PBS Coals Inc.
Sprott Resource Corp. invested US$55 million in PBS Coals Limited (formerly PBS Coals Corporation) (“PBS”) to acquire a 37% interest. The investment was made in two stages spanning five months beginning in December 2007.
PBS, through its subsidiaries operating in Pennsylvania, is a private metallurgical coal producer. Funding provided by Sprott Resource Corp. and other investors was used to expand production and to purchase shares and warrants from existing shareholders and warrantholders. The investment in PBS provided Sprott Resource Corp. with a stake in a solid, low-cost metallurgical coal producer that would benefit from a capital infusion and more favourable coal market conditions.
Subsequent to the initial investment by Sprott Resource Corp., pricing for metallurgical coal rose dramatically, increasing PBS’ value. In the summer of 2008 PBS went public by way of a reverse takeover of a Capital Pool Company. Sprott Resource Corp. sold a portion of its stake in PBS on a secondary offering and then its remaining stake to an affiliate of OAO Severstal, one of Russia’s largest steel companies, pursuant to a takeover bid completed in November 2008. In total, Sprott Resource Corp. received proceeds of approximately CAN$240.7 million from the sale of its PBS shares.