Press release from CNW Group
Sprott Resource Corp. Announces 2013 First Quarter Results
Monday, May 13, 2013
Sprott Resource Corp. Announces 2013 First Quarter Results07:00 EDT Monday, May 13, 2013
TORONTO, May 13, 2013 /CNW/ - (TSX: SCP) - Sprott Resource Corp. ("SRC" or the "Company") today announced financial results for the three-months ended March 31, 2013.
"We are pleased with the continued progress of our investee companies and see strong potential for a rebound in the energy sector. We believe the outlook for natural gas is excellent and are well positioned to benefit from its recovery through our investments in businesses like Long Run Exploration Ltd. ("Long Run"), which has significant oil, natural gas liquids and natural gas assets in Alberta," said Kevin Bambrough, Chief Executive Officer of SRC. "During the quarter, we also increased our energy exposure through a joint venture agreement between One Earth Oil & Gas Inc. ("OEOG") and Gift Energy Limited ("Gift Energy"), an entity established by the Gift Lake Metis Settlement ("Gift Lake"), to explore and develop Gift Lake lands for heavy oil."
"Our current portfolio consists of investments at various stages of maturity," said Paul Dimitriadis, Chief Operating Officer of SRC. "Going forward, one of our priorities will be to add a company with current or near-term positive cash flow to our asset mix. This will help support our dividend policy and our commitment to building value for our shareholders."
"Independence Contract Drilling, Inc. ("ICD") continues to execute on its three-year strategic plan with five rigs fully contracted and one additional rig under construction." said Arthur Einav, SRC's General Counsel and Managing Director. "It is anticipated that ICD will complete the manufacture of two or three additional rigs in 2013 and have one more rig in progress at the end of the year."
"During the first quarter, One Earth Farms Corp. ("One Earth Farms") continued its transition into a value-added food business with the acquisition of Beretta Farms Inc. ("Beretta Farms"), an established seller of antibiotic free natural and organic branded meat products in Ontario and British Columbia," said Steve Yuzpe, Chief Financial Officer of SRC. "This transaction gives One Earth Farms a retail presence in two large markets and is an important milestone in the company's vertical integration process."
SRC Equity attributable to shareholders as at March 31, 2013 and to the date hereof
The following table outlines SRC's equity attributable to shareholders as at March 31, 2013 and reflects the value at which individual items are carried on SRC's balance sheet.
|(in thousands)||March 31, 2013|
|Cash and Cash Equivalents1||$||2,307|
|Other current assets||1,995|
|Loan receivable from associate||6,800|
|Consolidated investment in:3|
|One Earth Farms||39,231|
|Fair value investment in:|
|Union Agriculture Group5||39,550|
|Virginia Energy (defined below)6||2,833|
|Potash Ridge (defined below)7||12,519|
|Equity investment in:|
|Stonegate Agricom Ltd.8||15,292|
|Less: Current Liabilities||(41,898)|
|Less: Non-Current Liabilities||(8,850)|
|Total equity attributable to shareholders (NAV)||$||419,612
- Cash held at SRC and SRP (defined below) and does not include cash held by subsidiaries of SRC or investee companies.
- As at March 31, 2013, SRC held 73,971 ounces of gold bullion valued at $1,623.42 per ounce.
- OEOG and One Earth Farms are controlled subsidiaries of SRC and are carried at their book value.
- As at March 31, 2013, SRC owned 35.7 million shares of Long Run (common shares and non-voting preferred shares) valued at 4.52 per share.
- As at March 31, 2013, SRC owned 3.4 million common shares of Union Agriculture Group valued at $11.44 per share, which is the price that the Company has recorded as fair value.
- As at March 31, 2013, SRC owned 9.4 million common shares of Virginia Energy Resources Inc. ("Virginia Energy") valued at $0.30 per common share.
- As at March 31, 2013, SRC owned 21.2 million shares of Potash Ridge Corporation ("Potash Ridge") (common shares and non-voting preferred shares) valued at $0.55 per share. Also included in the balance is $0.9 million of warrants.
- As at March 31, 2013, SRC owned 46.9 million common shares of Stonegate Agricom Ltd. ("Stonegate Agricom"), valued at its book value of $0.33 per share. The March 31, 2013 publicly traded price of these shares was $0.68 per common share.
- As at March 31, 2013, SRC owned 2.5 million common shares of ICD. ICD is not publicly listed and the Company equity accounts for this investment.
