Sprott still goes with the grain
Jamie Sturgeon, Financial Post
March 27, 2009
Eric Sprott's hunger for commodities may have wavered since last year's price collapse took a hefty strip off revenues at Sprott Inc., his money-management business. However, the legendary hedge-fund manager is still placing bets on at least one commodity: grain. Sprott Resource Corp., of which Mr. Sprott is chairman, announced yesterday the launch of One Earth Farms Corp., "a large-scale, fully integrated corporate farming entity" as a subsidiary agricultural business.
Sprott Resource said the venture plans to begin tilling 50,000 acres of Prairie farmland in conjunction with First Nations groups by yearend and will spend $27.5-million to kick-start operations.
Sprott Resource has called on underwriters Cormark Securities Inc. to explore raising outside capital.
"Management believes that the timing for this venture is opportune," Sprott Resource said in a statement. "Global trends continue to impact food supplies, as arable land continues to decline, fresh water remains in short supply and various regions of the world are experiencing severe, recurring droughts."
Mr. Sprott, who is chief executive of Sprott Inc., which made a name for itself as its mutual and hedge funds profited enormously from surging commodities in recent years, will chair the new entity.
The announcement yesterday came as Toronto-based Sprott reported mounting losses across its funds as demand for commodities has plummeted amid a global recession.
Revenue at the money manager plunged by almost two-thirds in the fourth quarter as investor redemptions and the "unprecedented" market volatility cut into the bottom line.
Total revenue was $58-million for the three months ended Dec. 31, compared with $163-million in the same period a year ago, just before Sprott went public in May, 2008.
"The current global economic crisis is unprecedented in scale and scope, making investment analysis unusually challenging," Mr. Sprott said.Net income at Sprott did not suffer as badly. Fourth-quarter profit was $20-million, or 14¢ a share, compared with $28-million (21¢) in the same period a year earlier.Net redemptions in the fourth
quarter were about $600-million, as Canadian investors pulled a record amount of cash from plummeting equity markets.
As a result, assets under management at Sprott during the fourth quarter plunged $1.2-billion, or 29%, from a year ago, to $4.4-billion.
Annual net sales were $95-million, compared with $1.35-billion in 2007. Sprott did not break out quarterly sales figures.
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