AIF - Sprott Resource Corp.

Counterparty Risk
The Energy Subsidiaries are subject to the risk that the counterparties to their risk management contracts, marketing
arrangements and operating agreements and other suppliers of products and services may default on their obligations
under such agreements or arrangements, including as a result of liquidity requirements or insolvency. A failure by such
counterparties to make payments or perform their operational or other obligations to the Energy Subsidiaries may
adversely affect their results of operations, cash flows and financial position and therefore may reduce the value of the
Company’s common shares.
General Energy Segment Risk
The business and operations of the Energy Subsidiaries, including the drilling of oil and natural gas wells and the
production and transportation of oil and natural gas, are subject to certain risks inherent in the oil and natural gas
business. These risks and hazards include encountering unexpected formations or pressures, blow-outs, craterings and
fires. The Energy Subsidiaries’ operations may also subject them to the risk of vandalism or terrorist threats including ecoterrorism.
The foregoing hazards could result in personal injury, loss of life, reduced production volumes or environmental
and other damage to the Energy Subsidiaries’ property and the property of others. The Energy Subsidiaries cannot fully
protect against all of these risks, nor are all of these risks insurable. Although the Energy Subsidiaries carry liability,
business interruption and property insurance in respect of such matters, there can be no assurance that insurance will be
adequate to cover all losses resulting from such events or that the lost production will be restored in a timely manner. The
Energy Subsidiaries may become liable for damages arising from these events against which they cannot insure or
against which they may elect not to insure because of high premium costs or other reasons. Any costs incurred to repair
damages or pay liabilities would reduce the value of the Company’s common shares.
The Properties and Assets acquired in the Future will be Subject to Operational Risks
The risk factors set forth in this AIF relating to the Energy Subsidiaries, their operations and reserves apply equally in
respect of any future properties or assets that the Company, the Energy Subsidiaries or any future subsidiary of the
Company may acquire. The Company and Energy Subsidiaries generally conduct certain due diligence in connection with
acquisitions, but there can be no assurance that the Company or Energy Subsidiaries, as applicable, will identify all of the
potential risks and liabilities related to the subject properties.
Inability to Compete Successfully with other Organizations in the Oil and Natural Gas Industry
The oil and natural gas industry is highly competitive. The Energy Subsidiaries compete for capital, acquisitions of
reserves, undeveloped lands, skilled personnel, access to drilling rigs, service rigs and other equipment, access to
processing facilities, pipeline and refining capacity and in many other respects with a substantial number of other
organizations, many of which may have greater technical and financial resources than the Energy Subsidiaries. Some of
these organizations not only explore for, develop and produce oil and natural gas but also conduct refining operations and
market oil and other products on a world-wide basis. As a result of these complementary activities, some competitors may
have greater and more diverse competitive resources to draw upon.
Environmental Claims and Liability
The oil and natural gas industry is subject to extensive environmental regulation pursuant to local, provincial and federal
legislation in Canada. A breach of that legislation may result in the imposition of fines or the issuance of ‘‘clean up’’
orders. Legislation regulating the Energy Subsidiaries’ industry may be changed to impose higher standards and
potentially more costly obligations, such as legislation that would require significant reductions in greenhouse gas
emissions. See ‘‘Energy Segment: Waseca and OEOG – Oil and Gas Industry Overview – Environmental Regulation’’ for
a summary of certain proposals. Although the actual form such legislation or regulation may take is largely unknown at
this time, the implementation of more stringent environmental legislation or regulatory requirements may result in
additional costs for oil and natural gas producers such as the Energy Subsidiaries, and such costs may be significant,
which may negatively impact the trading price or value of the Company’s common shares.
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