Financial Highlights for the three-months ended March 31, 2013
- For the three-months ended March 31, 2013, the Company reported a net loss attributable to the shareholders of the Company of $13.1 million ($0.13 loss per basic and diluted share respectively), compared to a net loss attributable to shareholders of the Company of $0.1 million ($0.00 earnings per basic and diluted share respectively), reported in the same period of 2012. The net loss for the three-months ended March 31, 2013 was substantially the result of the impairment of certain AFS investments ($2.4 million), and a decrease in the fair market value of gold bullion ($3.2 million), losses in subsidiaries, net of non-controlling interest ($3.2 million), management fees ($2.3 million) and corporate general and administrative costs ($2.4 million).
- For the three-months ended March 31, 2013, the Company has purchased and canceled 1.1 million common shares under the 2012 NCIB at an average cost of $4.41 per share for an aggregate cost of $5.0 million. Subsequent to quarter end and as at the date hereof, the Company has purchased and canceled an additional 0.5 million common shares under the 2012 NCIB at an average cost of $4.38 per share for a total cost of $2.3 million.
- Equity attributable to the shareholders of the Company decreased to $419.6 million as at March 31, 2013 from $459.9 million as at December 31, 2012. The $40.3 million decrease in equity attributable to the shareholders of the Company was primarily the result of a decrease in the fair market values of investments during the period of $14.2 million, the repurchase and cancellation of $5.0 million of shares purchased under the normal course issuer bid, dividends paid and payable of $15.4 million, $3.2 million decrease in the value of the physical gold bullion and operating losses incurred by the Company, OEF, OEOG, Stonegate Agricom and ICD.
- For the three-months ended March 31, 2013, the Company recorded a fair value decrease of $3.2 million in its physical gold bullion holdings. As at March 31, 2013, the Company's gold bullion had a fair market value of $120.1 million (December 31, 2012: $123.3 million) compared to a cost of $75.4 million.
Achievements by SRC Subsidiaries and Investees for the three-months ended March 31, 2013 and to the date hereof:
SRC Declares April Dividend
- On April 18, 2013 SRC announced that its Board of Directors has declared a dividend in respect of the month of April 2013 in the amount of $0.038 per common share (the "April Dividend"). The April Dividend will be paid on May 15, 2013 to shareholders of record at the close of business on April 30, 2013. The April Dividend is based on SRC's equity attributable to shareholders of the Company as at December 31, 2012.
SRC implements dividend reinvestment plan
- On February 25, 2013 SRC announced the introduction of the Dividend Reinvestment Plan (the "DRIP") for Canadian resident shareholders of common shares of SRC. The DRIP provides a convenient and cost-effective method for eligible holders in Canada to maximize their investment in SRC by reinvesting their monthly cash dividends to acquire additional SRC common shares. A discount in the purchase price of up to 5% may apply on dividend reinvestment shares purchased from SRC. Any applicable discounts on dividend reinvestment share purchases are announced at the time SRC declares a dividend. A discount in the purchase price of 5% applies on dividend reinvestment shares purchased from SRC with respect to the April Dividend.
Stonegate Agricom to Issue Common Shares to SRC
- On May 1, 2013, Stonegate Agricom acquired SRC's fully drawn $7.5 million loan facility for 11.5 million common shares of Stonegate Agricom ("Stonegate Shares"). After giving effect to the transaction, SRC owns 58.5 million Stonegate Shares, which based on information contained in documents publically filed by Stonegate Agricom, represents approximately 37.5% of the total issued and outstanding common shares of Stonegate Agricom.
One Earth Farms
- On February 19, 2013, SRC announced that its subsidiary OEF acquired Toronto based Beretta Farms, a purveyor of hormone free and antibiotic free natural and organic branded meat products in Ontario and British Columbia. This transaction is the first instance of OEF's strategy of vertical integration and branded food products, which will allow OEF to meet the needs of retailers and consumers, while generating increased margins from an integrated supply chain. After giving effect to the consideration of cash and common shares in OEF paid to the vendors of Beretta Farms, SRC's basic ownership in OEF decreased to approximately 54.3%.
- OEF will continue to shift its strategy to the value added business and allocate its capital between the crop and cattle operations in a manner that improves shareholder returns.
