Bottom-Fish Comment - January 13, 2017: Recommendation Strategy for Rainy Mountain Royalty Corp
Rainy Mountain Royalty Corp is a new addition to the 2016-2017 Bottom-Fish Edition as an accumulation target in the $0.10-$0.19 range based on its emergence as the flagship exploration vehicle within Doug Mason's Waterfront Capital group. The geological driving force is veteran explorer Bob Middleton who was instrumental in the discovery of the Bell Creek gold deposit near Timmins during the seventies and worked with Bruce Durham on the Goliath portion of the 20 million ounce Hemlo system. Since those glory days he has wandered in the wilderness generating new prospects, none of which emerged as a big score. Mike McCormick brought Middleton on board his East West Resource Corp in 1992 where he toiled until East West ended up in Scotland. In 2010 Doug Mason and Bob Buchan took charge of the orphaned junior and merged it with a capital pool called Rainy Mountain which brought Middleton back into the fold. Rainy Mountain floundered as it dealt with internal management conflicts that resulted in the departure of Ron Coombes in September 2014 and another 4:1 rollback, following which Mason appointed Middleton as VP of exploration. Middleton went to work consolidating the Clay-Powell properties west of Wesdome's Moss Lake gold deposit, but what really has brought a gleam to his eyes is the Brunswick property in Ontario he had Rainy Mountain option from prospector Mike Tremblay in September 2016. Middleton has a long relationship with Tremblay. In fact, in 2010 Tremblay brought the Borden prospect to Middleton who pitched it to Mason's board. Much to Middleton's annoyance the plan was shot down by arguments that everybody knows that while this region probably once hosted decent Archean gold deposits, the subsequent regional deformation event that created what is now called the Kapuskasing Structural Zone would have dispersed the gold zones into discontinuous fragments or low grade zones. Furthermore, Noranda had explored the area without success. Neither argument sat well with Middleton who had heard the same thing said about the region that hosts Hemlo and who regarded the Noranda exploration culture as having a good nose but no killer instinct, sort of as if those mouse scientists had switched on the hunting neuron while leaving the killing neuron deactivated. Instead it was Dave Palmer, perhaps too young to know what every old-timer knew, who optioned the Borden prospect for Probe Mines Inc, found about 5 million ounces in a low grade open-pittable disseminated zone that needed a better gold price, persisted in following the gold system until it mutated into a much higher grade quartz hosted free gold system that indicated a couple million ounces of underground minable medium grade gold, and in early 2015 while the resource juniors were dying attracted a $500 million buyout at $5 from Goldcorp. The Borden discovery has caused geologists to rethink the prospectivity of this region, and has revived speculation that the Ridout fault is a fertile continuation of the Cadillac Larder Break. The Cadillac Break disappears under younger rocks west of Matachewan and supposedly resurfaces around Shining Tree where it has been named the Ridout fault. The Borden deposit is at the far western limit of the Ridout fault. Iamgold is trying to develop the Chester gold deposit (formerly Cote Lake) about 40 km west of Shining Tree it bought from Trelawney Mining & Exploration Inc for $600 million in 2012 and there is now a lot of interest in the potential for gold bearing splays off the Ridout Fault. When Tremblay approached Middleton with a 9 km segment of the Ridout Fault called the Brunswick property Middleton cast a spell on all naysayers and got Rainy Mountain to option the property on decent terms. Mapping and outcrop sampling has revealed a 1 km by 1 km arsenic-antimony anomaly that reminds Middleton a lot of Bell Creek. Middleton thinks the geochemical anomaly is related to a gold system that is blind except for an outcrop near the Ridout fault that is too modest to have ever attracted any drilling. An IP survey has revealed a chargeability anomaly that tracks the Ridout fault to the north which Middleton thinks could be a gold enriched splay (the main breaks never host any gold mineralization). The IP anomaly, which is supposed to signal the presence of a sulphide system, starts at a depth of about 100 metres. Middleton has plotted a 14 hole drill program to test this target to a maximum depth of 300 metres which he hopes to start in March. As of October 31, 2016 Rainy Mountain had no working capital left after raising $680,000 in October, so the junior will have to raise money. Rainy Mountain has 26.9 million issued and 43 million fully diluted, with most of the dilution represented by 14 million warrants at $0.10. The stock has a strong shareholder base but sufficient liquidity to make it worthwhile as a bottom-fish accumulation target. The Plan B project is what the company now calls the Powell claims west of the Hamlin claims Wesdome recently purchased from Glencore. Rainy Mountain intrigues me because it is an old-fashioned grassroots exploration play generated with the help of rethinking a region's geological potential, driven by a toiling geologist hungry for a big score, and managed by a promoter who largely missed the last bull cycle and who has a hankering for the glory days of the discovery nineties.
*JK owns shares in Rainy Mountain Royalty Corp