Paula Myson - Managing Director, Investor Relations and External Communications Ian Delaney - Chairman and Chief Executive Officer Dean Chambers - Chief Operator Officer David Pathe - Chief Financial Officer

Onno Rutten - USB Securities Alec Kodatsky - CIBC Robin Kozar - RBC Capital Markets

Thank you and good afternoon everyone. Welcome to the Sherritt’s first quarter 2011 earnings conference call.

Our press release was issued this morning. A copy of that release, our MD&A and full financial statements are available on the Web site.

In addition to the analysts and investors the financial press has been invited to listen to today’s call. A replay will be available through a link on our Web site later today.

Before we begin our comments I’d like to remind everyone that in our press release and certain of our comments on the call today will include forward-looking statements. We’d like to refer everyone to the cautionary language included in the press release and to the risk factors described in our CEDAR filings.

On the call today are Ian Delaney, Chairman and Chief Executive Officer, Dean Chambers, Chief Operator Officer, and David Pathe, Chief Financial Officer. As usual, after our remarks we’ll open up the call for questions.

So to begin I’ll turn the call over to Ian Delaney.

Thank you Paula and thank you to those on the phone for taking the time to dial in and listen to us. I am not in the Toronto office with the rest of my colleagues.

I’m in one of our remote branches so I’m on a phone. There is some possibility that technology lets us down in which case Dean Chambers will pick up and finish the call.

So our quarter - a good quarter. As I have probably reflected in the past, delightfully boring.

Revenues up, commodity prices up, pressure on the costs side from commodity input price increases and on the coal side some transportation equipment delays and one thing or another keeping costs up. But the good news is that the output commodity prices are very robust.

And in the nickel world and cobalt world we think in the foreseeable quarter or so we see no good reason to presume that commodity prices are going to slack off. So we’re continuing to look for robust earnings in those areas.

In the coal world I think we’re looking at a dramatically better year for our coal business. New Castle price current just under $130 a ton.

We’re not sure where the end of year contract will come out. It’s overdue because of the earthquake and tsunami in Japan and so that has pushed off the pricing settlements.

But the New Castle price is generally a good indicator of where the annual contract prices are likely to settle in. And at those contract prices I think we have a very happy time in the coal business.

Our Ambatovy project continues ahead. My focus in the past few months has increasingly changed from construction to production.

We’re turning units on almost every week now, getting steam blows and various in the power plants. Our port was commissioned.

We’re now unloading coal, we’re about to unload the sulfur. We’re going to be moving material down the pipeline the next 60 days.

I say my focus there has gone entirely to how we’re going to start to manage this. We’re currently in the process of training managers, training operators.

We’ve moved entire production technical teams into Madagascar to start the production process. Still don’t know a firm date - I wish we could give everyone a firm date as to when we think we’ll actually be deemed to be complete.

But in my mind we’re almost complete now and I think any time or delay - we’ll be in partial production within a couple of months. And so far so good as I say in my concern there has moved from one of construction and budget to almost exclusively beginning production.

With me on the call today is David Pathe our Chief Financial Officer. David is very new to the job.

David of course has been with us for many years now as our corporate counselor and general counsel internally. Dean Chambers who was our Chief Financial Officer has moved over to become the Chief Operating Officer of the company and I think in the room in Toronto we also have David Pathe’s replacement Steven Botony who has just joined us from outside and to whom we are looking for great things.

In any event, I’d like to ask David Pathe to pick up the call at this point and walk us through the financials. When David is finished then we’d be happy to entertain questions.

So David, over to you.

Great. Well, thanks Ian and good afternoon everyone.

As you’ve now gathered I’ve now assumed the role of Chief Financial Officer with Dean’s appointment as our new Chief Operating Officer. This is my first call with you as the analyst call following our quarterly release and it’s also our first quarter reporting under IFRS.

So I wanted to just take a few moments and highlight a few things in our release this morning and touch on some of the more substantive impacts of IFRS before we take your questions. So first a few headline numbers.

EPS for the first quarter of 2011 was 22 cents a share. That compares to 10 cents a share for the first quarter of 2010.

We had strong operating cash flow for the quarter of $112.8 million, which was significantly above our cash capital expenditures of 29.1 million. We ended the quarter with approximately 1.5 billion in debt for a net debt figure of around $800 million if you net the approximately 700 million of cash, cash equivalents and short-term investments we have on our balance sheet from that figure.

That position reflects repayments of about $40 million on some of the credit facilities in our coal business during the quarter. Our aggregate foreign exchange losses for the quarter were relatively small and amounted only to about a penny per share.

With respect to taxes, our effective tax rate for the quarter was about 33%, which is a little higher than the normalized rate we have been assuming under Canadian GAAP of 25-26%. I’ll explain that when we get into IFRS in a little bit.

