Press Release

Sprott Resource Corp. Announces 2014 Third Quarter Results

TORONTO, Nov. 13, 2014 /CNW/ - (TSX: SCP) - Sprott Resource Corp. ("SRC" or the "Company") today announced its financial results for the three and nine-months ended September 30, 2014. 

Q3 Highlights

  • Net Asset Value ("NAV") at September 30, 2014 of $366.0 million ($3.73 per share) compared to December 31, 2013 of $366.2 million ($3.71 per share)
  • For the three-months ended September 30, 2014, the Company recorded a net loss of $10.1 million ($0.10 loss per basic and diluted share) compared to a net gain of $44.9 million ($0.45 gain per basic and diluted share) for the three-months ended September 30, 2013
  • SRC completed $51.2 million in new investments during the third quarter of 2014:
  • In July, SRC agreed to invest $36.4 million in Corsa Coal Corp. ("Corsa") to fund its strategic acquisition of PBS Coals Ltd. ("PBS Coals")
  • In August, portfolio company, Independence Contract Drilling, Inc. ("ICD") completed its Initial Public Offering on the New York Stock Exchange and subsequently joined the Russell 2000 Index

Subsequent Events:

  • In November 2014, SRC secured a $20 million credit facility from Sprott Resource Lending Corp., a subsidiary of Sprott Inc.
  • The downturn in the resource sector since September 30, 2014 has had a negative impact on the value of SRC's portfolio, particularly its public holdings in energy and energy services. For more detail, please see the company's third quarter Management Discussion & Analysis, which is available on SEDAR and SRC's website

"We maintained a high level of activity during the third quarter, completing a $36.4 million investment in Corsa and participating in the US$115 million initial public offering of Independence Contract Drilling, Inc.," said Steve Yuzpe, President and Chief Executive Officer of SRC.  "Despite the challenging resource markets, we are pleased with the performance made by our investee companies to advance their business plans."

"In the energy services segment, ICD continues to advance its rig building program and, as a result of its IPO, is well positioned financially to weather the current decline in oil prices," said Arthur Einav, SRC Managing Director and ICD board member. "ICD's fleet now includes 12 fully contracted rigs, two of which are currently in construction. Of these rigs, 10 will contain integrated multi-directional walking systems."

"One of our core agriculture positions, One Earth Farms Corp. ("OEF") has made significant progress this year, successfully transitioning away from its crop farming operations to focus on becoming a vertically integrated cattle and branded food products business" said Andrew Stronach, SRC Managing Director and OEF board member. "The company is in the process of integrating two new acquisitions and recently completed an $11 million financing, in which SRC participated."

"In addition to making accretive new investments and creating shareholder value through initiatives such as our longstanding share buyback program, we are also committed to providing financial support to our existing portfolio companies where appropriate," said Michael Staresinic, Chief Financial Officer of SRC. "We recently secured a $20 million revolving debt facility from our partners at Sprott, which will provide us with additional financial flexibility as we navigate the current tough resource markets."

SRC Net Asset Value as at September 30, 2014

The following table outlines SRC's equity attributable to shareholders as at September 30, 2014. Please see the Company's unaudited condensed interim consolidated financial statements and notes thereon, and management's discussion and analysis as at and for the three and nine-months ended September 30, 2014 for additional information.





As at

(in thousands except share and per share amounts)




September 30, 2014






Cash and Cash Equivalents



$

7,082

Other Current Assets




2,022

Other Non-Current Assets




5,181

Investments, at fair value






Long Run (defined below, note 1)




103,270


OEOG (note 2)




29,163


InPlay (note 3)




19,469


Corsa (note 4)




54,502


ICD (note 5)




59,549


Stonegate Agricom (defined below, note 6)




7,345


Potash Ridge (defined below, note 7)




5,300


Virginia Energy (defined below, note 8)




519


OEF (note 9)




31,000


Union Agriculture (defined below, note 10)




37,343


Other investments




8,069






Liabilities






Less: Current Liabilities




3,850

Total equity attributable to shareholders (NAV)



$

365,964






Number of common shares issued and outstanding as at September 30, 2014




98,159,103






NAV per share



$

3.73








1.

As at September 30, 2014, SRC owned 11.9% of Long Run Exploration Ltd. ("Long Run")

2.

As at September 30, 2014, SRC owned 96.1% of OEOG

3.

As at September 30, 2014, SRC owned 19.8% of InPlay

4.

As at September 30, 2014, SRC owned 19.9% of Corsa

5.

As at September 30, 2014, SRC owned 18.6% of ICD.

6.

As at September 30, 2014, SRC owned 36.5% of Stonegate Agricom Ltd. ("Stonegate Agricom")

7.

