I wrote a few months ago about Sprott Resource Corp. I believe it is an excellent risk/reward scenario.
http://www.gurufocus.com/news.php?id=98509
Earlier this week the company announced plans to buy back up to 7.3% of the stock outstanding.
The company currently trades at around $4.40 and has a net asset value that is conservatively (and relatively easily) calculated as being $5.85. And that net asset value will surely grow.
The really attractive part is the huge amount of liquid assets included in that $5.85. At least $1 to $2 per share are available to take advantage of distressed opportunities as they arise.
And take advantage of distressed opportunities is something Sprott Resource has shown that they can do.
In 2007 Sprott Resource invested $55mil in PBS Coals who needed a capital infusion at a time when metallurgical coal prices were depressed. Subsequently as prices improved PBS Coals was sold to one of Russia’s largest steel companies and Sprott Resource received $240mil in November 2008.
A fluke ? Hardly. In the fall of 2009 Sprott provided financing to an oil and gas producer facing a capital crunch. Sprott invested $100mil and in early 2010 took the company public as Orion Oil and Gas. The value of Sprott’s shares in this publicly traded company have ranged from $200mil to $300mil over the past 6 months.
Need more ? I’ve got it. I’m sure you noticed the interest in Canadian company PotashCorp (POT, Financial). Well, Sprott Resource owns a large percentage of an emerging phosphate producer that is shaping up as a homerun investment in a sector where the world is in bad need of supply. I wrote previously about this company which is not publicly traded and called Stonegate Agricom.
http://www.gurufocus.com/news.php?id=105760
Sprott Resource is managed by Sprott Asset management which is likely Canada’s most well known and perhaps successful hedge fund managers. They have an excellent access to deal flow which allows them to get in on these distressed situations, are disciplined enough to wait for a fat pitch to come and are motivated to maximize the share price of Sprott Resource Corp.
The current net asset value of Sprott Resource is broken down as:
Energy – 44%
Agriculture – 12%
Precious Metals – 29%
Cash and Securities – 15%
Oh, and the company has no debt. Which is a nice change for some of us. It is definitely worth a trip north of the border to pick up this gem.
