/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/ 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 facility. 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 Europe. 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.
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