12:00 pm (Pacific) Monday, Oct. 22
A little known fact about Rainbow Resources’ (RBW, TSX-V) President David W. Johnston is that just five years ago, at the age of 62, he climbed his way to the 19,300-foot-high summit of Mount Kilimanjaro. It was one of the defining moments of his life, and a sign of the grit and determination of this Calgarian whose business card includes the statement, “There is Always a Way”. He recalls, “My hands felt like a block of wood at times” when speaking about the grueling 7-day Kilimanjaro trek for charity. Johnston was accompanied by his wife Julie and a group of 20 others who together raised over $220,000 for the Canadian Arthritis Society.
Johnston has never been one to back down from a challenge. That’s why he was also able to successfully build privately-held Braveheart Resources Canada Inc., steer it through the financial crisis of 2008 and ultimately lead it into a takeover by Rainbow in late 2011 at a time when markets were also under severe stress.
Johnston at the International Silver Property.
Almost immediately following the Rainbow–Braveheart “marriage”, Johnston went to work at lightning speed to build the Venture-listed company with help from others who have been very successful in business, exploration and mining. This list includes engineer Jim Decker, Rainbow’s VP-Operations, whose advice is sought from and valued by some of the largest Gold and resource producers in the world. Decker was one of the original founders of Grande Cache Coal and was instrumental in helping it become an incredible success story in Western Canada.
By the end of the first quarter of this year, Rainbow had made major strides in the development of its 13,000-hectare Big Strike land package in the West Kootenays, and also scooped up one of the best available pieces of exploration real estate in Nevada – the Jewel Ridge Property in the heart of a multi–million ounce Gold system where Rainbow is now ready to drill. Priority #1 will be to duplicate a stellar hole from previous work that returned 2.1 g/t Au over 40 metres, and find others just like it around the past producing Hamburg Pit.
Rumor has it, Timberline Resources (TLR: AMEX and TBR: TSX-V), a stock that has climbed nearly 50% in a month based on results from Lookout Mountain immediately to the south of Jewel Ridge, was aiming to expand north and grab the Jewel Ridge Property itself but got out-maneuvered by Rainbow’s Calgary connection.
Johnston created wealth for Braveheart shareholders and is completely focused on doing the same for all RBW investors, just one of many reasons he’s got the strong backing and support of some of Calgary’s most prominent and successful businessmen including close friend Bob Libin – part-owner of the NHL’s Flames.
“David first and foremost is someone I have enormous trust in and respect for,” Libin told us the other day. “Exploration is always a risky business and there are never any guarantees. But David has set things up with Rainbow to give investors the best shot possible at a discovery very soon that would transform any junior almost overnight. Using a hockey analogy, we’re very early in the game. David’s behind the bench making the calls. He has an aggressive plan of attack that is about to result in three straight breakaways with a chance to score and put Rainbow in the lead with great momentum. I like our team’s odds. We have a great leader and a lot of talent. We’re all extremely competitive. Winning is the only option.”
Using Libin’s interesting analogy, International, Gold Viking and Jewel Ridge are Rainbow’s seasoned snipers. And they are now on the attack. It’s an exploration power play.
Friday’s news (Oct. 19) of some stunning sampling grades from the Referendum and Whitewater properties (2.51 oz/t, 2.06 oz/t, and 0.86 oz/t) merely constituted the Discovery Cup pre-game show in our view. Now is when things could really begin to heat up with drill results pending from the International, drilling starting at Gold Viking, and drilling about to begin in Nevada. This is a powerful 1-2-3 punch. Just one stellar hole from any of these properties, and Rainbow is off to the races given its current modest market cap of only $8.5 million.
“One of the great things about this industry is the leverage it provides,” Johnston told us in an interview last week. “GoldQuest was a recent excellent example of that, going from a nickel to $2 a share. There are a lot of other very good exploration successes happening right now as well. Our focus this year has been on the International, Gold Viking and Jewel Ridge properties, as we clearly stated it would be. That gives our investors huge leverage to three major discovery opportunities. We also have boots on the ground to investigate other potential new discoveries throughout the Big Strike package in the West Kootenays and the flake graphite region as well. I love our team as they are riding the Rainbow brand as hard as ever at the moment. We’re doing what we said we would do, that’s the cowboy code, and there’s a lot more news to come. The downhole tools will drive this story forward through the rest of the year, and I’m very comfortable with that given the quality of our properties. I can’t wait until we see start seeing results and get them all out.”
1. International Silver Property
Johnston expects assay results by the end of October/early November from the recently completed 15-hole shallow drill program at the International, one of the most prospective Silver properties in British Columbia. “Originally, the plan wasn’t to drill quite so many holes in this first phase,” Johnston said. “As we cautiously reported, we got some very encouraging signs. We consistently intersected the vein system and we’re very eager to see the numbers. The assaying is complicated because it involves testing for not only Silver mineralization but some base metals and Gold. We would re-check any high grades (Silver and lead) which this property is known for historically because of the massive galena. Up until our recent drilling, the International had never been previously drilled due to access issues which are no longer a problem. We’ve tested only a tiny portion of the northwest trending structure that we believe carries on for several kilometres. This is an outstanding 4,000-hectare property with high potential for the discovery of a deposit based on four geological reports over the past few years and the work that we have completed.”
