Paula Myson – Director, IR Ian Delaney – Chairman, President and CEO Dean Chambers – SVP, Finance and CFO

Lawrence Smith – Scotia Capital Robin Kozar – RBC Capital Markets Anoop Prihar – GMP Securities

Thank you and good afternoon everyone. Welcome to Sherritt’s Q3 2010 earnings conference call.

Our press release was issued this morning. A copy of that release, our MD&A, and full financials are available on our website.

In addition to analysts and investors the media will participate in this call on a listen only basis and we’ll put a replay of the call on our website this afternoon. I’d like to remind everyone that comments in our press release and in this call include forward-looking statements.

Please refer to the cautionary language in the press release and the risk factors described in our CEDAR filings. On the call today are Ian Delaney, our Chairman and Chief Executive Officer, and Dean Chambers, the Senior Vice President of Finance and Chief Financial Officer.

We’ll open with a few brief comments on the quarter and then take some questions. So let’s begin, I’ll turn the call over to Ian.

Thank you Paula and thank you to those on the phone for taking the time to be with us this afternoon. I will just, on a slight technical note, unlike the usual case, I’m in one of our field operations today so I’m not sitting in the room in Toronto with my colleagues so there may be a pause between responses and in that I would like to assure (inaudible) the operations of the company, all units are operating satisfactorily.

No particular variances that are of concern to us. Of course our principal preoccupation these days is the completion of our Ambatovy project in Madagascar, and to that end, fortunately all of the available time, think, emotion and labor in the organization is devoted there.

We are blessed with good operating management in most of our other divisions, all of our other divisions, so that in fact if we can devote our time and energies to that. We are making great progress.

The mine is actually in operation as we speak. The pipeline was completed ten days ago, four facilities are done, rail facilities are done.

Our intention these days is all riveted on the refinery and power plant at the refinery site. These things are coming along and responding.

Total project basis are approaching 85% complete. We don’t think there’s much scope here for dramatic variance from our published capital numbers.

We’re still looking for our first metal in the second quarter of next year. All our component parts are on the ground in Madagascar.

We’re wrestling with just the power plant; it’s perhaps the one we’re getting the most heartburn on simply because the steam turn on rate is the critical item there. But it is coming into line.

So in the main we’re pretty comfortable with schedule and capital. Capital’s- a big variability in capital right now is probably weather.

If we get several days or weeks of bad weather we will be delayed by that much. But that doesn’t account for matter very much in the capital account.

Issues which we are immediately trying to address; we’ve had some labor (inaudible) there, simply occasioned by the fact that on a project of this scale, I think we employ at a peak, I think we probably had 18,000 people on the ground. We’re looking at demobilization schedules now.

And so we are looking demobilizing several thousands of Malagasy. There’s no social safety nets to speak of in Madagascar and so it’s been a little troubling.

There have been some labor interruptions. Trying to accommodate that, I think we’ve dealt with that and I think we’re going to work out various ways of easing the shift back into the Malagasy economy for some of those employees that we’re laying off.

I think we’ve dealt with the problem and that’s the long and short of it. In other areas of the business metals business is generally operating quite well.

All of our company is operating quite well. The coal business level off mark because of lower power requirements in western Canada and our mine mouth coal business there.

The volumes there are a direct function of electricity demand and those are down slightly. And we’re still having some teething issues in our mountain operations.

We expect to revert to norms there sometime in the next few months. So having said that, let me turn this part of the discussion over to Dean Chambers and at the conclusion of Dean’s remarks we’ll answer questions that anybody on the phone might have.

Dean–

Yes, thank you Ian and good afternoon to everyone on the call. I’d like to spend a few minutes going through some of the key parameters that had an impact on our results that we announced earlier today.

When you look at our disclosure as a typical, all of our comparisons are typically this quarter to the similar quarter in the prior year, so Q3 2010 to Q3 2009. I also like to look at the performance in this quarter compared to the immediately preceding quarter.

So Q3 2010 compared to Q2 2010. And so all the comparisons I’m going to be talking about in my remarks here are going to be on that basis as opposed to the basis that’s in our public disclosure.

As I look at the quarter, operating earnings was about $91 million dollars versus $87 million dollars in the prior quarter, EBIDTA of $157.5 million versus about $150 million last quarter, and operating cash flow of $102 million versus $84 million last quarter; so pretty comparable. If you look at net earnings, we reported $57.6 million net earnings this quarter or $.20 a share.

Our net earnings last quarter was $15.7 million dollars or $.05 a share. Clearly there’s a lot going on in these numbers and both these quarters have been affected by significant non-cash accounting adjustments.

