Virginia Energy Resources Inc (fka VEGYF)

[Tommy]

Steve Yuzpe and Maria Smirnova: Why Sprott Resource Corp. Sold $76M in Bullion

http://www.theenergyreport.com/pub/na/15756?utm_source=delivra&utm_medium=email&utm_campaign=FINAL+TMR+12-17-13

TMR: What percentage of Sprott Resource Corp.'s assets is in the energy space?

SY: If I include actual exploration and production companies (E&Ps), as well as the energy services sector, it's about 60%. Our investments in the energy sector are primarily in light and heavy oil and natural gas, uranium and the services sector. We buy when commodities are cheap and we see opportunities over the next few years, meaning the commodity is likely to move back to its mean price or beyond and has the potential to create good returns. Those areas are natural gas, metallurgical coal and uranium. Those are the places where we see a lot of value right now.

TMR: Sprott has a 19.9% ownership stake in Virginia Energy Resources Inc. (VUI:TSX.V; VEGYF:OTCQX), which is developing the Coles Hills project in southern Virginia. But there's a moratorium on uranium mining there. Why would you take such a large stake in a junior with that much risk?

SY: Due to the moratorium, we were able to buy a stake in a large uranium deposit at a huge discount to the project's estimated net asset value (NAV). We believe that the U.S. is going to have to, at some point, develop domestic supplies of uranium. The U.S. already imports 90% of its uranium today and 20% of its energy is derived from nuclear power. Something's got to give there. Buying into a deposit at a huge discount gives us the opportunity to make an outsized return as it goes through the stages of development. Obviously, if the mining law doesn't change, we won't make any money on the investment. But, if the mining law does change, I believe that Virginia Energy will get rerated. We can take a very long-term view in the development of these assets. The risk/reward was absolutely in our favor.

TMR: The Coles Hill project has 133 million pound (133 Mlb) Indicated resource. That makes it among the largest undeveloped uranium resources in the U.S. If that law changes, is it a takeover target?

SY: It's more likely to be a takeover target if it can take the next step, which is getting permitted.