2. Gold Viking
As drilling begins at the Gold Viking Property, about 70 kilometres to the south of the International adjacent to the Village of Slocan, the prospects of a discovery at this location are very real even though Gold Viking has been flying “under the radar” of most investors.
a) Gold Viking is contiguous to the past producing Ottawa Mines, the #1 Silver producer in the Slocan Valley in the 1900’s (nearly 2 million ounces at an average mined grade of an incredible 61.6 oz/ton). Both properties share similar geological features. As we’ve often said, the best place to find a new mine is near an old mine;
b) Johnston told us Moose Mountain Technical Services, Rainbow’s resource consultants, were “startled” by a geophysical anomaly 1,400 metres long and over 300 metres wide (Fugro heli-borne electromagnetic survey) that importantly is coincident with a strong geochemical anomaly (soil sampling). This is a prominent linear feature that Rainbow has made available for investors to view on its web site. Phase 1 drilling is going to depths of 200 metres into the heart of this anomaly in the central portion of the property which includes an abundance of historical adits;
c) Historical workings: This writer has personally seen numerous adits at Gold Viking, and went to the very back of one of them for at least 400 feet. A strong smell of sulphur was very evident along with pyrite, chalcopyrite, sphalerite and galena mineralization in veins along the walls as confirmed by a geologist who was with us. Typically, in properties such as this, the “old timers” followed a high-grade vein but missed other vein systems and weren’t interested in 5 or 10 gram material that would be very economical at today’s Gold prices.
3. Jewel Ridge
Numerous juniors have done remarkably well in Nevada this year which is one of the world’s hottest mining and exploration addresses at the moment. Last Monday’s news from Rainbow shed new light on the possibilities of this property which is situated right in between 4.1 million ounces of NI-43-101 reserves and resources as outlined by both Barrick Gold (Ruby Hill Mine) and Timberline Resources (Lookout Mountain Project).
“I was at Jewel Ridge with our senior geologist, Bob Morris, in April, immediately after we optioned the property,” explained Johnston. “Both Bob and I were absolutely amazed at what we saw and the chip sampling grades that came back confirmed our thinking. Since then, Bob has collected an enormous amount of historical data that is forcing a major reinterpretation of this property, just like what happened with Timberline on the Lookout Mountain Project. This is serious prime exploration real estate with clear potential for a large tonnage system. Give the historical information we have, our odds for success in the upcoming Phase 1 drill program have increased dramatically.”
Below are some key points regarding Jewel Ridge based on Rainbow’s recent disclosure:
1. Historical drill data, previous mining activities, structural setting and style of mineralization at Jewel Ridge all point to the potential of the property hosting a “large mineralized system” in the words of Moose Mountain;
2. Geochemical signatures at Jewel Ridge are similar to those reported at Ruby Hill and Lookout Mountain;
3. Numerous past producing historical pits are lined up on a north-south trend from Lookout Mountain right through Jewel Ridge and further north past the 3.5 million ounce Ruby Hill Mine that produced 130,000 ounces of Gold last year. This is all the same geological structure;
4. Moose Mountain is in possession of “hundreds” of historical drill holes from Jewel Ridge. For the first time ever, all historical information on this property from various sources is being compiled in one data base by Moose Mountain. Combined with Rainbow’s upcoming drill program, RBW’s “geological and engineering teams will be aided immensely in their efforts to outline a potential deposit.”
5. Rainbow’s Phase 1 drilling will focus entirely on the past producing Hamburg Pit where Gold values are present “throughout the Hamburg Dolomite which appears to be at least 200 metres thick. Northeast trending faults host higher-grade Gold mineralization.”
6. Rainbow’s first hole will be drilled in the immediately vicinity of a 2004 hole that intersected a stellar 2.1 g/t Au over 39.6 metres near-surface.
7. Rainbow will be drilling underneath the Hamburg Pit, the same strategy Timberline has been employing with great success at Lookout Mountain.
The bottom line is that all the previous work at Jewel Ridge was completed in a much different Gold price environment when companies were looking for high-grade material to easily extract at very shallow depths (in many cases less than 100 feet). With Gold now above $1,700 an ounce, the dynamics at Jewel Ridge are now a lot different as they are at Lookout Mountain where Timberline is looking at near-term production with initial metallurgical recoveries of Gold indicating excellent potential for a low-capital, low-operating-cost, heap-leach operation.
The depth of the Rainbow story, the potential on the ground coupled with the people involved, is why we’ve been so excited by this opportunity in 2012.
Many investors would argue that moving a junior exploration company forward in 2012 has been as challenging as climbing a major mountain peak. Been there, done that for Johnston, so it should be no surprise that RBW has significantly outperformed the TSX Venture Exchange this year. Rainbow’s best, in our view, is yet to come, as Johnston aims for the summit of success with the International, Gold Viking and Jewel Ridge properties in the days and weeks to come.
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