So looking at IFRS, this is obviously our first quarter as it is for all companies that are coming out now reporting to you under IFRS. While the new standards obviously haven’t had any impact on our operations, they have had some significant impact on the way we present both our earnings and our balance sheet.

Looking first at the income statement, the two biggest impacts really come from changes in accounting for two different types of loans that we can have on our balance sheet, both of which relate to the Ambatovy project. The first significant change relates to the US dollar denominated loans from our partners at Ambatovy.

Under Canadian GAAP interest on those loans was being capitalized. However, under IFRS that interest is now being expensed.

This change alone had a negative impact on our earnings this quarter of about $15 million. The second significant change relates to US dollar denominated loans that we made to the Ambatovy project as part of our shareholder funding.

Previously these loans were eliminated in consolidation but under IFRS they are now required to be revalued each quarter based on foreign exchange movements. This change also had a negative impact of about $15 million in the quarter and going forward it will potentially increase volatility in our earnings based on future changes in the Canadian/US FX rates.

These and other changes are explained in much greater detail in the first few pages of our MD&A and in Note 30 to our financial statements. Lastly on earnings I just wanted to touch on the tax rates.

As I mentioned earlier, the effective tax rate was about 33%. If we remove the IFRS adjustments to that it would be more in line with the 25-26% that we’re used to seeing under Canadian GAAP.

Going forward I think we expect a more normalized rate under IFRS presentation to be in the 33-35% range. Looking at the balance sheet, if you’ve had a chance to take a look at that you may have noticed that it actually more closely resembles what we refer to as the adjusted balance sheet that we’ve been presenting in our MD&A over the last few quarters.

That balance sheet presents the company with its proportionate interest in what were referred to as variable interest entities rather than consolidating them 100%. That balance sheet showed total assets of about 6.6 billion and debt of around 2 billion, which is not that different now to our IFRS presentation.

The single biggest difference in the balance sheet from Canadian GAAP to IFRS probably relates to the project in Ambatovy and the way that is presented. Under Canadian GAAP it was fully consolidated meaning that 100% of the assets and liabilities were all included on our balance sheet and the non-controlling interests were reported separately.

Under IFRS we are now equity accounting for Ambatovy so the entire project appears as a line item under investment in an associate. Looking for more detail on Ambatovy, Note 9 in the financial statements contains some financial disclosure on the Ambatovy project specifically and is probably more information than you’ve seen in the past on the financial state of the project itself.

Lastly, there is one technical point I want to just highlight and it relates to capital spending. In addition to new nomenclature under IFRS capital spending on the cash flow statement specifically sites cash capital meaning that it doesn’t include accruals, which we would have seen in capital spending estimates in the past.

To come to a capital number that represents both cash and accruals we have broken that down in the MD&A and the divisional disclosures. That’s all I really intended to touch on with respect to IFRS but if you’re looking for more information on that there are a couple of things I wanted to point you to.

In our press release we have tried to capture all the significant changes in kind of a one-page table there that highlights all the significant movements and sets out the treatment in both Canadian GAAP and IFRS. There is obviously much more detail in Note 30 of the financial statements, which is the transition note and it goes through all of the various changes that have been implemented as a result of the move to IFRS and it includes reconciliations for Q1 2010, full year 2010 from Canadian GAAP to IFRS and it also includes an opening balance sheet as of January 1, 2011 under IFRS.

Moving over to operations, we’ve had strong performance across all of our business units this quarter driven in large part by robust pricing for the various commodities we produce. As Ian mentioned and it’s not unusual in robust commodity price environments, we’ve also seen increases in commodity price inputs for the inputs that we use in producing our products.

And that is really flowing through and showing up in the form of upward pressure on our operating costs. Looking specifically at MOA, we have had another strong quarter from our MOA joint venture.

The combined facility and processing plant at MOA set another production record for the quarter. Nickel cash costs for the quarter were just over $4 a pound compared to 3.36 for the previous quarter, reflecting the cost pressures that we’re seeing largely on input commodities.

For example, quarter over quarter we saw a 36% increase in sulfur. Those are quarter over quarter price increases that we haven’t seen since prior to the economic crisis in 2008.

Cost of sulfuric acid was also up significantly quarter over quarter, 21% compared to Q4 2010. Ian already touched on Ambatovy.

Commissioning activities and construction activities continued to advance there. At the end of the quarter approximately 50% of the major process modules were in the hands of the commissioning teams.

As Ian mentioned, the port facilities are now up and running. We have received our first shipment of coal there and that is now in place ready to be fed into the power plants.

