Sprott Inc. · TSX:SII

Sprott — Non-Deal Roadshow (October 2007)

26 slides from Sprott's roadshow presentation, October 2007

  1. Slide 1: Sprott Opportunities Hedge Fund L.P./RSP

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP Sprott Asset Management Inc. Sprott Opportunities Hedge Fund L.P. Sprott Opportunities RSP Fund Jean-François Tardif, CFA Senior Portfolio Manager October 2007 SPROTT OPPORTUNITIES HEDGE FUND LP As at September 30, 2007 Sprott Opportunities CSFB Tremont HFI H

  2. Slide 2: Portfolio Exposure and Bottom-Up Approach to Long Positions

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP PORTFOLIO EXPOSURE As at September 30, 2007 Sprott Opportunities Hedge Fund, LP Gross Long & Short Portfolio Exposure 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% Apr-04 Aug-04 Apr-05 Aug-05 Apr-06 Aug-06 Apr-07 Aug-07 Jun-04 Feb-05 Jun-05 Feb-06 Jun-06 Feb-07 J

  3. Slide 3: Bottom-Up Approach – Long Examples: Major Drilling, Grey Horse

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP BOTTOM-UP APPROACH – LONG EXAMPLE Major Drilling (TSX:MDI) Last sale of position @$45.72 Revenue EPS Year August 8, 2007 (in millions) (diluted) First purchase @$22.96 2008E $557 $3.21 June 16, 2006 2007 $415 $2.01 2006 $316 $1.09 2005 $246 $0.65 2004 $176 $0

  4. Slide 4: Long Example Genivar; Approach to Short Positions

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP BOTTOM-UP APPROACH – LONG EXAMPLE Genivar (TSX:GNV.UN) Revenue Pro-forma EPS Year (in millions) (tax-adjusted) First purchase @$10.00 2008E $306 $1.46 May 17, 2006 2007E $251 $1.16 2006 $176 $0.82 2005 $130 $0.55 2004 n/a n/a Source: www.bigcharts.com Source:

  5. Slide 5: Short Examples: Cinram, ATS Automation

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP BOTTOM-UP APPROACH – SHORT EXAMPLE Cinram International Income Fund (TSX:CRW.UN) Fully covered @$20.37 August 8, 2007 2006 2005 Initial short sale @$26.25 Revenue ($bln) 1.94 2.10 June 1, 2004 Earnings before tax ($mln) 95.8 116.8 Cash flow 226.5 257.3 CAPEX

  6. Slide 6: Outlook: A Lot of Danger in the US Economy

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP OUTLOOK A LOT OF DANGER IN THE US ECONOMY – Record US profitability as a percentage of GDP – US savings rate is bound to go up – Stocks have already done well (1 YR and 5 YR) – Liquidity crisis? – Money supply is shrinking Slide 12

  7. Slide 7: Risk Potential Going Forward

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP RISK POTENTIAL GOING FORWARD US Corporate Profits as a % of GDP Corporate profits as a percentage of GDP are currently around record levels Source: Bloomberg Slide 13 RISK POTENTIAL GOING FORWARD US Personal savings as a % of Disposable Personal Income Consum

  8. Slide 8: Reward Potential Going Forward: Germany, India

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP REWARD POTENTIAL GOING FORWARD Germany iShares (5-year) (1-year) +168%! +36%! LONG-TERM STOCK RETURNS AROUND 10% PER YEAR Source: Bloomberg Slide 15 REWARD POTENTIAL GOING FORWARD India BSE 30 Sensex (5-year) (1-year) +381%! +31%! WHAT ABOUT REVERSION TO THE

  9. Slide 9: Reward Potential: S&P Large Cap, S&P/TSX

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP REWARD POTENTIAL GOING FORWARD S&P 500 Large Cap Index (5-year) (1-year) +61%! +13%! WORLD GDP HAS BEEN GROWING AT A RECORD PACE OVER THE LAST 5 YEARS. IS IT GOING TO LAST WITHOUT INTERRUPTION? Source: Bloomberg Slide 17 REWARD POTENTIAL GOING FORWARD S&P/TSX

  10. Slide 10: Reward Potential: Shanghai Composite; Liquidity Crisis or Not?

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP REWARD POTENTIAL GOING FORWARD Shanghai Stock Exchange Composite Index (2-year) (1-year) +400%! +215%! +213%! WOW…400% IN TWO YEARS! Source: Bloomberg Slide 19 Liquidity crisis or NOT? Source: Globe & Mail Slide 20

  11. Slide 11: Bank Stocks Corrected and Recovered

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP Bank stocks corrected and recovered Canadian Imperial Bank of Commerce Toronto-Dominion Bank Only Only -19%! -13%! JP Morgan Chase Citigroup Only -19%! Only -17%! Source: Bloomberg Slide 21 WHAT HAPPENED IN 1998 & 2001? Canadian Imperial Bank of Commerce -41%

  12. Slide 12: What Happened in 1998 & 2001?

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP WHAT HAPPENED IN 1998 & 2001? Toronto-Dominion Bank -44%! -48%! Source: Bloomberg Slide 23 WHAT HAPPENED IN 1998 & 2001? JP Morgan Chase -61%! -48%! Source: Bloomberg Slide 24

