TORONTO, Nov. 14, 2013 /CNW/ - (TSX: SCP) - Sprott Resource Corp. ("SRC" or the "Company") today announced financial results for the three and nine-months ended September 30, 2013.
"The current downturn in the resource sector provides tremendous opportunities to make investments at extremely compelling valuations," said Mr. Yuzpe. "We believe that we have the right team in place to take advantage of these opportunities, while continuing to support the development of our current portfolio of investments. As always, our primary focus will be pursuing accretive transactions to create value for our shareholders."
"In November, subsequent to quarter end, we completed the disposition of our gold bullion holdings for gross proceeds of approximately US$76 million," continued Mr. Yuzpe. "This transaction gives us the financial flexibility to eliminate our outstanding debt, while providing the Company with approximately $24 million to pursue new investment opportunities."
"We have a strong portfolio of investments, the largest of which is our position in Long Run Exploration Ltd. ("Long Run") which enjoyed excellent performance during the third quarter and contributed to a significant increase in our net asset value," added Mr. Yuzpe. "In addition, Long Run recently announced a $0.402 cent per share annual dividend which, through our current holdings in the company, will provide Sprott Resource Corp. with more than $14 million in annual cash flows, which is more than enough to cover our costs to run the business."
"We remain committed to enhancing shareholder value through our long-standing normal course issuer bid ("NCIB") and when appropriate will continue to buy back shares for cancellation when we believe the share price does not fully reflect the net asset value of the business," concluded Mr. Yuzpe.
SRC Equity attributable to shareholders as at September 30, 2013
The following table outlines SRC's equity attributable to shareholders as at September 30, 2013 and reflects the value at which individual items are carried on SRC's balance sheet.
|(in thousands)||September 30, 2013|
|Cash and Cash Equivalents1||$||1,499|
|Other Current Assets||1,597|
|Consolidated investment in:3|
|OEOG (defined below)||17,023|
|One Earth Farms (defined below)||36,603|
|Fair value investment in:|
|Union Agriculture Group5||33,127|
|Virginia Energy (defined below)6||2,078|
|Potash Ridge (defined below)7||3,963|
|Equity investment in:|
|Stonegate Agricom (defined below)8||17,653|
|ICD (defined below)9||48,843|
|Less: Current Liabilities||(53,666)|
|Less: Non-Current Liabilities||(5,713)|
|Total equity attributable to shareholders (NAV)||$|| 383,399
|(assets in thousands)||Sept. 30, 2013|
|Net assets attributable to shareholders of the Company||$||383,399|
|Number of share outstanding as at September 30, 201310||99,351,131|
|Net assets per share||$||3.86|
|1.||Cash held at SRC and does not include cash held by subsidiaries of SRC or investee companies.|
|2.||As at September 30, 2013, SRC held 59,829 ounces of gold bullion valued at $1,366.49 per ounce. Subsequent to quarter end, the Company disposed of its entire gold bullion position for gross proceeds of approximately US$76 million.|
|3.||One Earth Oil & Gas Inc. ("OEOG") and One Earth Farms Corp. ("One Earth Farms") are controlled subsidiaries of SRC and are carried at their book value.|
|4.||As at September 30, 2013, SRC owned 35.7 million shares of Long Run (common shares and non-voting preferred shares) valued at 5.50 per share.|
|5.||As at September 30, 2013, SRC owned 3.4 million common shares of Union Agriculture Group valued at $9.79 per share, which is the price that the Company has recorded as fair value.|
|6.||As at September 30, 2013, SRC owned 9.4 million common shares of Virginia Energy Resources Inc. ("Virginia Energy") valued at $0.22 per common share.|
|7.||As at September 30, 2013, SRC owned 21.2 million shares of Potash Ridge Corporation ("Potash Ridge") (common shares and non-voting preferred shares) valued at $0.18 per share. Also included in the balance is $0.3 million of warrants.|
|8.||As at September 30, 2013, SRC owned 71.0 million common shares of Stonegate Agricom Ltd. ("Stonegate Agricom"), valued at its market value of $0.24 per share.|
|9.||As at September 30, 2013, SRC owned 2.5 million common shares of Independence Contract Drilling, Inc. ICD is not publicly listed and the Company equity accounts for this investment.|
|10.||As of the date hereof, SRC has 98,847,731 common shares outstanding.|
Financial Highlights for the three-months ended September 30, 2013
- For the three-months ended September 30, 2013, the Company reported a net loss attributable to the shareholders of the Company of $8.0 million ($0.08 loss per basic and diluted share respectively), compared to a net loss attributable to shareholders of the Company of $56.8 million ($0.53 loss per basic and diluted share respectively), reported in the same period of 2012. The net loss for the three-months ended September 30, 2013 was primarily the result of the impairment of certain AFS investments ($5.9 million), the impairment of Stonegate ($8.5 million), management fees ($2.3 million) and general and administrative expenses ($2.9 million), which was offset by an increase in the fair market value and gain on disposal of gold bullion ($10.1 million) and a deferred income tax recovery ($1.3 million).
- For the three-months ended September 30, 2013, the Company has purchased and canceled 0.9 million common shares under the Company's normal course issuer bid at an average cost of $3.30 per share for an aggregate cost of $2.9 million. Subsequent to quarter end, and as at the date hereof, the Company has purchased and cancelled an additional 0.5 million common shares under the NCIB at an average cost of $2.88 per share for a total cost of $1.5 million.
