Marks 5-Year Anniversary with an Internal Rate of Return on Investments(1) of approximately 28%
TORONTO, Nov. 14, 2012 /CNW/ - (TSX: SCP) - Sprott Resource Corp. ("SRC" or the "Company") today announced financial results for the three and nine-months ended September 30, 2012.
"In September, Sprott Resource Corp. celebrated its five year anniversary. Since beginning operations in 2007, we have established a strong track- record of delivering returns," said Kevin Bambrough, Chief Executive Officer of SRC. "We recently completed the sale of our subsidiary, Waseca Energy Inc. ("Waseca"), to Twin Butte Energy Energy Ltd. ("Twin Butte") for total proceeds of approximately $111.7 million, a 29% IRR (defined below) on our investment of approximately $44.2 million. This transaction is the most recent in a series of successful dispositions, such as the sale of our positions in PBS Coals and Stonegate Agricom Ltd. ("Stonegate Agricom"), that have enabled us to generate a five-year IRR of approximately 28% and gross gains, excluding taxes and fees, of approximately $280 million."
"The value created over the duration of our investment in Waseca validates our strategy of partnering with proven management teams to navigate the complexities of the junior oil and gas capital markets in Canada. It is expected that the Waseca transaction will increase SRC's net asset value, net of estimated fees and taxes, by over $40 million in the fourth quarter of 2012." added Paul Dimitriadis, SRC's Chief Operating Officer. "We thank the Waseca management team for their efforts in building the company over the past four years."
"We are pleased with the progress of our portfolio of agricultural investments," said Steve Yuzpe, Chief Financial Officer of SRC. "One Earth Farms Corp. ("One Earth Farms") has now completed 97% of its harvest operations and has recorded a substantial improvement in the total crop value per acre compared to 2011. The company has also made significant progress against its 2012 objectives of improving operations and reducing controllable costs and, in the third quarter, hired a marketing and branding executive to lead the development and execution of One Earth Farms' value added business strategy."
"We are proud of our accomplishments over the past five years and look forward to continuing to build value in all of our existing investments while also pursuing new opportunities," continued Mr. Bambrough. "After the closing of the Waseca transaction this month we are again in a strong position of liquidity that includes $127.8 million of unencumbered physical gold bullion and over $30 million in cash. We have always been patient and selective in our investments and will continue to support shareholders with the share buyback program. This year alone we have repurchased and canceled over 5.5 million shares totaling approximately $22 million and over our five year history repurchased and canceled over 17 million shares totaling approximately $55 million. We remain confident in our strategy and believe that we are well positioned for the next five years."
SRC Q3 2012 Net Asset Value (NAV) and estimate to the date hereof
The following table outlines SRC's NAV as at September 30, 2012 and reflects the value at which individual items are carried on SRC's balance sheet.
|(in thousands)||September 30, 2012|
|Cash and Cash Equivalents1||$||1,527|
|Other current assets||1,895|
|Loan receivable from associate||2,000|
|Consolidated investment in:3|
|OEOG (defined below)||7,975|
|One Earth Farms||47,657|
|Fair value investment in:|
|WestFire (defined below)4||115,814|
|Guide (defined below)5||28,173|
|Union Agriculture Group6||38,274|
|Potash Ridge (defined below)7||9,900|
|Equity investment in:|
|ICD9 (defined below)||45,915|
|Less: Current Liabilities10||(76,669)|
|Less: Non-Current Liabilities||(3,605)|
|Total equity attributable to shareholders (NAV)||$||429,884|
Financial Highlights for the three-months ended September 30, 2012
Achievements by SRC Subsidiaries and Investees for the three-months ended September 30, 2012 (and to the date hereof):
SRC passes five-year anniversary and establishes performance track record
One Earth Farms
The merger of WestFire and Guide to form Long Run
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 includes forward-looking information relating to One Earth Farms' seeding and harvesting operations. Forward-looking information looks into the future and provides an opinion as the effect of certain events and trends on the business of SRC. The forward-looking information contained in this news release is based on current expectations and various estimates, factors and assumptions including, among others: the successful crop harvest by One Earth Farms.
These forward-looking statements involve known and unknown risks, including, but not limited to: general economic, market and business conditions; changes in environmental and other regulations; weather risk associated with farming operations; operational risk associated with farming; commodity price changes; and other risks, which are beyond the control of the Company or its subsidiaries.
SRC has attempted to identify important factors that could cause its results, performance and achievements to differ materially from those contained in the forward-looking information contained in this news release. However, there can be other factors that cause results, performance and achievements not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate or that management's expectations or estimates of future developments, circumstances or results will materialize. Accordingly, readers should not place undue reliance on the forward-looking information contained in this news release. SRC does not intend, and does not assume any obligation, to update these forward- looking information contained in this news release except as required by law. For a description of additional material factors that could cause the Company's actual results to differ materially from the forward-looking statements, please see the risks and uncertainties set out in the "Forward- Looking Statements" section and "Risk Factors" section in the Company's Annual Information Form for the year ended December 31, 2011.
Non-IFRS Financial Measures
Throughout this press release, the Company uses the term "netback". This term does not have any standardized meaning as prescribed by IFRS and, therefore, may not be comparable with the calculation of similar measures presented by other issuers. Netback is calculated on a per boe basis as oil and gas sales, less royalties and operating and transportation expenses. Netback is used by management to measure operating results on a per boe basis to better analyze performance against prior periods on a comparable basis.
(1) Internal rate of return is a rate of return measure often used in investment analysis to compare investment opportunities. The Company believes that providing an internal rate of return measure on a supplemental basis to our IFRS results is helpful to investors in assessing the overall performance of the Company over the past five years. Non-IFRS financial measures do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. Past performance is not a reliable indicator of future results.
The internal rate of return calculation incorporated cash flows beginning on September 30, 2007 related to issuance of common shares, including through the exercise of warrants and stock options, the repurchase of common shares through normal course issuer bids and the payment of management fees and incentive fees and excludes income taxes paid. The calculation also includes management's estimate of the fair value of subsidiaries and entities over which the Company has significant influence, if different from the net asset value reflected in the Company's financial statements. The internal rate of return calculation does not correlate perfectly with the performance of the Company's quoted stock price from its listing on the listed on the Toronto Stock Exchange, or the compound annual growth rate of the net asset value due to the adjustments described above.
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.
The future net revenue estimates in this news release do not represent fair market value.
SOURCE: Sprott Resource Corp.
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