So I’d like to walk through those a little bit and hopefully that helps. One of the big things that’s happening here is foreign exchanged volatility both in terms of the changes in the Canadian dollar but also in terms of translation of certain balances within our statements.

To be clear, like almost all Canadian commodity producers, a stronger Canadian dollar has a negative impact on operating earnings and I think as you read our disclosures you’ll find that reference in several places where operating earnings have been affected by a stronger Canadian dollar in a period. But in addition to that, translation of certain financial instrument balances is having a big impact on our reported earnings results and these are unrealized foreign exchange gains and losses.

And where this is coming from is we have net US dollar denominated liabilities in our financial instruments and this has been growing as we continue to borrow from our partners under the Ambatovy arrangements to fund our investment in Ambatovy. So in this last quarter we have recognized a $16.4 million after tax gain or $.06 share.

Whereas last quarter that was an $18.1 million dollar after tax loss and so you can see the kind of volatility that this particular item is now bringing to our reported earnings results. One thing I would also note is this is a little bit different than a financing expense.

You’ll see in our statement and in note 17 to our statement as that includes both realized and unrealized foreign exchange gains and losses. So that $16.4 million that we had in this quarter is an unrealized non-cash foreign exchange result and I suspect we’ll continue to see some volatility in our earnings results as a result of this, obviously depending on what happens with the Canadian dollar over time.

The other adjustment that we made in this quarter is an impairment to property of about $7.9 million dollars or $.03 a share. This results from the fact that we have relinquished some oil and gas licenses in Turkey.

The costs associated with those licenses were capitalized since we relinquished those licenses we now take this impairment or this adjustment to our earnings. So if you look at adjusted net earnings for this quarter, it was $49.1 million dollars or $.17 a share compared to last quarter, on an adjusted basis, of $52.9 million or $.18 a share.

So hopefully that helps to understand some of the impacts flowing through our net earnings results. Let me talk briefly about some of the key things that happened in our businesses.

One thing to mention in oil and gas is we did take a retroactive adjustment from- as we have adjusted production from a well that was part of the Varadero west production sharing contract to other production sharing contract and at expiry to (inaudible). This really is a result, upon review, of looking at the arrangement and doing the proper allocation to the production sharing contracts.

These arrangements- this is consistent with similar situations in Cuba. Our metals division, as Ian mentioned, continues to operate very well.

You may notice that our production outlook has been raised slightly to reflect current production levels and feed composition going forward. Our power division tends to be somewhat affected by gas shortages but we continue to work on that.

You may also notice in our outlook that the capital spending for the phase eight expansion has been adjusted down somewhat as we continue to discuss that project with our partners and work on permitting to go ahead. In coal, prairie operations production has been affected by slightly lower demand for electricity in the prairie providences and some bad weather.

This was the first quarter where we fully consolidated all of mountain operations following our acquisition of the remainder from Ontario teachers at the end of the second quarter. Nonetheless, it’s somewhat offset by operations issues as we continue to move into new areas and seek improvement as we morph through those new areas of development at Coal Valley and at (inaudible).

One thing I wanted to mention in coal is activated carbon. We are in the middle of our start up and ramp up of our first activated carbon plant.

You may remember when we first entered into the joint venture with (inaudible) the ideas that we would construct up to four activated carbon plants. Based on the status of legislation for capture of mercury, we have no plans to build another plant at this moment.

We will build plants as expected demand increases with new legislation. New legislation is not now expected before 2014 in the United States.

However, the new plant that we have started up is expected at about $7 million dollars of EBITDA in 2011, which will be the first full year of production of that plant. And that $7 million dollars, our share of the output from the venture.

One last note, our liquidity remains very strong. Our cash balances are strong.

Our leverage is still on a recourse basis, very, very, quite low actually. And that’s despite a direct investment in Ambatovy and the acquisition of the remaining interest in mountain operations from Ontario Teachers.

So that concludes my sort of formal remarks if you will and I’m going to turn the call back to Paula Myson for questions.

Thanks Dean. Operator we can open the line to the questions now.

Hi, good afternoon. Two questions related to Ambatovy.

The first, Ian thanks for your comments about mechanical completion in Q2. Is it possible to give any indication of what you think production will be at Ambatovy in 2011?

And second question, Ian, and this is kind of mundane but in terms of accounting for Ambatovy, how is it going to show up in your financial results in 2011 and I guess what I’m thinking of is IFRS, what are the implications? Thank you very much.

Thanks for the question, I’m going to ask Dean to deal with the accounting issue and I’m not sure I would want to go on record with a pound of production projection.

Just between us, I mean.

I’m sure. I think I’ll duck that one unless, Dean, you have a number that you want to (inaudible)

Fair enough.

