Steve Yuzpe, president and CEO of Sprott Resource Corp (TSX: SCP), said he sees “exceptional investment opportunities” in resource sectors in the coming year, in part due to a roughly 65 percent decline in valuations since 2011. For this reason, the private equity firm plans to this year accelerate new capital deployment through increased investment activity and collaboration with the Sprott Group of Companies, and add expertise to its core investment team. Sprott Resource estimated it had a net asset value of up to $370 million at the end of last year. The firm also announced that in Dec. 2013 it committed $5 million for a royalty interest in a number of wells to be drilled by a Calgary-based company that explores, develops and produces oil and natural gas in northwestern Alberta.
Sprott Resource Corp. Provides Business Update
TORONTO, Jan. 13, 2014 /CNW/ – Sprott Resource Corp. (TSX: SCP) (“SRC” or the “Company”) is pleased to provide a business update on its portfolio of investments and the Company’s key objectives for 2014.
“As we enter 2014, we are pleased with the quality and diversity of our investment portfolio. Most of our portfolio companies are well positioned for 2014, while others are dealing with challenges that we are continuing to address,” said Mr. Stephen Yuzpe, President and Chief Executive Officer of the Company. “We are also excited about the exceptional investment opportunities that currently exist in the resource sector and will look to opportunistically deploy capital into new investments. Valuations in the resource sector are down approximately 65% from the peak in 2011 and we feel SRC, with permanent capital and the ability to invest counter-cyclically, is well positioned to benefit from an eventual cyclical recovery in the commodity sectors.”
“Going forward, we continue to see excellent opportunities across the capital structure, consistent with our resource-focused private equity model,” added Mr. Yuzpe. “We recently committed $5 million for a royalty interest in a number of liquids-rich natural gas wells to be drilled by a Calgary-based producer in Northwestern Alberta. This transaction was entered into together with other members of the Sprott Group of Companies and highlights the benefits of the deal flow, relationships and technical expertise that come from our partnership with the group.”
2014 Business Objectives
The Company has established four key objectives for 2014:
— Continue to support our existing subsidiaries and portfolio investments.
— Accelerate new capital deployment through increased investment activity and deal flow, enhanced capital planning and collaboration with the broader Sprott Group of Companies.
— Support the core investment team in place by adding expertise with regional and industry focus in Calgary.
— Enhance stakeholder communications in Canada and the U.S. to generate increased awareness of SRC, including holding regular quarterly conference calls.
Update on the Company’s Net Asset Value (“NAV”) and Cash Position
As at December 31, 2013, management expects NAV to be in the range of $340 million or $3.43 per common share to $370 million or $3.74 per common share, based on publicly available information of our public company holdings, our private company holdings and our corporate operations.
The Company finished the 2013 fiscal year with approximately $17 million in cash after taking into account the sale of gold bullion and the investment of $6.5 million into One Earth Oil and Gas Inc. prior to year end. Beginning in February 2014, the Company expects to receive approximately $1.2 million in monthly dividends from its ownership position in Long Run Exploration Ltd.
New Investment: $5 Million Oil and Gas Royalty
— In December 2013, SRC committed $5 million for a royalty interest in a number of wells to be drilled by a Calgary-based company that explores, develops and produces oil and natural gas in Northwestern Alberta.
— The royalty on the wells is received until an agreed upon rate of return is achieved, at which time the royalty will be extinguished on all wells.
— The transaction was entered into together with other members of the Sprott Group of Companies.
Update on Private Company Holdings
One Earth Oil & Gas Inc. (“OEOG”)
— The OEOG technical team has partially completed the previously announced 3D seismic and winter drilling program at the Gift Lake heavy oil play in Alberta and initial results are being evaluated.
— OEOG is also completing the acquisition of additional lands at Gift Lake which, when finalized in Q1 2014, will provide for a total of 45 sections (approx. 29,000 acres) of land to explore and develop for heavy oil with its joint venture partner Gift Energy Limited.
One Earth Farms Corp. (“OEF”)
— OEF is continuing restructuring efforts which will see OEF further scale back its crop farming operations to focus on vertical integration in the production and sale of value-added natural and organic food products through its Beretta Farms subsidiary.
— Costs associated with operational improvement initiatives in the cattle division along with expected operating results for the fourth quarter are anticipated to result in a fourth quarter 2013 charge for SRC of approximately $5 million to $8 million.
— SRC believes that OEF management is progressing well towards creating a stable platform on which to build as OEF focuses on the expansion of its natural and organic protein business and “farm-to-fork” business model. Independence Contract Drilling, Inc. (“ICD”)
— ICD completed construction of its seventh multi-directional walking rig, which was subsequently deployed to a major exploration and development company operating in the Permian Basin.
