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Well, I started looking at the financials for 3Q 2012. A lot of this will change because of the new spin-off, but it still gives some clues into Americas Bullion's strategy. I'm guessing the original strategy was to use the royalties to finance the development of its Yukon properties. After the success of other royalty companies, it makes more sense to split the companies, because it should be much easier to raise money by separating mining costs and risks from the safer income streams. Looking at the exploration costs (Note 8) and the eventual mine construction costs, separating this out will make the royalty structure a much cleaner vehicle to raise equity and debt.

Now I'm not sure if they would raise money for their spin-off's Yukon properties with new American Bullion's streams, but that would be an interesting idea. It would be similar to my Ship Finance example in financing a partner company like Frontline. The royalty company can derisk by not only having streams with its Yukon interests, but with dozens of other projects. That in itself, will be a great selling point to investors. On top of this, the Yukon properties can much more easily gain new financing by having this unique relationship. I'm not sure what the eventual setup will be, but this could be an interesting new take on the proven streaming model. The flexibility and opportunity of this relationship is compelling.

Back to the financials, it will be interesting to see how much of the operating expenses will follow the spin-off company in charge of the Yukon projects. By being solely a royalty company, America Bullion should be easier to invest into for the patient and risk-averse investor. It should be noted America Bullion has secured most of it financing through debt during 2012. It's hard to know what Gold Bullion's war chest will look like until we can see how the assets will be split up. At least on the financial side, there will be more questions than answers for a while.

Hopefully share dilution slows down, since the shares outstanding is now at 150M shares. If we continue to see this rate of dilution, it will negatively affect the stock price in the short-term and long-term. Despite this, it was refreshing to see a successful equity issuance at a much higher price than the current share price (Note 11). If a revaluation of the royalty focus is positive, it will help alleviate significant dilution.

If you do not like how I reorganized the financial statement, please click the link to the official one.

Assets [Change Since 29 Feb 2012]
Cash and Cash equivalents (Note 3): $3,329,215 [+1,538,198]
Gold Bullion: 257,858 [+7,280]
Investments (Note 4): 3,134,760 [-3,301,770]
Receivables (Note 5): 1,651,688 [-9,963]
Prepaid Expenses and Deposits: 644,074 [+105,801]
Mineral interests - held for sale: 0 [-2,563,817]
Current Assets: 9,017,595 [-4,224,271]

Reclamation Bonds: 1,159,805 [+796,178]
Water Rights: 193,781 [-7,994]
Property Plant and Equipment (Note 6): 5,417,222 [+313,981]
Investments in Associates (Note 7): 4,186,695 [+1,361,695]
Mineral Interests (Note 8): 86,594,272 [+20,463,474]
Total Assets: 106,569,272 [+18,703,063]

Note 3: Cash: 3,041,996; Short Term Investments: 287,219
Note 4: Common Share in Public Companies Cost: 6,042,077; Market Value: 3,017,918
Note 5: Taxable Recoveries: 891,842; Other Receivables: 759,846

Note 6: PPE Value [Value Change From Feb 12 to Nov 12]
Plant & Equpiment: 3,372,638 [+385,181]
Computer Equipment: 321,651 [-81,877]
Furniture: 129,108 [-22,905]
Camp & Drilling: 652,080 [+44,143]
Earthmoving & Auto: 929,683 [-5,540]
Leasehold Improvements: 12,063 [-5,019]
Total: 5,417,222 [+313,981]

Note 7: Investments
Investments in Silver Predator Corp
Balance Feb 29, 2012: 2,825,000
Share Loss For The Period: (577,472)
Share of Comprehensive Loss: (79,090)
Write Down to Fair Market Value at Period End: (619,6776)
Balance November 30, 2012: 1,548,762

Investments in Wolfpack Gold Corp
Initial Investment: 2,323,116
Share Loss For The Period: (135,507)
Share of Comprehensive Loss: (-)
Balance November 30, 2012: 2,187,609

Investments in Redtail Metal Corp
Initial Investment: 480,000
Share Loss For The Period: (24,139)
Share of Comprehensive Loss: (5,537)
Balance November 30, 2012: 450,324

The shares in Redtail were acquired in a transaction whereby the Company agreed to accept shares of Redtail for repayment of $480,000 owing under a cost sharing arrangement, which was terminated on November 1, 2012. The Company held a 14.37% interest in Redtail at November 30, 2012.

