Rio Tinto Sells Control of Sulawesi Nickel Project

Sherritt International To Buy Controlling Stake Nickel Project In Indonesian

Sherritt International Corp will acquire a controlling stake in the Sulawesi nickel project in Indonesia from Rio Tinto Ltd. (RIO) for an undisclosed amount. Sherritt, a Toronto-based diversified international mining company, will become the project’s operator. The company said it plans to use its expertise in nickel laterite mining to exploit Sulawesi, which is considered one of the largest undeveloped nickel projects in the world.

For Rio Tinto, the sale represents a pulling back from its first ambitious estimate made in 2008 that the development of Sulawesi would allow it to enter the nickel market and be among the world’s top 10 producers within a decade.

Instead, Rio Tinto spokesman Tony Shaffer said the company will focus on its smaller Eagle nickel project in Michigan, which is expected to producer 16,000 metric tons a year.

Rio says Sulawesi contains 162 million tonnes of nickel, and a first mine could yield 46,000 metric tons a year and eventually expand to more than 100,000 metric tons a year.

However, Sulawesi’s nickel is embedded in laterite rock, which is more difficult and expensive to process.

“Rio Tinto has been considering next steps for its Sulawesi Nickel project for some time and has concluded that bringing in a partner on an earn-in basis is the best way of developing it,” Rio Tinto said in a statement. “Sherritt is a very good partner for Rio Tinto. It has two active laterite mining and processing projects which make it ideally placed to lead this project.”

After the Indonesian government uses an option to acquire a 20% interest in the project, Sherritt would have controlling interest and a 46% economic interest, with Rio Tinto maintaining a 34% economic interest.

A Rio Tinto executive has been quoted in Indonesian media as saying the project will cost US$2 billion to develop. Shaffer said no official cost estimate has been released.

BMO Capital Markets analyst Tony Robson noted that Sulawesi has been under consideration since 1999 and warned investors to expect delays. “Development would take at least seven years to potential first production, based on the challenges of laterite projects generally and potential regulatory delays in Indonesia,” Robson wrote in a note to clients.

Sherritt, which has operations across the world including in Canada, Cuba and Madagascar, said it has executed an earn-in and shareholders agreement in connection with the deal and has also committed to fund US$110 million toward producing a feasibility study from which a development decision will be made. theaustralian.com.au

News Release: Sherritt to acquire a controlling interest in the Sulawesi Nickel Project

TORONTO, December 1, 2010 – Sherritt International Corporation (“Sherritt” or the “Corporation”) (TSX: S) today announced it has executed an earn-in and shareholders agreement with a subsidiary of Rio Tinto Limited (“Rio Tinto”) whereby Sherritt will acquire an interest in the Sulawesi Nickel Project (the “Sulawesi Project”) in Indonesia. Subject to satisfaction of certain conditions, Sherritt will acquire a controlling 57.5% equity interest in the holding company that owns the Sulawesi Project, and Rio Tinto will continue to hold the remaining 42.5%. Sherritt has been appointed as the Operator and will license its commercially-proven, proprietary technology to the Project. As consideration for its interest, Sherritt has committed to fund US$110 million towards producing a feasibility study from which a development decision will be made.

In compliance with Indonesia’s Mining Law, local Indonesian interests are expected to acquire a 20% interest in the Project. Following that event, Sherritt and Rio Tinto together will indirectly own and control an 80% interest in the Sulawesi Project, which will give Sherritt a controlling interest and a 46% economic interest with Rio Tinto maintaining a 34% economic interest.

The Sulawesi Project currently ranks as one of the largest known undeveloped, greenfield laterite nickel deposits in the world. Ian W. Delaney, Sherritt’s Chairman and CEO commented, “The Sulawesi Project is a truly impressive, high quality lateritic nickel resource. With 60 years of technological expertise in lateritic solutions, 50 years of operational experience in Canada and Cuba, and most recently, its project experience in the development of the Ambatovy Project in Madagascar, Sherritt is uniquely positioned to help move the Sulawesi Project forward. We will begin process development and further delineation of the resource immediately.”

About the Sulawesi Project

The Sulawesi Project is located in the Southeast and Central Sulawesi provinces on the island of Sulawesi in the Republic of Indonesia. Based on exploration completed to date, the Project includes a large, high grade resource potentially richer than Ambatovy. Identification of further mineralization will be achieved through additonal exploration and completion of feasibility studies.

About Sherritt

Sherritt is a diversified natural resource company that produces nickel, cobalt, thermal coal, oil, gas and electricity. It also licenses its proprietary technologies to other metals companies.
Sherritt’s common shares are listed on the Toronto Stock Exchange under the symbol “S”

For further information, please contact:
Investor Relations
Telephone: 416-935-2451
Toll-Free: 1-800-704-6698
Email: investor@sherritt.com
www.sherritt.com