Sprott Resource Corp. Announces Sale of its Subsidiary Waseca Energy Inc. to Twin Butte Energy Ltd.

TORONTO, Sept. 4, 2012 /CNW/ - Sprott Resource Corp. ("SRC" or the "Company") (TSX: SCP) announced today that its subsidiary, Waseca Energy Inc. ("Waseca"), has entered into an arrangement agreement providing for the acquisition by Twin Butte Energy Ltd. ("Twin Butte") of all of the issued and outstanding common shares of Waseca for $134.5 million ($127 million on an enterprise value basis) or $1.35 per Waseca common share (the "Transaction").

The consideration for the Transaction will be comprised of a minimum of $32.2 million and a maximum of $58.9 million of cash (assuming the Waseca options and performance shares are arranged in accordance with the arrangement agreement) and a minimum of 28.9 million and a maximum of 39.0 million of Twin Butte common shares depending on the elections between cash and Twin Butte shares made by Waseca shareholders.

SRC owns 73.6 million Waseca common shares (or 81.1% of the undiluted Waseca common shares outstanding), which it purchased for $44.2 million ($0.60 per Waseca common share).  SRC will receive total consideration of $99.4 million in cash and Twin Butte common shares for its Waseca common share holdings.  On closing of the Transaction, SRC will own approximately 9% of Twin Butte's common shares outstanding.

Waseca's SAGD Assets

Waseca's SAGD assets (the "SAGD Assets") are not included as part of the Transaction.  Such assets will either be sold prior to October 1, 2012 or conveyed by Waseca to a new wholly-owned subsidiary of Waseca, the shares of which would be distributed to Waseca common shareholders on closing of the Transaction.  If the SAGD Assets are sold prior to October 1, 2012, Waseca common shareholders will be entitled to a special cash distribution of approximately $10 million on closing of the Transaction ($0.09 per Waseca common share).  The special cash distribution, if made, would result in additional consideration of $6.6 million to SRC.

"We would like to congratulate the Waseca team for delivering an exceptional return on investment to Waseca shareholders over the past four years, especially relative to the returns experienced by most Canadian oil and gas companies during this period," said Kevin Bambrough, President & CEO of SRC.

"We are pleased that Waseca has entered into the Transaction with Twin Butte in particular.  We believe that Twin Butte's dividend plus growth business model focused on low-risk, high-return Lloyd heavy oil is attractive and sustainable."

Transaction Terms and Conditions

The Transaction is to be effected by way of a plan of arrangement under the Business Corporations Act (Alberta).  Completion of the Transaction, which is anticipated to occur in early November 2012, is subject to, among other things, the approval of at least 66⅔ percent of the Waseca shareholders voting on the arrangement, the approval of the Court of Queen's Bench of Alberta, the receipt of all necessary regulatory and stock exchange approvals, and certain closing conditions that are customary for a transaction of this nature.

The Boards of Directors of each of Twin Butte and Waseca have unanimously approved the Transaction and Waseca's Board of Directors has resolved to recommend that its shareholders vote in favour of the Transaction.  Directors, officers and shareholders of Waseca, including SRC, who collectively hold approximately 81.9 % of the outstanding Waseca common shares, have entered into support agreements with Twin Butte pursuant to which each has agreed to vote in favour of the Transaction.

Waseca has agreed to not solicit or initiate any discussions regarding any other business combination or sale of material assets and has granted Twin Butte the right to match competing, unsolicited proposals.  The arrangement agreement provides for a $4.0 million non-completion fee payable by Waseca in certain circumstances if the Transaction is not completed.

Complete details of the terms of the Transaction are set out in the arrangement agreement, which will be filed by SRC and will be available for viewing at www.sedar.com.

Financial and Legal Advisors Advisors

RBC Capital Markets is acting as financial advisor to Waseca and has provided the Board of Directors of Waseca with an opinion that the consideration to be received by the Waseca shareholders pursuant to the Transaction is fair, from a financial point of view, to Waseca shareholders.  Stikeman Elliott LLP is acting as legal advisor to Waseca.

Peters & Co. Limited is acting as financial advisor and Raymond James Ltd. is acting as strategic advisor to Twin Butte.  Burnet, Duckworth & Palmer LLP is acting as legal advisor to Twin Butte.

About Waseca Energy Inc.

Waseca is a private heavy company with 100 percent of its production being from properties located in the greater Lloydminster area.

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 information and statements

This news release contains certain forward-looking information and 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 information or statements. In particular, but without limiting the forgoing, this news release contains forward-looking information and statements pertaining to the Transaction and its possible completion and the possible sale of the SAGD Assets.  Forward-looking statements or information are based on a number of material factors, expectations or assumptions which have been used to develop such statements and information but which may prove to be incorrect, including the assumption that the Transaction will be completed. Although SRC believes the expectations reflected in such forward-looking statements or information are reasonable, undue reliance should not be placed on forward-looking statements because SRC can give no assurance that such expectations will prove to be correct.  The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Such information and statement, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors, including the possibility that the Transaction will not close due to a failure to receive all necessary approvals or meet closing conditions, which may cause actual results or events to defer materially from those anticipated in such forward-looking information or statements.

The forward-looking information and 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 or information, 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.

For further information:

Stephen Yuzpe
Chief Financial Officer
Sprott Resource Corp.
200 Bay Street, Suite 2750
Toronto, Ontario
M5J 2J2
Tel: (416) 977-7333
Fax: (416) 977-9555

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Sprott Resource Corp.

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