Note 8: Mineral Interests
Yukon Canada Properties: Feb 12 Balance: 43,409,843; Acquisition Costs: 8,853,811; Exploration Costs: 11,475,078; Adjustments: 727,624; Nov 12 Balance: 64,466,356
Nevada/Other Properties: Feb 12 Balance: 25,284,772; Acquisition Costs: 177,432; Exploration Costs: 316,724; Adjustments: (3,651,013); Nov 12 Balance: 22,127,916

Liabilities [Change Since 29 Feb 2012]
Accounts Payable and Accrued Liabilities (Note 9): 2,565,601 [+1,231,243]
Current Portion of Long-Term Finance Leases: $306,189 [+10,010]
Current Portion of Long-Term Debt (Note 10): 28,408 [+28,408]
Flow-through share premium liability (Note 11): 14,949 [+14,949]
Current Liabilities: 2,915,147 [+1,284,610]

Long-Term Finance Leases: 304,291 [-206,879]
Embedded Derivative Liability (Note 10): 384,945 [+384,945]
Long-Term Debt (Note 11): 9,258,878 [+9,258,878]
Deferred Income Tax Liabilities: 9,395,283 [+3,146,150]
Total Liabilities: 22,258,544 [+13,867,704]

Note 9: Accounts Payable and Accrued Liabilities
Trade Payables: 764,798 [+529,403]
Accruals: 1,871,559 [+984,004]
Payroll Remittances and HST: (70,939) [-282,163]
Total: 2,565,601 [+1,231,243]

Note 10: Red Kite Loan Agreement
On September 25, 2012, the Company executed definitive agreements with MF Investment Holding Company 1 (Cayman) Limited (the “Lender”), part of the Red Kite group, for a senior secured loan facility in the principal amount of USD $35,000,000 (the “Loan”).

The Loan will be provided through three advances. The first advance of USD $10,000,000 was provided on September 26, 2012 and two subsequent advances of USD $10,000,000 and USD $15,000,000, respectively, will be made on completion of certain specified conditions including delivery of an acceptable pre-feasibility study and receipt of required permit amendments for the Brewery Creek Project.

The first $10,000,000 of the Loan matures on July 1, 2015. The Loan bears interest payable at LIBOR plus 8% per annum, subject to a minimum interest rate of 10%. In the event of default under the loan, it will bear interest payable at LIBOR plus 12% per annum, subject to a minimum interest rate of 14%, for so long as the Loan is in default.

As a condition to the second advance of the Loan, the Company has agreed to enter into an offtake agreement under which it will sell to the Lender the first 500,000 ounces of gold produced from the Brewery Creek Project, at a discount of 1.5% from the spot price.
The loan is secured by a charge against the assets of the Company and a pledge of the shares of the Company’s subsidiaries, and the Company has also granted the Lender the right, in the event of a continuing default under the Loan to acquire all of the Company’s US property interests (which includes the Company’s royalty portfolio), for USD $35,000,000.

Of the initial advance, CAN $3,205,000 was used to complete the acquisition of the remaining interest in 100% of the Brewery Creek Project from Alexco with the balance of the net proceeds of the Loan to be used exclusively to fund the working capital requirements of the Company related to or arising in connection with the exploration and development of the Brewery Creek Project.

As part of the loan agreement, the Company paid an origination fee of 3.5% of the Loan amount. The Company also incurred financing and legal fees amounting to $514,093. The loan instrument is comprised of a debt instrument and an embedded derivative related to the interest rate floor. The embedded derivative had an estimated fair value of $385,485 at inception, resulting in a residual value of $9,614,515 being attributed to the debt instrument. The Company recorded interest and accretion totaling $197,463 in the period which was calculated based on an effective interest rate of 13.54%.

Hayden Office Building Note
On October 15, 2012 the Company entered into a note agreement in the amount of USD $350,000 to partially fund the purchase of an office building and land in Hayden, Idaho USA for USD $550,000. The note calls for monthly payments of US$3,627 including interest at 4.5% and matures October 2016.

Shareholders' Equity
Share Capital (Note 11): 114,091,817[+13,425,033]
Contributed Surplus (Note 11): 9,298,870 [+1,605,317]
Treasure Stock: (114,898) [+0]
Accumulated Other Comprehensive Loss: (3,772,812) [-2,156,848]
Deficit: (35,192,151) [-8,038,143]
Total Equity: 84,310,826 [+4,835,359]
Total Liabilities + Equity: 106,569,370 [+18,703,063]

Note 11: Share Capital and Reserves
On March 21, 2012, the Company completed a brokered private placement whereby 13,758,116 flow-through common shares were issued at a price of $0.86 per flow-through common share for gross proceeds of $11,831,980, and 350,000 non-flow-through shares were issued at a price of $0.75 per share for gross proceeds of $262,500. The Company paid cash commission of $350,196 and issued 420,000 non-flow-through shares to the agent

The initial premium on issuance of the flow-through shares, amounting to $3,527,526, has been treated as a current amount payable and is recognized as an offset against the deferred tax charge related to flow-through expenditures in the period. An amount of $955,140 was offset against the deferred tax charge in the period, fully offsetting the expense accrued.