Our current capital spending estimate and the schedule still contemplates $4.76 billion in first metal in summer of 2011. As we get closer and closer to those dates we’re reviewing that and looking whether there is any pressure on those dates.

If there is any significant change we’ll advise you of that but at the moment we’re working hard to stay on that time table. In our coal business the most significant event of the quarter was undoubtedly the earthquake and tsunami in Japan.

Normally at this time we’d be talking to you about how the Japanese contracts have settled out for the year. Those contract settlements have been delayed because of the events there.

As a result, in the first quarter we booked some provisional pricing reflecting what we’re anticipating to be an increase in the prices that we’ll be receiving for our export thermal coal. Those contracts will settle out in the next few weeks and one will see a greater impact in that going forward over the rest of the year.

In the Prairie business one of our contract mines removed two units from service during the quarter. This impacted the volume numbers there but not the revenue based on the structure of that contract.

As the volume decreased however, it somewhat skewed the unit operating costs for Prairie but it didn’t have an overall impact on profitability. Oil and gas not much to report there.

The business is enjoying a strong market pricing environment and steady production. So we’re pleased with the production levels we’re seeing there and able to capitalize on the pricing environment.

Lastly, I just wanted to touch on our guidance for 2011 that you would have seen at year end. All of our operations are performing more or less as expected so there is very little change in our estimates from what you would have seen at the time of our year end numbers.

The most significant item going forward is the point in coal where I made where we’re expecting to see those coal contracts settle out in the next few weeks. We have already made this anticipated provision in anticipation of the increase that will be retroactive to January 1st.

Other contracts will be increased with effect from April 1st once those amounts are settled out based on where we see the New Castle reference price at the moment and what settlements we have seen in the market so far. We’re confident it’ll be much stronger pricing than we saw in 2010.

That covers about all I wanted to cover so now we’ll pass it back to Paula and take your questions.

Ron, we can now open the line for questions.

Good afternoon everyone and hi Ian wherever you are. Quickly, first of all on Ambatovy, there is disclosure there on the boilers for the power plants.

One maybe running in July, one in July, one in October. To what degree do the problems at the boilers affect the schedule in your mind?

And secondly, could you elaborate a bit more on those issues associated with these boilers?

I’d be happy to but I think my phone is coming through not so well. So I’m going to get Dean Chambers to pick up on that.

Onno, I think unit one is starting up and that in addition we’ve got an electricity tie line with Georama. And so we don’t see the scheduling of ramp up and commissioning of the other units of the power plant to have any impact on the overall commissioning and start up schedule for the project.

And the issues with regards to these power plants because you started one up and then it failed immediately - could you elaborate?

I think from time to time we’ve had some refectory that we’ve had to look at again and things like that.

Okay. And then on construction activity and budget, I mean 12,000 people on site right now.

Only less than $200 million left in your budgets - how do these two reconcile or am I justified in believing that just getting 12,000 people off the site will be costing more than that to demobilize if you may?

I think we still have a lot of people on site, a lot of people working on the refinery as you can imagine. As you know, that’s the last stage in the process.

And we are demobilizing at the other portions of the project, for example the mine as you know was the first part done and it has essentially been done. A lot of the manpower are local people that we’re continuing to employ and are doing a lot of what I’ll call a lot of the labor that is required to complete the project.

So we are demobilizing some of the contractors that are no longer needed and the skilled trades involved with them.

Okay. And then lastly on the hand off of the various units, will all the pressure asset leach units be handed over to commissioning teams in Q2 and the asset plant as well?

Or is there thought of any of those units being pushed further out?

I think the way if you think about as you know there are five trains in the asset leach plant. So those are being turned over to teams in sequence and will be commissioned and started up in sequence.

So it’s not like we’re going to start all five at once as you probably realize. And so the exact schedule how that works out through the next little period will unfold as we progress.

But it will do it in sequence and all that is part of the planned commissioning and ramp up schedule.

And the asset plant ready to be handed over?

Yes, I believe so.

Okay. And then lastly on the IFRS, I’m sure there are lots of questions - just one from my side is on the Prairie coal where as I understand it Genesee and Highvale in their entirety are then being taken out.

But then if I look at the revenue portion as it is disclosed it looks as if it’s the revenue of the entire Prairie operations including Genesee and Highvale. I am confused on multiple levels but am I confused on this one or is that the right interpretation?

It is all revenue of the Prairie operations. It’s mainly a reclassification issue.

And it’s two units at Highvale.

Yes. It’s Genesee and Highvale, some of the income there is rather than being classified now as operating earnings it’s being classified as lease income.

So it comes out and it’s not considered part of EBITDA but it is also included in part of the revenue of the Prairie operations.

