Sprott Resource Corp. Announces Investment in PBS Coals Corporation


    TORONTO, Dec. 5 /CNW/ - (TSX: SCP) - Sprott Resource Corp. ("SRC") today
announced that it has signed an agreement (the "Agreement") with PBS Coals
Corporation ("PBS Canada") under which SRC has agreed to invest US$31 million
in PBS Canada in exchange for approximately 37.5% of the common stock of PBS
Canada. PBS Canada is a newly incorporated corporation, the sole purpose of
which is to own approximately a 59.6% indirect interest in PBS Coals, Inc.
("PBS"), the balance of which will be held by management and existing
investors. Private companies controlled by the Lundin family trusts will also
be significant investors in PBS Canada.
    "We believe the price of metallurgical coal is poised for a large upward
move as the industry is experiencing an unprecedented supply shortfall," said
Kevin Bambrough, President and CEO of SRC. "With this timely and opportune
investment, Sprott Resource Corp. is well positioned for significant potential
capital appreciation. An experienced team runs PBS and it has managed to keep
costs stable while operating through difficult times in the coal market. Now
that PBS has the financial resources to grow production, it can take advantage
of this excellent environment for coal producers. It is also a fantastic time
to invest in US-based commodity exporters, as the weakening US dollar will
allow for large profit margins."
    PBS, together with its affiliates, produces approximately 3 MM tons per
annum of primarily high quality, low volatility metallurgical coal in Somerset
County, Pennsylvania. PBS and its affiliates have been operating open-pit and
underground coal mines for more than 20 years, and have long standing
relationships with many of the most significant global consumers of
metallurgical coal. Production is sourced from 9 operating underground and
open-pit mines and treated at its wholly-owned Shade Creek processing
    A significant portion of the net proceeds of the offering will be used to
fund an expansion program which is expected, through a number of stages, to
increase PBS' output to more than 4 MM tons per annum, with an increasing
focus on metallurgical coal for use in the steel industry in North America and
    Management of PBS, who are well known in the industry and have
successfully operated the company for more than 15 years, will retain a
significant stake in the business. PBS is pleased to announce that Colin K.
Benner will join as Chairman of PBS Canada. SRC is entitled to nominate one
member of the PBS Canada Board.
    Robert Scott, President of PBS, commented: "We at PBS are delighted to
welcome Sprott Resource Corp. and the other investors in this financing as new
shareholders. These are exciting times in the metallurgical coal markets, and
we look forward to servicing our increasing customer demands through expansion
projects financed with this transaction. We believe that we share a common
vision with SRC and the other investors in supporting the growth of PBS, which
will be made possible by its unique combination of high quality, permitted
reserves and experienced employees."
    SRC will realize a one-time foreign exchange gain of approximately
CDN$2.4 million in connection with the closing of this transaction. This
one-time foreign exchange gain is attributable to an increase in the value of
the U.S. dollar relative to the Canadian dollar for the period between the
date SRC purchased U.S. dollars necessary to close this transaction and the
closing date.

    About Sprott Resource Corp.

    SRC is a Canadian based company, the primary purpose of which is to
invest, directly and indirectly, 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 Ltd. (SCL), a wholly-owned subsidiary of Sprott Asset
Management Inc. Pursuant to a management services agreement between SCL and
SRC, SCL provides day-to-day business management for SRC as well as other
management and administrative services.

    Forward Looking Statements

    Certain statements regarding SRC and its indirect investment in PBS,
including management's assessment of future plans, may constitute
forward-looking statements under applicable securities laws and necessarily
involve risk, including without limitation, risk associated with future
commodity prices, foreign exchange rate fluctuation, government regulation
relating to the production of coal, environmental risks, changes in laws,
capital expenditure cost increases, increases in mining and energy costs and
operational issues at mine sites. SRC's and PBS' actual results or
achievements could differ materially from those expressed in, or implied by,
the forward-looking statements. No assurance can be given that any events
anticipated by the forward-looking statements will occur. These
forward-looking statements, which are based on management's current
expectations, are made as at the date of this news release. SRC does not
undertake any obligation to publicly update or revise any of these
forward-looking statements, except as required by applicable securities laws.

For further information:

For further information: Kevin Bambrough, President and Chief Executive
Officer, Tel: (416) 977-7333, Fax: (416) 977-9555, E-mail:

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Sprott Resource Corp.

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