Sprott Resource Lending Corp., formerly Quest Capital Corp. , released more details this morning about its exiting of the real estate lending sector and its move back into mining and oil and gas loans. (Recall that Quest originally lent to resource companies until 2008).
Sprott said the deal was inspired by a contraction in resource lending by banks despite companies' demand for financing. The timing was also important. Many junior resource firms are trading at big discounts to spot commodity-based net asset values and short-term rates are at record lows right now, which allows Sprott to build a loan book with good spreads.
Sprott also offered some guidance on the type of loans it is looking to make. They will range from $5-million to $15-million and have terms between six to 24 months; the interest rate will average around 12 per cent and companies will also typically offer around 10 per cent in bonus shares or warrants; and at the moment there are no geographic restrictions in place.
At the start, Sprott will pay a dividend to shareholders equal to the 30-year Canada yield, but hopes to increase that as the company ramps up.
As was already reported, investors who want to get out of the company because they prefer playing real estate have the option to sell their shares back to Sprott in a Dutch Auction totalling $60-million.
Tim Kiladze