During the nine months ended November 30, 2012, the Company granted 1,915,500 options with a weighted average fair value of $0.346 per option to officers, employees and directors of the Company.

Total share based payments recognized in the statements of operations during the nine months ended November 30, 2012 was $1,179,272 (2011 – $1,080,494) for incentive options granted and vested.
On August 15, 2012 shareholders of the Company approved an amendment to the exercise price of 11,260,375 stock options previously granted to directors, officers, employees and consultants of the Company to $0.50 from the previous exercise prices ranging from $0.60 to $1.05. The difference between the fair market value of the original options and the amended options, measured on the date of the amendment, have been expensed in respect of vested options, and will be expensed over the remaining vesting periods of unvested options.

Expenses 3Q 2012 [Change Since 3Q 2011]
Depreciation and amortization: 133,452 [+16,668]
Directors’ fees: 8,892 [-27,108]
General and administrative: 688,240 [-5,093]
Staff costs: 1,539,361 [+693,961]
Stock-based compensation (Note 11): 261,976 [-279,442]
Write-off of mineral interests (Note 8): 0 [+0]
Loss (gain) on sale of mineral interests: (29,559) [-29,559]
Royalty income: (79,708) [+28,417]
Expenses Total: (2,522,654) [-341,010]

Other Items
Foreign exchange gain (loss): (154,445) [-387,360]
Interest income: 22,368 [+9,189]
Unrealized gain (loss) on investments held- for-trading: 0 [+0]
Unrealized gain (loss) on gold bullion: 18,406 [+26,651]
Gain on sale of subsidiary: 0 [+0]
Loss on settlement of loan: 0 [+0]
Accretion expense (Note 10): (58,287) [-58,287]
Loss on equity investment in associates: (99,444) [+39,003]
Other Items Total: (359,390) [-667,058]

EBIT: (2,882,044) [-1,008,068]
Interest expense: 139,176 [+139,176]
Loss before taxes: (3,021,220) [-1,147,244]

Current income tax recovery (expense): 460,341 [+611,419]
Deferred income tax recovery (expense): 29,200 [+2,377,905]

Loss for the period: (2,531,679) [+1,842,090]

Change in cumulative translation adjustment:(250,843) [-259,843]
Share of other comprehensive loss of associates: (87,155) [-87,155]
Unrealized gain (loss) on available-for-sale investments, net of tax: 146,324 [+1,122,883]

Comprehensive loss for the period: (2,723,353) [+2,617,965]
Basic and diluted loss per common share: (0.02) [+0.02]

Weighted average number of common shares outstanding: 150,534,647 [+28,450,206]

Cash Flow From Operating Activities Nine Months 2012 [Change From Nine Months 2011]
Net income loss for the period (8,038,143) [-457,848]
Items not affecting cash: 3,849,009 [+1,825,263]
Changes in non-cash working capital items: 1,135,386 [+1,105,406]
Net cash used by operating activities: (3,053,728) [+2,357,629]

Cash Flow From Investing Activities
Mineral interests, net of recoveries: (17,651,078) [+7,620,279]
Proceeds from sale of mineral properties: 0 [-5,850,000]
Purchase of water rights, property, plant and equipment: (811,059) [+283,083]
Proceeds from sale of investments: 617,603 [-2,699,268]
Proceeds from loan receivable: 0 [-152,007]
Purchase of investments: 0 [+8,108,942]
Net cash used by operating activities: (17,844,534) [+7,310,813]

Cash Flow From Financing Activities
Proceeds received from private placements: 12,409,480 [-10,217,532]
Equity issuance costs: (480,578) [+1,130,297]
Proceeds on exercise of warrants: 0 [-14,211,024]
Proceeds on exercise of options: 38,320 [-365,554]
Proceeds from loans: 10,469,238 [+10,469,238]
Net cash used by operating activities: 22,436,460 [-13,194,575]

Change in cash and cash equivalents during the period: 1,538,198 [-3,526,133]
Cash and cash equivalents, beginning of period: 1,791,017 [-2,615,318]
Cash and cash equivalents, end of period: 3,329,215 [-6,141,451]

Note 14. Supplemental Disclosure With Respect To Cash Flows
Significant non cash transactions for the nine month period ended November 30, 2012 included:
a) Issued common shares for mineral properties with a value of $184,500.
b) Issued common shares for brokers’ commission with value of $315,000.
c) Sold mineral properties for shares with a value of $2,400,000.

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