Sprott Resource Holdings Press Releases

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Press Release

Sprott Resource Corp. Announces Third Quarter Results

11/12/2010

TORONTO, Nov. 12 /CNW/ - Sprott Resource Corp. ("SRC" or the "Company") today announced its financial results for the three and nine month periods ended September 30, 2010.

Q3 2010 and Q4 to date Highlights:

  • Orion Oil & Gas Corporation ("Orion") achieved an exit rate of approximately 5,000 boe/d, an 11% increase from the second quarter of 2010 and a 100% increase from December 31, 2009. Orion's production has increased to over 5,800 boe/d since the end of the third quarter.
  • Waseca Energy Inc. ("Waseca") achieved an exit rate of 533 bbl/d. Waseca's production has since increased to approximately 850 bbl/d since the end of the third quarter.
  • One Earth Farms Corp. ("One Earth Farms") has completed its 2010 harvest and is currently planning field operations for 2011. One Earth Farms anticipates becoming the largest crop farm in Canada in 2011.
  • One Earth Oil and Gas Inc. ("One Earth Oil & Gas") completed an $8.1 million private placement to fund its 2010 capital program. As part of that private placement, SRC purchased 7 million common shares for $1.00 each. Building upon that success, One Earth Oil and Gas has entered into joint venture and lease agreements with First Nations and private companies in Canada and the United States, and has commenced exploration drilling under these agreements.
  • The market value of the Company's gold bullion holdings has increased to $99.7 million as at the end of Q3 and $104.2 million as at November 11, 2010. The Company's gold bullion is recorded at cost ($75.4 million as at the end of Q3) on its financial statements.
  • During and subsequent to quarter end, a total of 3.9 million share purchase warrants (exercisable at $4.25) were exercised for total proceeds of $16.5 million. The remaining 12.7 million warrants expire on December 31, 2010 and represent $53.9 million of proceeds if exercised in full.

"We continue to build value in each of our subsidiaries and investments," said Kevin Bambrough, President and CEO of Sprott Resource Corp. "In our view, energy, agriculture and precious metals are the sectors that will continue to outperform over time as global currency devaluations continue and investor demand for alternative stores of wealth grows."

"We are also pleased with our most recently announced proposed acquisition of a 19.9% stake in the Coles Hill Uranium Project, located in Virginia U.S.A. This project has many attractive attributes and we look forward to being part of its development."

Financial Highlights:    
Consolidated Income Statements    

Three Months Ended
September 30, 2010
Three Months Ended
September 30, 2009
Net loss ($000's)
($6,194)
($3,040)
Loss per share - basic
($0.07)
($0.04)
Loss per share - diluted
($0.07)
($0.04)
     
     
Consolidated Balance Sheets    
            As at

September 30, Dec. 31, 2009
  2010 ($000's)
($000's)
Cash and cash equivalents
$51,354
$107,085
Gold bullion (at cost)
$75,392
$75,392
Portfolio investments
$44,138
$33,750
Total Assets
$446,686
$408,602
     
Current liabilities
$39,068
$21,930
Long-term liabilities (including non-controlling interest)
$63,996
$52,110
Shareholders' equity
$343,622
$334,562

Financial Review

Working Capital
As at September 30, 2010, the Company had current assets of $156.3 million, consisting primarily of cash and cash equivalents ($51.4 million), gold bullion ($75.4 million), accounts receivable ($17.2 million) and inventory ($6.7 million). Current liabilities of $39.1 million consist of accounts payable and accrued liabilities ($39.0 million) and capital tax payable ($77 thousand).

For the quarter ended September 30, 2010, working capital (defined as current assets minus current liabilities) has decreased to $117.3 million from $176.0 million as at Dec. 31, 2009. The decrease in working capital compared to the year-ended December 31, 2009, is attributable to the net purchase of private securities, the purchase of long-term assets and operating losses at the Company and its subsidiaries.

Oil and Gas Revenue (net of royalties)
For the three-months ended September 30, 2010, oil and gas revenue net of royalties increased to $18.7 million from $699 thousand in the third quarter of 2009. For the nine-months ended September 30, 2010, oil and gas revenues net of royalties increased to $52.7 million from $1.7 million during the same period in 2009. The increase resulted from continuing increases in Orion's and Waseca's production. As at September 30, 2010, Orion's exit rate of production was approximately 5,000 boe/d and Waseca's exit rate of production was 533 bbl/d.

Farming Revenue, Production Costs and Operations Update
During the third quarter of 2010, One Earth Farms reported revenue of $2.8 million, comprised of $132 thousand from the Company's custom farming operation, $692 thousand from the sale of crops and livestock, a $329 thousand market value adjustment to inventory and $1.6 million from crop insurance receipts.

For the nine-months ended September 30, 2010, One Earth Farms generated $4.9 million in revenue.

Other Income and Expenses
Other income and expenses includes general and administrative expenses, management fees, incentive fees, oil and gas operating and production expenses, farm production expenses, gains on the disposition of investments and other miscellaneous income and expenses. In the third quarter of 2010, the Company recorded $30.6 million in other income and expenses, compared to $5.3 million in the third quarter of 2009. The increase was primarily the result of growth in general and administrative expenses and oil and gas operating and production costs.

For the nine-months ended September 30, 2010, the Company reported $64.9 million of net expenses in other income and expenses, compared to $7.0 million during the same period in 2009.

As at September 30, 2010, the Company had 99,827,427 common shares issued and outstanding.

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 Limited Partnership ("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.

Forward Looking Statements

This news release includes certain forward-looking statements respecting the future performance of SRC's business, its operations, management's objectives, strategies, beliefs and intentions, including the closing of the proposed transaction regarding the Coles Hill Uranium Project and the belief that the energy, agriculture and precious metals sectors will outperform other sectors. These forward-looking statements represent management's best judgment based on current facts and assumptions that management considers reasonable including the assumption that the acquisition of SRC's interest in the Coles Hill Uranium Project will close and that the energy, agriculture and precious metals sectors will outperform other sectors. All forward-looking information is inherently uncertain and subject to a variety of risks, uncertainties and other factors that may cause SRC's actual results, performance or achievements to be materially different from those expressed or implied from such information, including, that the acquisition of the Coles Hill Uranium Project may not close due to a failure to agree to final terms or a failure to get regulatory approvals, that economic factors such as exchange rates, interest rates, commodity prices may result in the energy, agriculture and precious metals sectors underperforming other sectors. SRC has attempted to identify important factors that could cause its actual results, performance and achievements to differ materially from those contained in forward-looking statements. 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 forward-looking statements and the information contained therein. SRC does not intend, and does not assume any obligation, to update these forward- looking statements except as required by law.

Barrels of Oil Equivalent

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.

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