Special Alert: 3:30 am Pacific
The countdown is on. In just 48 hours, for the first time ever and nearly a century after a significant discovery, diamond drilling will be in progress at the International Silver Property 60 kilometres north of the historic Silver mining community of Kaslo in southeast British Columbia. Silver is what built this intriguing village along Kootenay Lake many decades ago, and it’s what could build Rainbow Resources (RBW, TSX-V) in the weeks and months ahead.
Up until now, access issues have been the biggest obstacle in drilling the highly prospective International Property but that all changed in recent years thanks in part to the dedication and vision of David W. Johnston, Rainbow’s colorful and popular President from Calgary who operates by the “cowboy code”. He has surrounded himself with financiers, supportive shareholders, and some first-rate geologists, prospectors and engineers. In so doing he has whipped up a frenzy of excitement over a 4,000-hectare land package that based on historical information and several geological reports, has to be considered one of the best un-drilled properties in all of British Columbia.
The last major exploration play we covered in B.C. was Richfield Ventures which made a major Gold-Silver discovery in the Blackwater district (central part of the province). Richfield became a 10-bagger for some of our readers as it ended up getting taken out by New Gold Inc. (NGD, TSX) in the spring of last year at about $10 per share (past performance is no guarantee of future success, and this is of course is a risky business, but Rainbow has similar discovery potential when looking at the International and the rest of its holdings).
No matter what the market conditions, investors will always embrace a discovery – and Rainbow is a pure “discovery play” which is why there has been so much interest in the story since the beginning of the year.
Yesterday’s news was “icing on the cake” for Rainbow as results from a major Fugro airborne survey have shown strong geophysical signatures, similar to those recorded for two important showing areas (“Cabin” and “Forgotten”), over a whopping 7 kilometre stretch of the International. It seems British Columbia government geologists may have missed (by Olympic-sized proportions) the full extent of the vein system when they surveyed it over a strike length of 1.2 kilometres in the 1930’s. Geologists hired by Braveheart Resources Canada Inc., Johnston’s private company before it came under the Rainbow umbrella in the fall of last year, believed the potential northwest trending zone could be as long as four kilometres. The Fugro data – the first-ever heliborne electromagnetic survey over the International – even caught Johnston a bit by surprise, despite his strong belief in this project since Day 1.
“It’s an eye-opener and a game-changer for us,” said Johnston, when we caught up with him for a short interview yesterday. “Bob Morris and his group at Moose Mountain have done a terrific job with this property in so many ways. With regard to this airborne data, they’ve given us half a dozen specific high-priority locations to target on the ground well outside the 1.2 kilometre zone between the Forgotten showing and the Cabin area. From the extreme north to the extreme south, for 7 kilometres, we have these strong geophysical responses that are very similar to those for the Forgotten and Cabin showings. We have a lot of work to do but our team is on the ground now in an effort to identify new discoveries for drill-testing. Does this speak to the untapped potential of the International? Absolutely. With the drilling and the prospecting, expect a lot of news flow the rest of this year. There will be up days and down days – that’s the nature of this business – but I guarantee excitement and our team’s 100% effort at making a discovery.”
BMR’s site visit in late June confirmed that both the Forgotten and Cabin areas are important showings. The initial Silver discovery at the International was made on the Forgotten claims, and looking at rocks in the area is like walking through a candy store as a kid. There is massive, fine-grained galena all over – just like the float sample below we picked up.
High-grade Silver, lead, zinc and even some low-grade Gold were pulled out of at least two significant historical adits at the Forgotten, while the Cabin showing 1 kilometre to the south is an impressive exposed wall of mineralization (also including some historical adits) 100 metres in length and up to 2.5 metres’ high. Rainbow will be drilling into a quartz-dominated structure which includes massive galena, pyrite and rare sphalerite – a “honey zone” that has the potential of producing some spectacular early results. The vein system continues in between the Forgotten and Cabin showings, covered at times by overburden.
“We are going to drill a series of angled shallow holes, to depths of about 100 metres, right into the heart of that Cabin structure,” stated Johnston. “Then some vertical holes to test the system down-dip. These holes have been very carefully planned and are based on several years of work on the property, started by Braveheart in 2007. Our sampling values returned grades as high as 35 ounces per ton silver. The exploration target is a near-surface, high-grade deposit – one with the potential to be a low-cost producer. Though we could find one, we don’t necessarily need an elephant for a deposit. A nice fat cow would work just fine. You can make good money off a fat cow.”
Rainbow has been a terrific performer in 2012, bucking the downtrend in the junior resource market as it’s currently up 42% for the year when many stocks are down by 50% or more. Rainbow has flourished for a multitude of reasons, and many companies on the Venture could learn by its example as RBW has not pulled back from an aggressive agenda simply because of a challenging market environment.
“The market hasn’t scared us at all,” Johnston told us. “I’ve known for a long time that if you look after your company, the stock will look after itself. And I want to give full credit to our entire team because we have an excellent group that has been working on our projects since the beginning. It’s almost like the cowboy code. They all ride for the brand. They believe in our projects. They believe in what we’re doing. They’re just as excited as the management of Rainbow. If it weren’t for these people, you know, maybe we would be wringing our hands. But we’re a ‘people-driven’ company and everybody that’s involved with us, they all ride for the brand and they follow the Rainbow like everybody.”
And they’re riding more than just a one-trick pony. As prospective as the International Property is, Rainbow has been aggressive in assembling other opportunities. About 70 km to the south is the company’s Gold Viking Property, a promising Silver-Gold target (also never previously drilled) contiguous to the old Ottawa Mines that produced nearly 2 million ounces of Silver at an average grade of more than 60 ounces per ton in the 1900’s. And in red-hot Nevada, Rainbow is gearing up for a drill program at its recently optioned Jewel Ridge Property contiguous to the northern boundary of Barrick’s Ruby Hill Mine along the prolific Battle Mountain-Eureka Trend. Oh, and Rainbow also happens to hold 40 square kilometres in the heart of what could turn out to be a world class flake graphite camp in the Valhalla Metamorphic Complex immediately west and south of its Big Strike Project in the Kootenays.
With the countdown now on to drilling at the International, the Rainbow train is about to leave the station. And what a ride this could be in the coming weeks.
Note: The writer holds a share position in Rainbow Resources. As always, perform your own due diligence. Our stock coverage is for informational and entertainment purposes only and must NOT be viewed or interpreted as “buy”, “sell” or “hold” recommendations. Please read our disclaimer.