— Currently, all of ICD’s rigs are contracted and working in the Permian Basin with, what ICD management believes are, industry-leading drilling performance metrics.
— Construction of ICD’s eighth and ninth rigs are currently underway.
The Company also has significant investments in Long Run Exploration Ltd. (TSX: LRE), Union Agriculture Group and Stonegate Agricom Ltd. (TSX: ST) as well as smaller investments in Virginia Energy Resources Inc. (TSX.V: VUI) and Potash Ridge Corporation (TSX: PRK). In addition, the Company has investments in several smaller pre-production and technology companies in the natural resource sector.
About Sprott Resource Corp.
SRC is a Canadian-based company, the primary purpose of which is to invest and operate in natural resources. Through acquisitions, joint ventures and other investments, SRC seeks to provide its shareholders with exposure to the natural resource sector for the purposes of capital appreciation and real wealth preservation. SRC is well positioned to draw upon the considerable experience and expertise of both its Board of Directors and Sprott Consulting Limited Partnership (SCLP), of which Sprott Inc. is the sole limited partner. Pursuant to a management services agreement between SCLP and SRC, SCLP provides day-to-day business management for SRC as well as other management and administrative services. SRC invests and operates through Sprott Resource Partnership (SRP), a partnership between SRC and Sprott Resource Consulting Limited Partnership, an affiliate of SCLP which is the managing partner of SRP.
Forward Looking Statements
This news release contains certain forward-looking information and statements (collectively referred to herein as “Forward-Looking Statements”) within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends” and similar expressions are intended to identify Forward-Looking Statements. In particular, but without limiting the forgoing, this news release contains Forward-Looking Statements pertaining to: (i) SRC’s future strategies, outlook, investment opportunities and anticipated events or results; (ii) anticipated NAV and cash as at December 31, 2013; (iii) the receipt of dividends by SRC from certain of its holdings; (iv) the results of OEOG’s drilling program and acquisition of additional land; and (v) OEF’s restructuring efforts, operational improvements and expected provisions to be taken in the fourth quarter. Forward-Looking Statements are based on a number of expectations or assumptions which have been used to develop such information and statements but which may prove to be incorrect, including, but not limited to, (i) the energy markets and the price of oil, natural gas liquids and natural gas; (ii) the natural and organic crop and livestock market and the price of natural and organic grains and livestock products; (iii) the phosphate market and the price of phosphate rock; (iv) the potash market and the price of potash; (v) the market and services rates for land-based contract drilling services; (vi) the NAVs of each of the Company’s subsidiaries and portfolio companies; and (vii) the future outlook for the commodity sector. The Company will publish the final year-end NAV in its audited December 31, 2013 financial statements. The final year-end NAV could vary significantly from the ranges provided in this press release. Although SRC believes the expectations and assumptions reflected in such Forward-Looking Statements are reasonable, undue reliance should not be placed on Forward-Looking Statements because SRC can give no assurance that such expectations and assumptions will prove to be correct. The Forward-Looking Statements included in this new release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors, which may cause actual results or events to differ materially from those anticipated in such Forward-Looking Statements, including, without limitation: (i) general economic, market and business conditions; (ii) market volatility that would affect the ability to enter or exit investments; (iii) risks associated with the farming industry in general (e.g., weather risks; operational risks in production; the uncertainty of estimates and projections related to crop and cattle); (iv) risks associated with the oil and gas industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to reserves, production, costs and expenses and health, safety and environmental risks); (v) commodity price and exchange rate
fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures; (vi) risks associated with the mining industry in general (e.g., permitting risks, operational risks in production; control of ore grade; the uncertainty of estimates and projections relating to reserves, production, costs and expenses and health, safety and environmental risks); (vii) uncertainty of receipt of approvals for the acquisition of lands; (viii) the uncertainty of mineral reserves and resources; (ix) changes in environmental and other regulations; * those risks disclosed under the heading “Financial Instruments and Risk Management” in SRC’s MD&A for the nine-months ended September 30, 2013; (xi) those risks listed under the heading “Risk Factors” in SRC’s AIF dated March 28, 2013; and (xii) other risks, which are beyond the control of SRC or its subsidiaries. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the Forward-Looking Statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the Forward-Looking Statements contained in this news release. The Forward-Looking Statements contained in this news release speak only as of the date of this news release, and SRC does not assume any obligation to publicly update or revise any of the included Forward-Looking Statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.
SOURCE Sprott Resource Corp.
/CONTACT: Steve Yuzpe
President & Chief Executive Officer
Sprott Resource Corp.
T: (416) 977-7333
E: email@example.com Glen Williams
Director of Communications
T: (416) 943-4394
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