Sprott Resource Corp. Announces 2013 Annual Results
TORONTO, March 25, 2014 /CNW/ - (TSX: SCP) - Sprott Resource Corp. ("SRC" or the "Company") today announced financial results for the year ended December 31, 2013.
"For natural resource investors, 2013 was a difficult year as the sector continued to struggle through a protracted downturn. With SRC's portfolio of resource investments, both our net asset value and share price were negatively impacted by the volatile market conditions," said Steve Yuzpe, President and Chief Executive Officer of SRC. "Our portfolio consists of a range of investments at various stages of maturity and we are committed to supporting their ongoing development. Most are well positioned for 2014, while others face challenges that are actively being addressed."
"We continue to believe that investing in long-term sustainable businesses in vital commodity industries is the best way to build and protect wealth for our shareholders," continued Mr. Yuzpe. "We are committed to enhancing shareholder value through accretive new investments, increasing the value of our current portfolio and by repurchasing shares for cancellation through our longstanding normal course issuer bid."
"During the fourth quarter of 2013, our largest holding, Long Run Exploration, Inc., ("Long Run") announced a $0.402 cent per share annual dividend that, based on our current holdings in the company, will provide SRC with more than $14 million in annual cash flows," continued Mr. Yuzpe. "Our view on the energy sector remains positive and we look forward to building further value in new investments in 2014."
"One of our more recent investments, Independence Contract Drilling, Inc. ("ICD") continues to perform well," commented Arthur Einav, SRC Managing Director and ICD Director. "The company is finalizing construction of its eighth rig, equipped with multi-directional "walking" and bi-fuel systems, which will be deployed in April to a large exploration and development company operating in the Permian Basin. Currently, all of ICD's fielded rigs are working in the Permian Basin with, what ICD management believes are, industry-leading drilling performance metrics. Construction of ICD's ninth and tenth rigs is currently underway."
"In the agriculture segment, One Earth Farms Corp. ("OEF") continues its transition towards becoming a vertically integrated producer of natural and organic branded food products," said Andrew Stronach, SRC Managing Director and OEF Director. "Early in 2013, OEF completed the acquisition of Beretta Farms Inc. ("Beretta Farms"), a purveyor of hormone free and antibiotic free natural and organic branded meat products in six Canadian provinces. This transaction was an important milestone in One Earth Farms' strategic shift towards vertical integration and a focus on branded food products. This transition has involved some difficult decisions for OEF management and the company recently announced that it will be exiting its crop farming operations in 2014, in order to focus on its cattle and branded food divisions, which better align with its long-term growth strategy."
SRC equity attributable to shareholders as at December 31, 2013
The following table outlines SRC's equity attributable to shareholders as at December 31, 2013 and reflects the value at which individual items are carried on SRC's balance sheet.
|(in thousands)||December 31, 2013|
|Cash and Cash Equivalents1||$||17,041|
|Other Current Assets||2,454|
|Consolidated investment in:2|
|OEOG (defined below)||23,391|
|Fair value investment in:|
|Union Agriculture Group4||34,203|
|Virginia Energy (defined below)5||1,039|
|Potash Ridge (defined below)6||4,498|
|Equity investment in:|
|Stonegate Agricom (defined below)7||12,666|
|Less: Current Liabilities||(2,692)|
|Less: Non-Current Liabilities||(3,313)|
|Total equity attributable to shareholders (NAV)||$||359,975|
|(net assets in thousands, except per share amounts)||December 31, 2013|
|Net assets attributable to shareholders of the Company||$||359,975|
|Number of shares outstanding as at December 31, 20139||98,791,831|
|Net assets per share||$||3.64|
Cash held at SRC and does not include cash held by subsidiaries of SRC
or investee companies.
One Earth Oil & Gas Inc. ("OEOG") and OEF are controlled subsidiaries of
SRC and are carried at their book value.
As at December 31, 2013, SRC owned 35.6 million shares of Long Run
(common shares and non-voting preferred shares) valued at $5.31 per
As at December 31, 2013, SRC owned 3.4 million common shares of Union
Agriculture Group valued at $10.10 per share, which is the price that
the Company has recorded as fair value.
As at December 31, 2013, SRC owned 9.4 million common shares of Virginia
Energy Resources Inc. ("Virginia Energy") valued at $0.11 per common
As at December 31, 2013, SRC owned 21.2 million shares of Potash Ridge
Corporation ("Potash Ridge") (common shares and non-voting preferred
shares) valued at $0.21 per share. Also included in the balance is $0.3
million of warrants.
As at December 31, 2013, SRC owned 71.0 million common shares of
Stonegate Agricom Ltd. ("Stonegate Agricom"), valued at its market
value of $0.23 per share.
As at December 31, 2013, SRC owned 2.5 million common shares of ICD,
which is a private company that SRC equity accounts.
- As of the date hereof, SRC has 98,406,838 common shares outstanding.
