Sprott Resource Holdings Press Releases


Press Release

Sprott Resource Corp. Announces Investment in PBS Coals Corporation

        /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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