As at September 30, 2014, SRC owned 24.4% of Potash Ridge Corporation ("Potash Ridge") (common shares and non-voting preferred shares)

8.

As at September 30, 2014, SRC owned 16.5% of Virginia Energy Resources Inc. ("Virginia Energy")

9.

As at September 30, 2014, SRC owned 50.1% of OEF

10.

As at September 30, 2014, SRC owned 6.9% of Union Agriculture Group ("Union Agriculture")



SRC corporate and portfolio company developments:

  • The Company reported an investment loss of $10.3 million for the three-months ended September 30, 2014 that was comprised of a change in unrealized loss (excluding the effects of foreign exchange) on investments of $17.0 million, an unrealized foreign exchange gain of $4.2 million and dividend, royalty and interest income of $2.5 million. Expenses for the three-months ended September 30, 2014 were $2.2 million including management fees of $2.0 million and transaction costs of $0.1 million.
  • The Company's discount to NAV widened to 25% as at September 30, 2014 from 18% as at June 30, 2014
  • As at September 30, 2014, the Company's cash position was $7.1 million
  • SRC completed $51.2 million in new and follow-on investments during the third quarter of 2014:
    • Invested $36.4 million in Corsa to fund strategic acquisition of PBS Coals
    • Participated in ICD IPO, investing $7.3 million for an additional 600,000 shares of ICD
    • Invested $3.4 million in OEF
    • Invested $2.7 million in OEOG to fund drilling program
    • Invested $1.4 million in oil and gas royalty interest investment
  • In September 2014, SRC renewed its longstanding normal course issuer bid

Conference Call Details

SRC will hold a conference call to discuss its 2014 third quarter results on November 13, 2014 at 12:00pm 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, November 20, 2014 by calling 416-849-0833 or 1-855-859-2056, reference number 29005510. The conference call will be webcast live at www.sprottresource.com and http://event.on24.com/r.htm?e=883000&s=1&k=E32D473070B1D880C5629A1989322D41


About Sprott Resource Corp.

Sprott Resource Corp. (TSX: SCP) is a resource-focused private equity investor managed by one of Canada's leading teams of resource private equity specialists. The company currently has investments in oil and gas, mining, agriculture and agricultural nutrients. SRC takes an active involvement in the companies in which it invests. Management is dedicated to generating consistently superior returns on capital for its shareholders, while focusing on risk management and real wealth preservation. To learn more, please visit www.sprottresource.com.

Forward-Looking Information

Certain statements in this presentation, and in particular the Outlook slides, contain forward-looking information (collectively referred to herein as the "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 presentation contains Forward-Looking Statements pertaining to: (i) expectations regarding the positioning of Sprott Resource Corp.'s ("SRC" or the "Company") energy holdings; (ii) the sustainability of Long Run Exploration Ltd.'s dividend; (iii) netbacks generated by InPlay Oil Corp.; (iv) continuation of Independence Contract Drilling, Inc.'s rig building program; (v) SRC's continued commitment to share buyback; (vi) SRC's outlook, including its long-term belief in the energy sector and its expectation that price recovery will eventually be led by supply/demand fundamentals and changing geopolitical events; (vii) portfolio companies continuing to advance business plans; (viii) deal flow remaining strong; and (ix) continued support of investee companies to create value for shareholders.  Although SRC believes that the Forward-Looking Statements are reasonable, they are not guarantees of future results, performance or achievements.  A number of factors or assumptions have been used to develop the Forward-Looking Statements, including: (i) the impact of increasing competition in each business in which the Company's subsidiaries operate will not materially change; (ii) conditions in general economic and financial markets will be consistent with the current environment; (iii) the effects of regulation and tax laws of governmental agencies will not materially change; and (iv) future operating costs will be consistent with the current environment. Actual results, performance or achievements could vary materially from those expressed or implied by the Forward-Looking Statements should assumptions underlying the Forward-Looking Statements prove incorrect or should one or more risks or other factors materialize, including: (i) SRC becoming unable to draw down on the debt facility; (ii) market volatility that would affect the ability to enter or exit investments; (iii) adverse market conditions; (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) risks associated with manufacturing of drilling rigs in general; (vi) those risks disclosed under the heading "Financial Instruments and Risk Management" in SRC's MD&A for the nine-months ended September 30, 2014; and (vii) those risks described under the heading "Risk Factors" in SRC's annual information form dated March 25, 2014.  The Forward-Looking Statements speak only as of the date hereof, unless otherwise specifically noted, and SRC does not assume any obligation to publicly update any Forward-Looking Statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable Canadian securities laws.

SOURCE Sprott Resource Corp.

For further information: Glen Williams, Director of Communications, T: (416) 943-4394, E: gwilliams@sprott.com

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