- On January 14, 2013, SRC announced that OEOG had entered into a joint venture agreement with Gift Energy to explore and develop Gift Lake lands for heavy oil.
- Gift Lake is located in the Peace River region of Northwest Alberta, an area of existing heavy oil production. The Gift Lake lands are situated southeast of major Bluesky oilsands production fields in the Seal and Cliffdale regions currently operated by several established Canadian energy producers. An oilsands lease for 12 sections (7,680 acres) of land has now been finalized with the Alberta government.
- In the three-months ended March 31, 2013, OEOG commenced operations in the Gift Lake area of Alberta. As at the date hereof, OEOG completed a six square mile 3D seismic program, drilled and cored three vertical test wells, horizontally extended one of the wells by over 800 meters and is presently production testing. The well is currently cold-flow producing between 30 and 45 boe/d of heavy oil. With the onset of spring breakup, the drilling operation on a fourth commitment well was suspended and will recommence in the summer when the provincial road bans are lifted.
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 contains certain forward-looking information and statements (collectively referred to herein as "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 news release contains Forward-Looking Statements pertaining to: (i) SRC's future strategies, outlook, investment opportunities and anticipated events or results; (ii) the creation of value for SRC shareholders in the future; (iii) SRC's Dividend Policy, future dividend payments and DRIP (including any applicable discounts in the purchase price); (iv) potential for a rebound in the energy sector; (v) the future outlook for natural gas and the Company's position to benefit from its recovery through the Company's investments; (vi) the addition of a company with current or near-term positive cash flow to the Company's asset mix and the expected benefits therefrom; (vii) ICD's execution of its three-year strategic plan and its anticipated manufacturing of additional rigs; (viii) One Earth Farms' strategy of vertical integration and branded food products and the expectation that it will allow OEF to meet the needs of retailers and consumers, while generating increased margins from an integrated supply chain; and (ix) the future drilling operations on a fourth commitment with respect to the Gift Lake area. Forward-Looking Statements are based on a number of expectations or assumptions which have been used to develop such information and statements but which may prove to be incorrect, including, but not limited to: (i) the benefits of investments; (ii) future outlook for the energy sector and, in particular, natural gas; (iii) expectations with respect to ICD's three-year strategic plan; (iv) expected sales and margins of Beretta Farms; (v) oil and gas reserves; (vi) expected oil and gas production results and rates from future drilling by OEOG and Long Run;. Although SRC believes the expectations and assumptions reflected in such Forward-Looking Statements are reasonable, undue reliance should not be placed on Forward-Looking Statements because SRC can give no assurance that such expectations and assumptions will prove to be correct. The Forward-Looking Statements included in this new release are not guarantees of future performance and should not be unduly relied upon. Such information and statements, including the assumptions made in respect thereof, involve known and unknown risks, uncertainties and other factors, which may cause actual results or events to differ materially from those anticipated in such Forward-Looking Statements, including, without limitation: (i) general economic, market and business conditions; (ii) market volatility that would affect the ability to enter or exit investments; (iii) risks associated with the farming industry in general (e.g., weather risks, operational risks in production; the uncertainty of estimates and projections related to crop and cattle); (iv) risks associated with the food product and retail business (e.g., food safety risks and fluctuations in the price of inputs and sales volumes); (v) 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); (vi) commodity price and exchange rate fluctuations and uncertainties resulting from potential delays or changes in plans with respect to exploration or development projects or capital expenditures; (vii) risks associated with rig construction projects (e.g., delays, cost overruns, start-up complications, operational problems) (viii) changes in environmental and other regulations; and (ix) those listed under the heading "Risk Factors" in SRC's annual information form dated March 28, 2013. In addition, the payment of dividends is not guaranteed and the amount and timing of any dividends payable by SRC will be at the discretion of the Board of Directors and will be established on the basis of SRC's earnings, the satisfaction of solvency tests imposed by applicable corporate law for the declaration and payment of dividends, and other relevant factors. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the Forward-Looking Statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the Forward-Looking Statements contained in this news release. The Forward-Looking Statements contained in this news release speak only as of the date of this news release, and SRC does not assume any obligation to publicly update or revise any of the included Forward-Looking Statements, whether as a result of new information, future events or otherwise, except as may be expressly required by applicable securities laws.
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.
SOURCE: Sprott Resource Corp.
For further information:
Chief Financial Officer
Tel: (416) 977-7333
Fax: (416) 977-9555