- Equity attributable to the shareholders of the Company decreased to $383.4 million as at September 30, 2013 from $459.9 million as at December 31, 2012. The $76.5 million decrease in equity attributable to the shareholders of the Company was primarily the result of a decrease in the value of gold bullion from market value changes and disposal ($41.5 million), decrease in property, plant and equipment ($16.6 million), increase in the margin account and credit facility ($50.9 million) and a decrease in cash and cash equivalents ($5.0 million), which was offset by increases in Goodwill ($6.7 million) and exploration and evaluation assets ($14.8 million).
- For the three-months ended September 30, 2013, the Company recorded a fair value increase and gain on disposal of $10.1 million in its physical gold bullion holdings. As at September 30, 2013, the Company's gold bullion had a fair market value of $81.8 million (December 31, 2012: $123.3 million) compared to a cost of $61.0 million. The realized gain on gold bullion sold during the quarter was $6.7 million.
SRC corporate developments:
- The Board of Directors of the Company has appointed Steve Yuzpe to serve on the board until the next annual general meeting.
- SRC also announced that Paul Dimitriadis will resign from the position of Chief Operating Officer of Sprott Resource Corp. effective December 31, 2013, in order to pursue opportunities outside of the Company.
- Subsequent to quarter end, the Company disposed of its entire gold bullion position for gross proceeds of approximately US$76 million. The Company intends to pay the Margin Account in full, leaving approximately $24 million in cash. In addition to providing capital for additional investment opportunities, the Company will save approximately $900 thousand in interest and storage costs annually.
Achievements by SRC Subsidiaries and Investees for the three-months ended September 30, 2013 and to the date hereof:
Stonegate Agricom Issues Common Shares to SRC
- On July 24, 2013, Stonegate Agricom completed their previously announced short form prospectus offering (the "Stonegate Offering") of units (the "Units") of Stonegate Agricom. SRC acquired beneficial ownership of 12.5 million Units for a purchase price of $0.30 per Unit pursuant to the Stonegate Offering. Each Unit consists of one Share and one Share purchase warrant (a "Stonegate Warrant"). Each Stonegate Warrant will entitle the holder thereof to purchase one Stonegate Share at an exercise price of $0.40 per Stonegate Share for a period of 24 months following the closing of the Stonegate Offering. On August 8, 2013, the agents exercised their over-allotment option in full, resulting in the sale of an additional 5 million Units at a price of $0.30 per Unit.
- Following completion of the Stonegate Offering, SRC beneficially owns 71.0 million Stonegate Shares, which based on information contained in documents publically filed by Stonegate Agricom, represents approximately 36.5% of the issued and outstanding Stonegate Shares. SRC acquired 12.5 million Stonegate Warrants which, based on information contained in documents publically filed by Stonegate Agricom, represents approximately 32.6% of the issued and outstanding Stonegate Warrants.
- On August 14, 2013, SRC filed an amended and restated technical report entitled "Amended and Restated NI 43-101 Technical Report Paris Hills Phosphate Project Bloomington, Idaho, USA" effectively dated February 28, 2013 and amended and restated as of July 8, 2013 (the "Amended Technical Report"). The Amended Technical Report was filed solely to ensure that a "Qualified Person" (as that term is defined in National Instrument 43-101 - Standards of Disclosure for Mineral Projects) had taken responsibility for each section of the previously filed technical report. A copy of the Amended Technical Report is available on SEDAR at www.sedar.com under SRC's profile.
One Earth Farms
- During the second quarter of 2013, Michael Beretta was appointed Chief Executive Officer of One Earth Farms. In November 2013, Gael Mourant was appointed Chief Financial Officer of One Earth Farms. Ms. Mourant is an experienced business leader who has held a number of senior positions in the manufacturing and financial services sectors including at the CFO and CEO level over the past 20 years. Her background in financial reporting, debt and equity financing, and operational improvement initiatives are expected to be a valuable addition to the One Earth Farms executive team.
- In July 2013, One Earth Farms acquired Sweetpea Baby Foods Ltd. a company that markets frozen organic meal options and snacks for babies and toddlers across Canada.
- As of November 14, 2013, harvest operations are substantially complete.
One Earth Oil and Gas
- In October 2013, Peter Sametz was appointed to the position of Chief Executive Officer. Mr. Sametz is an experienced energy industry leader and was most recently with Connacher Oil and Gas for an eight year period in a variety of senior operational roles including President, COO, and Interim CEO. Blaine Favel remains with OEOG in the role of Executive Chairman and together with Mr. Sametz will have the responsibility for advancing OEOG's joint venture with Gift Lake Energy.
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 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) the receipt of dividends by SRC from certain of its holdings; and (iii) potential use of SRC's normal course issuer bid. 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 future outlook for the energy sector and, in particular, natural gas. 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 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); (iv) 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; (v) the ability of the Company to repurchase its securities may be limited by applicable corporate law; and (vi) those listed under the heading "Risk Factors" in SRC's annual information form dated March 28, 2013. 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.
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.
SOURCE: Sprott Resource Corp.
For further information:
President and Chief Executive Officer
Tel: (416) 977-7333
Fax: (416) 977-9555