salvage Value

The governance crisis at Sherritt International (TSX: S) has reached a critical inflection point. Shareholder SC2 Inc., wielding an 8.07% stake, has declared war on the status quo, demanding a complete overhaul of the board to halt years of value destruction. This article examines how Sherritt's operational failures, governance lapses, and misaligned incentives have created a ticking time bomb—and why investors must act now to support SC2's proxy fight.

A Leadership Failure That Costs Billions

Sherritt's board has presided over a catastrophic decline in shareholder value. Since May 2022, the stock price has plummeted 76%, erasing billions in market capitalization. The decline mirrors a broader pattern of mismanagement:

• Operational Underperformance: Mixed sulphide production at the Moa JV—Sherritt's lifeblood—hit near-record lows in Q4 2024 and Q1 2025, despite a Phase 1 expansion. Net Direct Cash Costs (NDCC) remain stubbornly elevated, a red flag for operational inefficiency.
• Liquidity Crisis: Canadian liquidity dipped to $30 million as of Q1 2025, forcing the company to sell nickel at discounted prices—a short-term fix that sacrifices long-term value.
• Strategic Drift: Executives have poured capital into speculative projects like mixed hydroxide precipitate processing, repeating past mistakes (Ambatovy, Bitumen Upgrading) that destroyed shareholder wealth.

Governance Failures: Transparency and Accountability Absent

The board's governance record is equally damning:

1. Withheld Disclosures: A material agreement was not disclosed ahead of the 2024 AGM, violating transparency norms.
2. Repressive Tactics: SC2 was granted only a single one-hour meeting over a year despite repeated requests. Cease-and-desist letters were issued to critics, signaling a culture of intimidation.
3. Overhead Bloat: “Corporate and Other” expenses hit $8.4 million annually—40% of Sherritt's market cap—a staggering sum for a company in distress.

Executive Compensation: A Misalignment of Incentives

While shareholders suffered, executives received $7 million in 2024 compensation, or 10% of the company's market cap. This included stock-based awards despite a 76% stock price collapse. The message is clear: leadership is insulated from consequences.

SC2's Proxy Fight: The Last Chance for Survival

SC2's demand to replace the board is not radical—it's existential. By opposing the re-election of all directors except Richard Moat (a seasoned, independent nominee), shareholders can force a reset:

• Focus on the Moa JV: Sherritt's sole viable asset requires urgent attention. The Phase 2 expansion's 20% production boost hinges on operational discipline and cost control.
• Cost Cuts: Eliminating bloat (e.g., redundant offices) and halting speculative projects could free capital for critical initiatives.
• Transparency: Restoring trust demands full disclosure and engagement with shareholders.

The Stakes Are Existential—Act Now or Perish

The June 10 shareholder meeting is a binary moment:
- Vote FOR SC2: Reject the current directors to trigger a special meeting and board overhaul. This is the only path to salvage the Moa JV's value and stabilize liquidity.
- Abstain or Support the Status Quo: Risk further value destruction, a liquidity crisis, and potential collapse.

Conclusion: The Clock is Ticking

Sherritt's governance failures have reached a breaking point. SC2's proxy fight is not just about board composition—it's about survival. Investors who ignore this call to action risk permanent capital loss. The Moa JV's potential remains intact, but only if leadership changes. Vote against the incumbent directors—before it's too late.

For further details, review Sherritt's Q1 2025 results and proxy materials on SEDAR.