TORONTO, Aug. 9, 2012 /CNW/ - (TSX: SCP) - Sprott Resource Corp. ("SRC" or the "Company") today announced financial results for the three and six-months ended June 30, 2012.
"We have made significant investments in agriculture and agricultural nutrients because we have long believed that we are entering a prolonged period of food price inflation, driven by persistent droughts caused by climate change, increased demand from emerging markets, outbreaks of geopolitical turmoil and inevitable supply shocks," said Kevin Bambrough, President and CEO of Sprott Resource Corp. "With issues of food scarcity on the rise, and severe drought conditions in the U.S. and Russia devastating crops and pushing corn, wheat and canola prices to record highs, we are beginning to see our thesis validated."
"During the second quarter, One Earth Farms ("OEF") completed seeding operations in Alberta and Saskatchewan," commented Steve Yuzpe, Chief Financial Officer of the Company. "We have enjoyed favourable growing conditions for wheat and canola this summer and recently began harvest operation in Southern Alberta, with the expectation that we will complete the harvest in October. We are also pleased with the success that we have had marketing into the natural beef marketplace."
"However, the global economic slowdown has put pressure on energy prices, negatively impacting the current value of some of our oil and gas investments. We believe that energy businesses are currently undervalued relative to their historical multiples and expect to see valuations recover significantly as markets normalize," added Mr. Bambrough.
"We continued to build business value in our energy subsidiaries during the second quarter," said Paul Dimitriadis, Chief Operating Officer, Sprott Resource Corp. "Waseca Energy Inc. ("Waseca") continues to advance its drilling program with 28 wells drilled so far this year. The company also improved its exit rate of production to 4,106 barrels of oil per day ("boe/d") from 3,746 boe/d at December 31, 2011 and expects to reach between 4,600 and 5,000 boe/d by December 31, 2012."
SRC Q2 2012 Net Asset Value
The following table outlines SRC's net asset value as at June 30, 2012 and reflects the value at which individual items are carried on SRC's balance sheet.
|(in thousands)||June 30, 2012|
|Cash and Cash Equivalents1||$||2,994|
|Other current assets||1,783|
|Consolidated investment in:3|
|OEOG (defined below)||8,939|
|One Earth Farms||46,696|
|Fair value investment in:|
|WestFire (defined below)4||116,961|
|Guide (defined below)5||26,999|
|Union Agriculture Group6||45,491|
|Potash Ridge (defined below)7||9,900|
|VA Uranium Holdings, Inc.||3,639|
|Equity investment in:|
|Stonegate Agricom (defined below)8||16,362|
|ICD9 (defined below)||48,843|
|Less: Current Liabilities10||(64,831)|
|Less: Non-Current Liabilities||(5,607)|
Financial Highlights for the Three-Months Ended June 30, 2012
Achievements by SRC Subsidiaries and Investees for the Three-Months Ended June 30, 2012 (and to the date hereof):
One Earth Farms
WestFire and Guide
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 Waseca's 2012 production targets and 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: expected oil and gas production results from future drilling by Waseca and 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; fluctuations in oil and gas prices; the results of exploration and development drilling and related activities; changes in environmental and other regulations; risks associated with oil and gas operations; 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.
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.