So revenue and cost of sales are fully consolidated for all the mines effectively but then the income is split between let’s say an operating income of Prairie ops and then another line item which is only income from Genesee and Highvale, is that correct?

Yes. Some of the income is now actually characterized as a reimbursement of capital and so it’s all largely a reclassification issue, which we can take you through in a bit more detail.

I don’t know if we need to but yes.

Okay.

But it’s largely just a change in accounting because the sum of those rather than being treated as operations, they’re treated as revenue on lease income.

Okay. Thanks.

I’ll hand it over then. Thanks.

Thanks and good afternoon. I just had a couple questions again following up on Ambatovy.

You sort of I guess hedge yourself to a degree with respect to assessing both the start up timelines and the CapEx estimates being under review. And I just wondered if you could maybe provide some goalposts around what you think would be material changes to those numbers both in terms of the CapEx and the start up?

I think at this point we’re looking at schedule and we’re looking at budgets just as we get closer and closer to the end to see whether there is pressure on those numbers. At this point we don’t have anything to update you on there and we don’t have any news of any material changes at this point.

If we do in the future as this process unfolds we’ll let you know. But at this point there is no sort of material departure from the budget figures as they have been approved by us and by the partners.

Okay. And I guess just another follow up on that, is there any sort of internal view as to - I understand it’s still early days with the commissioning but is there any sort of internal view as to when you may be able to provide a bit more firm production guidance or cost expectations?

Something for the second half of the year or more towards later in the year?

I think frankly towards the end of the year when we have and when we see what first metal looks like and we’re up and running and have a firmer idea of what the ramp up curve is going to look like. We’ll be looking to give some guidance for what 2012 is going to look like but I don’t think there will be much in the way of guidance for 2011.

Okay. Thank you very much.

It’s Ian Delaney. My phone keeps fading in and out but if you can hear me let me make a couple of comments.

One, I don’t think we’re going to get a clear idea of the cost structure of making metal in Ambatovy probably for another year. These things won’t start up and you won’t reach capacity, you won’t have anything you need.

We might have some rough estimates by the end of the year but we won’t really see the complete picture for at least another year. And secondly, I don’t want to get too cute with the cost and budget number.

I think Onno made a good point. You’ve got 12,000 people on site.

It’s a massive site and it’s a massive project. Anything that - any spanner in the works at this point is going to put us over budget and over time.

And we don’t know what that is, we don’t know where that is. But we’ve got an awful lot of moving bits on the ground there.

Frankly I mentioned earlier in the call these things are rapidly beginning to bore me. My concern is almost exclusively on how we’re actually going to operate the plant and train and move in the necessary people, meet the spec and such.

I don’t want to get too cute with cost and budget numbers like that. Anything that moves off center at this point in time is going to have an effect.

Okay.

Sorry. I couldn’t do this.

I just have one follow up on the power costs because I mean a year ago they were $8 a megawatt hour then let’s say 10-12. And now they’re at 18.

Is that mostly related to these temporary issues with some failure and some gas shortages? Or are there structural pressures to the operating costs on the power side?

Thank you.

It’s primarily related to the couple of turbine failures that we made reference to in the quarter. I don’t know how much exactly they cost us in production capacity but they were remedied in the quarter and they’re back on line now.

There were some gas shortages but the impact was the majority of it was due to the turbine failures and the downtime of the equipment.

Okay. Thanks.

Thanks operator and good afternoon everyone. I just had one quick question to follow up to Onno’s previous questions in regard to the Prairie operations.

Just so I understand, I mean during the Highvale there are two units that were taken offline, Sundance units I believe 1 and 2. You’re mentioning that those, the revenue, the earnings and the bottom line hasn’t changed but I don’t understand.

Are those units being taken off permanently and does that impact Sherritt’s basically service structure and what you’re providing and ultimately how much money you’ll be receiving from that contract?

A couple points to make there then Robin. That is not an owned mine.

The Highvale mine we operate under contract and the primary structure of that contract is we’re compensated not on a function of volume mined but on a management fee. So our revenues are not tied directly to volumes that come out of that mine.

It’s basically a flat management fee to operate the mine with a pass through on costs with some potential to realize some upside if we can realize some cost savings and some potential relatively narrow band of upside and downside penalties if we fail to keep costs in check. So the decrease in volume is not a direct impact on revenue under the contract.

The other thing to keep in mind in that contract is the Keephills 3 facility is coming online now and is being commissioned. I think we have shipped some coal to it already as part of the commissioning activities and will be coming online later this year.

And I think it’s going to consume about 2 million tons of coal a year compared to about the 2-1/2 that came offline when Sundance 1 and 2 went down.

Perfect. Thank you.

Thank you Ron. We can - as always, we’re available if you have further questions and thank you for joining us today and have a great afternoon.