  13. Slide 13: What Happened in 1998 & 2001? TD, JP Morgan

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP IS MONEY SUPPLY NOW SHRINKING? Commercial Paper Outstanding $2,500 $2,000 $1,500 Billions ($USD) $1,000 $500 If it does..watch out? $0 Jan-03 Jan-05 Jan-01 Jan-02 Jan-04 Jan-06 Jan-07 Jul-01 Jul-02 Jul-04 Jul-05 Jul-06 Jul-07 Jul-03 Commercial Paper Outstandi

  14. Slide 14: Is Money Supply Now Shrinking?

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP MONEY SUPPLY IS CREATED BY EXPANSION OF DEBT Components of Total Debt (US) 50000 45000 40000 35000 30000 Billion ($USD) 25000 20000 15000 10000 5000 0 1952 1955 1958 1961 1964 1967 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 1970 Government De

  15. Slide 15: Money Supply Is Created by Expansion of Debt

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP … THE ECONOMY GOES DOWN US GDP 125 105 What happens to stocks? … -33% 85 Billion ($USD) 65 45 25 5 1907 1908 1909 1910 1911 1912 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1931 1932 1933 1934 1935 1936 1938 1939 1930

  16. Slide 16: The Economy Goes Down; Stocks Go Down

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP WHAT DO WE LIKE? ENERGY is the way to go …

  17. Slide 17: Energy

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP OIL SUPPLY U.S. OIL PRODUCTION PEAKED IN 1970 12 10 8 MMbbls/d 6 4 2 0 1900 1915 1930 1945 1960 1975 1990 2005 Source: DOE/EIA Slide 34

  18. Slide 18: Oil Supply: US Oil Production Peaked in 1970

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP MEXICAN OIL PRODUCTION PREDICTION Source: PEMEX Slide 35 INDONESIAN OIL IMPORTS 1000 1800 1600 800 Production (RHS) 1400 600 1200 1000 mmbls/d 400 mmbls/d 800 200 600 400 0 Net Exports (LHS) 200 -200 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 20

  19. Slide 19: Mexican Oil Production Prediction; Indonesian Oil Imports

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP NON-OPEC PRODUCTION GROWTH HAS BEEN INCONSISTENT Excluding Former Soviet Union 2.00 1.50 Net gain since 1998 = 1.4 Mmbbls/d 1.00 0.50 0.00 ? ? ? ? -0.50 -1.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007E 2008E 200

  20. Slide 20: Non-OPEC Production Growth Has Been Inconsistent

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP US GAS PRODUCTION PER WELL 20 18 16 (MMbls/d) 14 12 10 8 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: EIA Slide 39 EVERYBODY INTO THE BAKKEN POOL B Y C L A U D I A C AT TA N E O BAKKEN OIL FIELD of southeastern Saskatchew

  21. Slide 21: US Gas Production per Well; Everybody Into the Bakken Pool

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP OIL DEMAND CHINA BECOMES A “SUPER POWER” China Electricity Production (Billion kwh) Source: Bloomberg Slide 42

  22. Slide 22: Oil Demand: China Becomes a Super Power

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP OIL DEMAND U.S. Demand vs. China/India/Brazil Demand 25.00 12.50 GROWTH IS EVEN FASTER IN RECENT YEARS 6.6% 10.50 20.00 U.S. (LHS) 1.5% 8.50 15.00 MMbbls/d MMbbls/d 6.50 China/India/Brazil (RHS) 4.50 10.00 3.9% 2.50 5.00 0.50 - (1.50) 1960 1964 1968 1972 1976

  23. Slide 23: Oil Demand: US vs China/India/Brazil

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP CONCLUSION – We believe that oil is going much higher ($200+ in 5-10 years) – Unleveraged hedge funds could help to protect your portfolio* * Speak to your Investment Advisor to determine your suitability. Slide 45 SPROTT OPPORTUNITIES HEDGE FUND LP (closed)

  24. Slide 24: Conclusion

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP SPROTT OPPORTUNITIES RSP FUND Investment Manager: Jean-François Tardif, CFA Type of Fund: Long/Short Equity Capital Appreciation Securities Offered: Open-ended unincorp. Mutual Fund Trust Launch Date: September 30, 2005 Launch NAV: $10 per unit Fund Codes: SP

  25. Slide 25: Fund Terms: Hedge Fund LP and RSP Fund

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP QUESTIONS? CONTACT INFORMATION Sprott Asset Management Inc. Royal Bank Plaza, South Tower Suite 2700 Toronto, ON M5J 2J1 T: 416 943 6707 Toll Free: 866 299 9906 F: 416 362 4928 Email: invest@sprott.com Web: www.sprott.com Slide 50

  26. Slide 26: Questions? Contact Information

    SPROTT OPPORTUNITIES HEDGE FUND L.P./RSP DISCLAIMER The opinions, estimates and projections ("information") contained within this report are solely those of Sprott Asset Management Inc. (SAM) and are subject to change without notice. SAM makes every effort to ensure that the information has been der

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