December 17, 2010

Sprott aims to build Canada's biggest farm

Sprott Resource Corp (SCP.TO) said on Thursday (Dec 16), that it will invest US$30 million in its One Earth Farms Corp subsidiary to make it Canada's biggest operating crop and cattle farm in 2011.

Sprott plans to exercise 30 million warrants in One Earth, increasing its ownership interest to 8 % from 66.7%.

One Earth Farms leases land in Western Canada, mainly from aboriginal reserves. Large corporate grain farms are a novelty in Canada, although they are well-established in Eastern Europe and South America.

Global farmland values have risen in recent years with rising crop prices, a trend linked to the growth in population and income in developing countries like China and India, where meat is becoming more common in diets.

"One Earth Farms will command a high valuation as concern for food quality and security continues to increase," Kevin Bambrough, chief executive of SRC, said.

Saskatchewan, Canada's biggest crop-growing province, restricts ownership of farmland by foreign investors. Even so, farmland values there have climbed 44% since 2002 to about US$500 an acre.

One Earth plans in 2011 to lease and plant 150,000 acres of cultivated farmland, lease 100,000 acres of pasture land, and expand its cattle herd to 22,000 head of cattle.

The plan will require US$65 million in incremental capital, made up of additional equity and debt.

The average farm size in Canada has been growing as farmers retire and sell their land to others. The 2006 census said the average farm size was 728 acres, up from 676 acres five years earlier.