Secured Notes Payable

9 Months Ended

Sep. 30, 2013

Secured Notes Payable [Text Block]

8.	Secured Notes Payable
	On June 6, 2013 the Company entered into a Note Purchase Agreement whereby $6,000,000 was received in exchange for secured promissory notes (the “Notes”) bearing interest from the date of issue at 6% per annum increasing to 10% per annum on August 16, 2013 when the notes were not repaid. In addition, the principal amount of the Notes also increased to $6,150,000 when the Notes were not repaid prior to August 16, 2013. The Notes are secured by the Company’s mineral properties, equipment and personal property and mature at the earlier of: i) the 30th day following execution and delivery by the Company of all documents to be executed and delivered by the Company in respect of a pending financing facility (State of Wyoming Industrial Revenue Bond) and (ii) December 31, 2013.
	As additional consideration for the loan, the Company issued non-transferable common stock purchase warrants entitling the holders to purchase from the Company 1,600,000 common shares at an exercise price of $1.60 per share, of which 1,200,000 warrants were immediately exercisable and 400,000 additional warrants exercisable only if the Notes remain outstanding after August 15, 2013. The Notes contain restrictive covenants with respect to indebtedness and material corporate changes. The warrants expire 30 months from the date of issue, subject to an acceleration option exercisable by the Company in the event that the Company’s common shares trade at a closing price on the NYSE MKT of greater than $2.75 per share for 20 consecutive trading days. No warrants have been exercised as at September 30, 2013.
	The proceeds from the Notes were allocated based on the relative fair values of the Notes without the warrants issued in conjunction with the Notes and of the warrants themselves at the time of issuance. The Company estimated the fair value of the warrants using a binomial lattice model with the following assumptions at June 6, 2013: risk-free rate of 0.48%, expected volatility of 78% and an expected term of 2.50 years.
	The Company recorded the relative fair value of the warrants of $525,461 at the time of issuance as additional paid in capital and as a debt discount to the Notes. The Company also recognized a discount equal to the additional $150,000 principal on August 16, 2013. The Company will amortize this debt discount as interest expense over the life of the Notes. At September 30, 2013, the Company recorded amortized interest expense of $544,911 and increased the carrying value of the notes to $6,019,450.
	The Company incurred financing costs associated with the issuance of the Notes of $296,840.