No, what I would say, Larry, is we do expect to be producing metal in the second quarter of next year as things go to plan. We’re not providing an outlook on production at this time but we will certainly at some later date.

Okay.

With respect to accounting IFRS is- if you read our notes in IFRS on the MD&A you’ll see that IFRS is likely to have some significant impacts to our statements. And Larry, we’ll spend some time with you to help you work through that, I promise.

But it’s most likely at this point that we will be accounting for Ambatovy on one line, basically an equity, an investment in associate line, but like an equity line.

Okay, well I’ll follow up with this later on, thank you.

But it’s not the full consolidation or proportional consolidation.

Okay, thanks Dean.

Thank you Ian, Dean and Paula for taking the call. I had a few questions about Ambatovy.

In terms of the power plant it sounds like- you had mentioned this last quarter as well that there were some potential delays on the construction of that. Now the construction has been turned over to Sherritt and the EPCM contractor.

What’s the status of the power plant and what are the potential delays in terms of construction or completion of that?

Well I think- and I’ll get Dean to supplement this because he’s actually been onsite a little bit more recently than I have. But I think that we are now, I think we solved the problem from on a go forward basis.

It’s still the number one item for delay of production. But we think we’re now on top of it.

And, Dean, maybe you want to give a more complete answer than that.

Well, no, I think that’s just it. I mean we’ve taken some steps to make sure that the power plant is completed in a timely fashion so that our commissioning wrap up can go as planned.

And I think it was simply a step that we’ve taken to ensure that happens. I mean the power plant overall is not where we originally expected it to be but it is all factored into our plans going forward.

Okay, that’s good to hear that the problem’s under control. The second question I guess back to Ambatovy again is CapEx.

I think in the statement you said that your 90% complete to date. Last quarter I think it was 89% and there’s also some indication that CapEx could increasing here.

I mean are we talking $100 million or $200 million or is there potential for greater variance (inaudible)?

There’s no potential for a really significant variance and I wouldn’t even want you to think there’s $200 million dollars there. I don’t think there’s anything like that.

Okay.

I think, and there’s no equipment there so those costs are pretty much locked in. All the peripherals are virtually now complete.

So what we’re talking about now is how fast can welders weld and technicians assemble and what kind of weather do you get. So we don’t think there’s much scope here for surprises.

Okay.

So (inaudible) which I think would be your main concern, it’s my main concern and I’m confident, I’m pretty comfortable.

Yeah, I’m not too worried about a $50 million dollar overrun, given the size of the project of course. Just to switch gears quickly, in call, there’s been a couple quarters here now where we see more sales in the prairie operations and you guys have pointed to lower consumer demand or customer demand.

Now I know that the (inaudible) plan was decommissioned and, you know there’s other related issues there. But is there anything here that’s, you know, that’s fundamentally changed, or going forward that we could see lower demand over the median term.

I’m not talking long term, but the next one or two years. Do we expect next quarter to see again lower customer demand?

It’s very difficult to say. We don’t see an structural change in our business relationship or our business unit, so others more competent than I can project what electricity demand is going to be because it’s really just a function of that.

Okay, so it’s simply a function. Okay, I guess that’s what, I guess that’s the answer I was looking for.

Last but not least, and I’ll pass on the phone, in the power division CapEx was cut in half, roughly. Is that because there’s an expansion slowing there and does that have anything to do with gas availability in Cuba?

I’ll get Dean to answer but I think it’s just lumpiness in the process.

Yeah, it’s just the process is not moving forward as fast as we originally anticipated in particular on phase eight. That’s all.

And it comes and goes, you know, some months you have higher depending on where you are in the construction process.

But it’s not related to gas availability.

Perfect. Well thank you very much.

Good afternoon. Just a question on the oil operations; I was wondering if you could give us a bit of context into the retroactive adjustment on the PSA.

How did it come about and I guess (inaudible) should we assume that production out of Cuba next year should be lower on a year over year basis as a consequence of this?

Dean, you want to deal with it?

Sure, I think simply what happened is as one production sharing contract expired, it caused us to review the arrangements and how we booked the arrangements and as we looked at it we realized that this was the more proper allocation of production and now we’re just fixing the accounting. So this is really, you know, I would characterize it as sort of a one-time event.

It’s not an ongoing effect. But I do think that as we go forward you can expect some slightly reduced production of oil next year.

And how many PSAs do you have in Cuba?

We have two producing at this time and two in expiration.

Okay. And it’s fair to say that the ones that are in place right now; you’re pretty comfortable that we’re not going to incur any similar sorts of issues?

Yeah, I’m not expecting anything similar in any other arrangements.

Great, thanks a lot.

Okay.

Thank you operator. As always, we’re available if you have further questions.

Thank you for joining us this afternoon and have a good day.