Small Bullion Royalty Play in Trouble

By Travis Johnson, Stock Gumshoe, June 25, 2013

Americas Bullion Royalty (AMB.TO Canada, AMBCF pink sheets) is in a bit of a pickle again — last time around it was because they were shot down on the development of their Brewery Creek mine in Canada, and therefore lost the ability to split the royalty company and the mining company into two entities, and this time it’s because the folks who lent them the money to advance that Brewery Creek mine are now sending lawyers to claim that AMB has defaulted and that the lenders now have the right to buy the key royalties for $35 million. AMB has responded with a “nuh uh!” and a shuffling at the top of the organizational chart (the old CEO stepped over Jim Fink, the new CEO, Fink is currently Chief Investment Officer), this change has something to do with the dispute.

I think that’s less than those royalties are worth in any sane evaluation, unless you believe that gold will go below $1,000 an ounce and stay that low for a very long time, so the stock has taken a beating in response — without those royalties, there’s no reason to own Americas Bullion. Indeed, the key reason to own America’s Bullion can be winnowed down to just three properties, their two projects with Midway Gold (Pan and Gold Rock) and the Bald Mountain royalty that may begin generating revenue (the operator is Barrick) as early as 2015, those are the ones that are likely to have any financial impact on the company over the next couple years.

But that’s also $35 million. Which is a lot more than the whole company is trading for at the moment, so hopefully if they are indeed forced to sell those royalties they would liquidate the company and issue the net cash to shareholders — their liabilities are not particularly large as of the last time I checked, but their assets are certainly not worth much in the current environment if they had to clear them out in a fire sale, so it’s not clear exactly how that would hit the share price but $35 million would be about 21 cents per share, versus the current trading price of about 11 cents. That doesn’t mean I think it’s a good idea to rush out and buy the stock, and I’m personally taking a beating in my holdings of AMB, which I have on ...

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