TORONTO, Aug. 12 /CNW/ - (TSX: SCP) - Sprott Resource Corp. ("SRC" or the "Company") today announced its financial results for the three and six month periods ended June 30, 2010.
Q2 2010 Highlights:
- Stonegate Agricom Ltd. ("Stonegate Agricom") successfully completed a $51.75 million Initial Public Offering and began trading on the TSX under the symbol "ST". - One Earth Farms Corp. ("One Earth Farms") increased lands under lease and management to approximately 93 thousand acres (62,000 crop and hay, 8,000 custom farm management and 23,000 pasture acres). - Orion Oil & Gas Corporation ("Orion") achieved an exit rate of approximately 4,500 boe/d, a 13% increase from the first quarter of 2010 and an increase of 80% from December 31, 2009.
"We are pleased with the progress of our investee companies during the first half of 2010," said Kevin Bambrough, President and CEO of Sprott Resource Corp. "One Earth Farms continues to scale up its operations and now has approximately 93 thousand acres of farmland under lease and management. This year, extreme weather in areas such as Russia, China and Canada has driven wheat prices higher. The higher prices and the risk of shortages have increased investor demand in agriculture. We hope to capitalize on this investor demand through One Earth Farms by demonstrating that a well-capitalized, geographically diverse, professionally managed farming company is an attractive way to invest in primary agriculture."
"In the energy sector, Orion continues to make progress on its development program and remains on track to meet its production targets for the year. We also expect Waseca to show continued growth this year," added Mr. Bambrough. "In May, Stonegate Agricom successfully completed its Initial Public Offering. The company is currently conducting further exploration development activities at its phosphate projects in both Peru and the U.S."
"While we did not start or acquire any businesses during the first six-months of 2010, we continue actively look for attractively priced acquisition and investment opportunities that will be accretive to our shareholders," concluded Mr. Bambrough.
Financial Highlights:
Consolidated Income Statements ------------------------------------------------------------------------- Three Months Three Months Ended Ended June 30, June 30, 2010 2009 ------------------------------------------------------------------------- Net earnings ($000's) $ 4,299 $ 490 Earnings per share - basic $ 0.04 $ 0.01 Earnings per share - diluted $ 0.04 $ 0.01 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Balance Sheets ------------------------------------------------------------------------- As at June 30, 2010 Dec. 31, 2009 $000's $000's ------------------------------------------------------------------------- Cash and cash equivalents $ 45,737 $ 107,085 Gold & silver bullion (at cost) $ 75,392 $ 75,392 Portfolio investments $ 39,938 $ 33,750 Total Assets $ 421,141 $ 408,602 Current liabilities $ 17,115 $ 21,930 Total Liabilities (including non-controlling interest) $ 91,149 $ 74,040 Shareholders' equity $ 329,992 $ 334,562 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Financial Review
Working Capital
As at June 30, 2010, the Company had current assets of $152.2 million, consisting primarily of cash and cash equivalents ($45.7 million), and gold bullion ($75.4 million). Current liabilities of $17.1 million consist of accounts payable and accrued liabilities ($17.0 million) and capital tax payable ($77 thousand).
For the quarter ended June 30, 2010, working capital (defined as current assets minus current liabilities) has decreased to $135.1 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 June 30, 2010, oil and gas revenue net of royalties increased to $18.9 million from $753 thousand in the second quarter of 2009. For the six-months ended June 30, 2010, oil and gas revenues net of royalties increased to $34.0 million from $1.0 million during the same period in 2009. The increase resulted from the acquisition of Orion and Waseca's increased production from drilling. As at June 30, 2010, Orion's exit rate of production was approximately 4,500 boe/d and Waseca's exit rate of production was 531 bbl/d.
Farming Revenue, Production Costs and Operations Update
During the second quarter of 2010, One Earth Farms reported revenue of $1.9 million, comprised of $816 thousand from the Company's custom farming operation, and $1.1 million from the sale of livestock.
For the six-months ended June 30, 2010, One Earth Farms generated $2.3 million in revenue. One Earth Farms was launched during the first quarter of 2009 and did not generate revenue in the first half of 2009.
Due to an exceptionally wet spring in the Prairies, approximately 25,000 crop acres went unseeded. We expect unseeded acres to be eligible for a claim of a yet to be determined amount under the various provincial crop insurance programs.
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 second quarter of 2010, the Company recorded $13.1 million in other income and expenses, compared to $118 thousand in the second quarter of 2009. The increase was primarily the result of growth in general and administrative expenses and oil and gas operating and production costs which was partially offset by the gain on dilution from Stonegate Agricom.
For the six-months ended June 30, 2010, the Company reported $34.6 million of net expenses in other income and expenses, compared to $1.7 million during the same period in 2009.
As at June 30, 2010, the Company had 96,251,427 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 expectation that One Earth Farm's geographical diversification will help mitigate weather risk, that management expects One Earth Farms to be eligible for insurance claims on unseeded acreage and that Orion and Waseca will show increased production growth for this year. These forward-looking statements represent management's best judgment based on current facts and assumptions that management considers reasonable including the assumption that geographical diversification of land mitigates against weather risk for One Earth Farms, that One Earth Farms will qualify for insurance coverage in respect of its unseeded acreage and that One Earth Farms will receive insurance payments based on such coverage and that Waseca and Orion will drill their forecast number of wells the remainder of this year and that the production rates from such wells when combined with existing production will generate total production that will meet target estimates. All forward-looking information is inherently uncertain and subject to a variety of assumptions, 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, but not limited to, weather affecting all of One Earth Farms' lands, the eligibility requirements for insurance claims and limits associated therewith, production rates from new wells drilled by Waseca and/or Orion not meeting expectations, Orion's and/or Waseca's existing production decreasing above expectations and the inability to drill the expected number of oil and gas wells due to weather, labour disruptions or lack of capital. 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.
