Sprott Resource Holdings Inc. Provides Update on Strategic Review by Independent Board Members
19 February 2020 - 1:00AM
Sprott Resource Holdings Inc. (“
SRHI” or the
“
Company”) (TSX: SRHI) provides an update on the
strategic review by the Special Committee of the Board of Directors
(the “
Board”).
On February 11, 2019, the Company announced that
in consultation with its significant shareholders including Sprott
Inc., the Board formed a Special Committee of the Board
comprised of four Independent Directors and chaired by
Terry Lyons, the Chairman of the Board. The Special
Committee reviewed and evaluated potential measures to address
the Company's market valuation, with the aim of maximizing
shareholder value. The Special Committee engaged financial and
legal advisors to assist in its evaluation.
During the period of strategic review, the
Special Committee oversaw a change in the Chief Executive Officer
and divested holdings in non-core assets of Virginia Energy
Resources Inc. and InPlay Oil Corp. For an extended period, it
was also restricted from seeking potential partners for the Minera
Tres Valles (“MTV”) asset as the Company
negotiated and completed the $45 million prepaid facility (the
“Facility”) with the lenders to MTV.
The Special Committee has been dissolved but its
strategic review continues at the Board level. The conclusion of
the Special Committee was to complete a transition to focus the
Company’s investment thesis as a pure-play copper-mining company,
to continue to pursue alternatives to divesting its portfolio of
investments in order to further support MTV and to continue to look
for strategic alternatives for the Company.
SRHI continues to hold an investment in Corsa
Coal Corp (CSO:TSXV) valued at $4.1 million as at February 13,
2020. Alternatives for this block are being considered. In
addition, SRHI has investments in Beretta Farms Inc.
(“Beretta”) and Lac Otelnuk Mining Ltd.
(“Lac Otelnuk”). SRHI continues to look for
opportunities to monetize its investment in Beretta and in
conjunction with our partner BaoWu Steel, SRHI is taking steps to
unwind the Lac Otelnuk joint venture and return capital to the
partners, of which a wholly-owned subsidiary of SRHI is a 40%
partner.
As part of its mandate, the Special Committee
reviewed certain strategic alternatives relating to the Company’s
interest in MTV, but ultimately it was determined that the ongoing
efforts to optimize operations and better capitalize MTV provided
the best potential to maximize shareholder value. Following
the execution of the Facility, the Board is investigating strategic
alternatives for MTV. There is no guarantee that the Company
will reach resolution on the strategic alternatives for MTV.
With the continued support of Sprott Inc., the
Company has reached an agreement to amend the Management Services
Agreement (“MSA”) with Sprott Consulting
Limited Partnership (“SCLP”, a 100% owned entity
of Sprott Inc.) whereby SCLP will continue to provide management
services, eliminating the management fee and reducing the
termination notice period as described in the MSA to three months;
in return the Company will bear some of the direct costs of
SCLP-provided management representing a significant cost savings to
the Company.
About Sprott Resource Holdings Inc.
SRHI is a publicly-listed diversified resource
holding company focused on the natural resource industry. SRHI is
currently focused on expanding its cash-flowing copper mining
operation in Chile and divesting of its legacy investments. Based
in Toronto, SRHI is part of the Sprott Group of Companies and seeks
to deploy capital to provide our investors with exposure to
attractive commodities. For more information about SRHI, please
visit www.sprottresource.com.
Cautionary Statement Regarding Forward-Looking
Information
Certain statements in this news release, contain
forward-looking information (collectively referred to herein as the
"Forward-Looking Statements") within the meaning
of applicable Canadian securities laws, including statements
pertaining to: the outcome of SRHI’s strategic review including in
respect of its investments in Beretta and Lac Otelnuk and success
in SRHI’s strategic alternatives for MTV.
Although SRHI 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 there being no significant disruptions
affecting the development and operation of MTV; the availability of
certain consumables (including water) and services and the prices
for power, acid and other key supplies being approximately
consistent with assumptions in the Technical Studies; labour and
materials costs being approximately consistent with assumptions in
the Technical Studies; fixed operating costs being approximately
consistent with assumptions in the Technical Studies; the
availability of financing for MTV’s planned development activities;
assumptions made in mineral resource and mineral reserve estimates
and the financial analysis based on the mineral reserve estimate
and in the case of the PEA, the mineral resource estimate,
including (as applicable), but not limited to, geological
interpretation, grades, commodity price assumptions, metallurgical
performance, extraction and mining recovery rates, hydrological and
hydrogeological assumptions, capital and operating cost estimates,
and general marketing, political, business and economic
conditions.
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:
possible variations in grade or recovery rates; copper price
fluctuations and uncertainties; delays in obtaining governmental
approvals or financing; risks associated with the mining 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 mineral reserves, production,
costs and expenses; and labour, health, safety and environmental
risks) and risks associated with the other portfolio companies'
industries; performance of the counterparties; risks associated
with investments in emerging markets; general economic, market and
business conditions; market volatility that would affect the
ability to enter or exit investments; failure to secure financing
in the future on terms acceptable to the Company, if at all;
commodity price fluctuations and uncertainties; the financial
situation of MTV deteriorates; the inability of SRHI to deal with
its investments in Beretta and Lac Otelnuk as expected; and a lack
of success in SRHI’s strategic alternatives for MTV; those risks
disclosed under the heading "Risk Management" in SRHI’s
Management’s Discussion and Analysis for the three and nine-months
ended September 30, 2019; and those risks disclosed under the
heading "Risk Factors" or incorporated by reference into SRHI’s
Annual Information Form dated March 6, 2019. The
Forward-Looking Statements speak only as of the date hereof, unless
otherwise specifically noted, and SRHI 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.
Investor contact information:
Michael HarrisonInterim CEO and Director(416)
543-8487mharrison@sprott.com
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