TORONTO , July 15, 2014 /CNW/ - Sprott Resource Corp. ("SRC" or "the
Company") (SCP.TO) announced today that it has entered into an
agreement to invest US$33.4 million for 19.9%1 of the outstanding shares of Corsa Coal Corp. ("Corsa") (CSO.V).
SRC has agreed to purchase 236,963,302 Corsa shares, at a price of
C$0.15 per share, upon the completion of Corsa's US$60 million
acquisition of metallurgical coal producer PBS Coals Ltd. ("PBS
Coals"). SRC previously invested in PBS coals in 2007 before it was
acquired by OAO Severstal in 2008.
"This transaction has the potential to create tremendous value for our
shareholders while providing the added benefit of diversifying SRC's
investment portfolio," said Steve Yuzpe, President and Chief Executive
Officer of SRC. "We are excited to be involved in reacquiring the PBS
Coals assets and we believe that Corsa has the management team and
experience necessary to maximize their value."
Other key investors in Corsa include Quintana Capital Group, an
established energy investor with more than US$950 million committed to
the sector; and the Lundin Group, an internationally recognized group
of public companies with investments in the mining and energy sectors.
"We are pleased to be investing alongside strong partners in Sprott
Resource Corp. and the Lundin Group, both of which have long histories
and outstanding track records investing in the natural resource
sector," added Corbin Robertson III , a member of the Board of Quintana
Capital Group and Chairman of Corsa.
Metallurgical coal's main industrial use is the production of steel.
Following the completion of the transaction, Corsa's strategy is to
become primarily a metallurgical coal producer. PBS Coals has two
modern preparation plants and produces metallurgical coal from three
active deep mines located in Somerset County, Pennsylvania . Corsa's two
principal operating assets are its Wilson Creek metallurgical coal
mines in Somerset, Pennsylvania and its Kopper Glo thermal and
industrial coal mines in Knoxville, Tennessee .
"With the completion of this acquisition, Corsa and PBS Coals together
will represent a significant player in the U.S. low volatile
metallurgical coal market with excellent growth potential," said George
Dethlefsen , Director of Corsa and a Managing Director at Quintana
Capital Group. "With substantial infrastructure in place and access to
both local and export markets, the combined entity is well positioned
to benefit from economies of scale as the market recovers."
"SRC seeks to create shareholder value by investing counter-cyclically
in out-of-favour commodity sectors," said Arthur Einav , Managing
Director of SRC. "Metallurgical coal is currently in a bear market,
with the benchmark price having decreased by more than 50% over the
past three years. We expect that, on a combined basis, Corsa and PBS
will pursue a program of operational improvements and initiatives to
realize cost synergies, while also positioning the combined entity to
be a growing producer for domestic and export metallurgical coal
markets."
Mr. Einav is expected to be nominated to the Corsa Board of Directors
upon completion of the transaction.
Conference Call Details
On July 15 at 11:00am EST , SRC and Corsa will host a conference call to
discuss the details of the transaction. To participate, please dial
647-427-7450 or 1-888-231-8191, ten minutes prior to the scheduled
start of the call and provide Conference ID: 74742708. A taped replay
will be available until July 28, 2014 by calling 416-849-0833 or
1-855-859-2056, reference number 74742708. The conference call will be
webcast live at www.sprottresource.com and http://event.on24.com/r.htm?e=825598&s=1&k=F35FEB54CB06053A6118402830A8EC70.
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1. 17.4% on a diluted basis taking into account redeemable units in
Wilson Creek Energy held by affiliates of Quintana.
About Sprott Resource Corp.
Sprott Resource Corp. (SCP.TO) is a resource-focused private equity
investor managed by one of Canada's leading teams of resource private
equity specialists. The company currently has investments in oil and
gas, mining, agriculture and agricultural nutrients. SRC takes an
active involvement in the companies in which it invests. Management is
dedicated to generating consistently superior returns on capital for
its shareholders, while focusing on risk management and real wealth
preservation. SRC invests and operates through Sprott Resource
Partnership ("SRP"), a partnership between SRC and Sprott Resource
Consulting Limited Partnership, which is the managing partner of SRP
and an affiliate of Sprott Inc. SRC intends to indirectly own, through
SRP, the Corsa shares to be purchased and to hold such shares for
investment purposes. SRC does not currently own or control any
outstanding securities of Corsa and may purchase or sell further Corsa
shares in the future on the open market, in private transactions or
otherwise, depending on market conditions and other factors material to
the investment decisions of SRC. SRC intends to file an early warning
report under Corsa's profile on SEDAR at www.sedar.com and, once filed,
a copy of such report may be obtained from the SRC contact noted below.
To learn more about Corsa or SRC's other portfolio holdings, please
visit www.sprottresource.com.
Forward-Looking Statements
Certain statements in this news release contain forward-looking
information (collectively referred to herein as the "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) the anticipated
completion of Corsa's US$60 million acquisition of PBS Coals (the "Acquisition"); (ii) the ability of the parties to satisfy the conditions to, and to
complete, SRC's investment in Corsa (the "Transaction"); (iii) the anticipated benefits of the Transaction; (iv) Corsa's
ability to maximize the value of the PBS Coals assets; (iv) Corsa's
strategy to become primarily a metallurgical coal producer; (v) the
anticipated benefits of the Acquisition to Corsa and its
securityholders, including its position in the marketplace and
potential growth; (vi) Corsa's future initiatives and benefits derived
therefrom; and (vii) the nomination of Mr. Einav to the Corsa Board of
Directors upon completion of the Transaction. Although SRC believes
that the Forward-Looking Statements are reasonable, they are not
guarantees of future results, performance or achievements. A number of
factors or assumptions have been used to develop the Forward-Looking
Statements, including: (i) that the metallurgical coal market will
improve; and (ii) Corsa and PBS together will be able to execute its
program of operational improvements and initiatives to realize cost
synergies. Actual results, performance or achievements could vary
materially from those expressed or implied by the Forward-Looking
Statements should assumptions underlying the Forward-Looking Statements
prove incorrect or should one or more risks or other factors
materialize, including: (i) the failure to obtain TSX Venture Exchange
and other necessary approvals or to otherwise satisfy the conditions of
the completion of the Acquisition and the Transaction, in a timely
manner, or at all; (ii) failure to obtain the foregoing approvals, or
the failure of the parties to otherwise satisfy the conditions to or
complete the Acquisition or Transaction, may result in the Acquisition
or Transaction not being completed on the proposed terms, or at all;
(iii) market volatility that would affect the ability to enter or exit
investments; (iv) adverse market conditions; (v) risks associated with
the coal mining industry in general (e.g. those risks described under
the heading "Risk Factors Relating to the Company and the Coal Mining
Industry in Corsa's MD&A for the year ended December 31, 2013 ); and
(vi) those risks described under the heading "Risk Factors" in SRC's
annual information form dated March 25, 2014. The Forward-Looking
Statements speak only as of the date hereof, unless otherwise
specifically noted, and SRC does not assume any obligation to publicly
update any Forward-Looking Statements, whether as a result of new
information, future events or otherwise, except as may be expressly
required by applicable Canadian securities laws.
SOURCE Sprott Resource Corp.