Financial Highlights for the year ended December 31, 2013:
- For the year ended December 31, 2013, the Company recorded a loss attributable to shareholders of the Company of $85.2 million ($0.85 loss per basic and diluted share respectively) compared to a loss attributable to shareholders of the Company of $57.1 million ($0.53 loss per basic and diluted share respectively). The loss for the year ended December 31, 2013, attributable to shareholders is comprised of (i) the corporate segment loss of $65.0 million, (ii) the agricultural segment loss attributable to shareholders of $16.6 million and (iii) the energy segment loss attributable to shareholders of $3.6 million. The major components of the corporate segment loss of $65.0 million are the fair value loss net of gain on disposal of gold bullion of $22.7 million, the impairment of certain available-for-sale and held-for-trading investments of $25.2 million, the share of loss from associates of $2.8 million and the impairment of Stonegate Agricom of $12.2 million.
- Equity attributable to the shareholders of the Company decreased to $360.0 million as at December 31, 2013 from $459.9 million as at December 31, 2012. The $99.9 million decrease in equity attributable to shareholders was primarily the result of (i) the loss for the year attributable to shareholders of $85.2 million, (ii) the combined effect of capital transactions of the normal course issuer bid ("NCIB") of $14.2 million and the dividend declared of $25.7 million, and (iii) an increase in accumulated other comprehensive income of $25.2 million attributable to fair value changes of certain investments.
SRC corporate and portfolio company developments:
- Steve Yuzpe named President and CEO of SRC in October 2013 and appointed to the Board of Directors of the Company until the next annual general meeting and Michael Staresinic was subsequently named Chief Financial Officer of SRC in December 2013.
- OEOG acquired rights to approximately 45 sections (28,800 acres) of land in the Peace River region of Alberta in a joint venture with Gift Energy. OEOG is continuing its 3D seismic and drilling programs on the lands.
- OEF acquired Toronto based Beretta Farms, a purveyor of hormone free and antibiotic free natural and organic branded meat products in six Canadian provinces.
- SRC continued to support Stonegate Agricom by converting its loan to Stonegate Agricom into additional equity and by participating in its equity raise in 2013. SRC owns approximately 36.5% of the issued and outstanding Stonegate Agricom shares on an undiluted basis.
- 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.
- During 2013, SRC sold 73,971 ounces of its gold bullion for approximately $100.6 million dollars at an average price $1,359 per ounce. In addition to providing capital for investment opportunities, the Company also applied some of the funds received to the Company's margin account.
- In August 2013, SRC cancelled its dividend and dividend reinvestment plan in order to better manage its capital plan.
- SRC repurchased 3.7 million shares for cancellation in 2013 through its NCIB.
Conference Call Details
SRC will hold a conference call to discuss its 2013 year end results on March 26, 2014 at 8:00am ET. To participate in the call, please dial 647-427-7450 or 1-888-231-8191 ten minutes prior to the scheduled start of the call. A taped replay of the conference call will be available until Thursday April 2, 2014 by calling 416-849-0833 or 1-855-859-2056, reference number 12080061. The conference call will be webcast live at www.sprottresource.com and http://www.newswire.ca/en/webcast/detail/1321189/1459211
About Sprott Resource Corp.
SRC is a Canadian-based company, the primary purpose of which is to invest and operate in natural resources through its subsidiaries. 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 LP ("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 Information and 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) the ongoing development of SRC's investments; (ii) the cash flows provided by Long Run's annual dividend; (iii) building further value in SRC's oil and gas investments in 2014; (iv) the deployment of ICD's eighth rig; (v) continuation of OEF's transition towards becoming a vertically integrated producer of natural and organic branded food products; and (vi) OEF's exit from crop farming operations in 2014 and its focus on its cattle and branded food divisions. 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 the following: (i) energy markets and the price of oil, natural gas liquids, natural gas will be consistent with the current environment; (ii) Long Run will continue its annual dividend; (iii) the contract for ICD's eighth rig will be fulfilled; (iv) OEF will be able to successfully exit its crop farming operations; (v) the natural and organic meat market and the price of natural and organic meat will be consistent with the current environment; (vi) the market and services rates for land-based contract drilling services will be consistent with the current environment; (vii) the impact of increasing competition in each business in which the Company's subsidiaries operate will not materially change; (viii) conditions in general economic and financial markets will be consistent with the current environment; (ix) the effects of regulation and tax laws of governmental agencies will not materially change; and * future operating costs will be consistent with the current environment. 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 news 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) market volatility that would affect the ability to enter or exit investments; (ii) 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); (iii) those risks listed under the heading "Risk Factors" in SRC's annual information form dated March 25, 2014; and (iv) 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 new 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.
Information Regarding Disclosure on Oil and Gas Information
Where amounts are expressed in a barrel of oil equivalent ("boe"), or barrel of oil equivalent per day ("boe/d"), natural gas volumes have been converted to barrels of oil equivalent on the basis that 6 thousand cubic feet ("mcf") is equal to one barrel of oil. Use of the term boe may be misleading, particularly if used in isolation. This boe conversion ratio is based on an energy equivalence methodology, and does not represent a value equivalency. Indeed, the energy and value relationships may differ widely with market conditions. The conversion conforms to the Canadian Securities Regulators' National Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities.
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