Rainy River Resources Ltd.

A rising tide lifts all boats, and the same is true of mines. “In a rising gold environment, the best thing we can do is build this project and bring it to production,” Rainy River Resources Ltd. President and CEO Raymond Threlkeld maintains. Threlkeld cites the favorable experiences of two other Canadian gold mining companies – Osisko Mining Corp. of Montreal, and Detour Gold Corp. in Toronto – as creating a favorable environment for Canadian gold mining investment.

“They’ve seen a very nice appreciation of their share price and value to the shareholder,” Threlkeld points out. “So we really look at the successes of those two companies as a model for us to follow. We are the third in line with a large gold deposit that will come into production in eastern Canada. We have a slight advantage in that early years of production at Rainy River will be substantially higher grade. Osisko is in production now, Detour will be in production early next year and we’re coming along right behind them. We look to their successes as being our success.”

State of the Project
Rainy River Resources Ltd. has drilled more than 650,000 meters of core drilling at its gold mine site, located on approximately 40,000 acres the company holds in northwest Ontario. In June 2005, Rainy River Resources purchased a 100-percent interest in the gold project from Nuinsco Resources Ltd., which calculated the initial resource in 2003 that it had discovered in 1994.

“There is no history of mining here – no outcrop of gold,” Threlkeld cautions. “Everything is explored by the drill.”

Since 2005, the Rainy River Gold Project has grown from 600,000 ounces to almost 8 million ounces [across all categories]. As of earlier this year, Rainy River Resources is exploring the property with 12 drill rigs. In June, the drilling will slow down for another resource estimate. The measured and indicated resources then will be put into a feasibility study to become proven and probable reserves.

“After June, we really don’t have to drill another hole in the ore body,” Threlkeld insists. “It is ready to go. From that point forward, we will do the feasibility study, and that is the engine necessary to obtain permits to construct and operate a gold mine there. The quality of the resource is extremely good.”

A preliminary economic assessment completed in the first quarter envisions a project capable of producing 329,000 ounces of gold on an annual basis for 13 years, Threlkeld reveals. “The capital costs were estimated to be $680 million and net present value using a $1,200 gold price was $786 million,” he reports. “It’s an extremely robust project.”

Maximizing Net Asset Value
Rainy River Resources Ltd. is exploring different processing scenarios to maximize the net asset value per share. “In order to build this project, we have to raise sufficient capital through debt or equity markets,” Threlkeld explains. “For this reason, we’re going to focus on the best net asset value per share that we can estimate using various forms of debt and various level of equity. Those are subject to change because we don’t know what the share price will hold for us in the future, so we have to make some estimates.”

As a junior company, Rainy River Resources has $100 million in cash to complete the drilling, do further exploration on the property throughout 2012 and produce a feasibility study, targeted for the first half of 2013. With a goal of achieving production by 2016, orders for mining equipment would be placed early because of the long lead times to obtain such equipment, such as large trucks, earth-moving equipment and some mill components that would have to be specially built. “That would be the uses of our funds for the next two years,” Threlkeld notes.

The company began the environmental assessment permitting process by submitting project descriptions to the authorities. “We expect the environmental process to take about 24 months, during which we’ll have completed the feasibility studies and detailed engineering we’ll do. So we can submit for final permits for operation.”

Discovery Made
The original gold discovery was part of the Ontario Geological Survey of western Ontario. In 1994, in one of a series of drill holes, 4 grams per ton of gold were discovered at the bedrock. Nuinsco Resources Ltd. was following the government survey and had to make property payments to the owners of the farms and old timber stands where the gold was discovered in order to explore it further, Threlkeld relates.

“They found about 600,000 ounces of gold,” he says. “The markets fell apart in the mid to late 1990s, and they really were not able to raise the capital to continue exploring, but they held onto the properties. In 2005, a group of entrepreneurs were looking for gold assets and heard of the Rainy River discovery through several consulting geologists. They formed a company and were able to purchase the Rainy River assets from Nuinsco for $2 million.”

Favorable Location
The gold project’s land is approximately 60 kilometers to the west of Fort Frances and 22 kilometers north of the small town of Emo, Ontario. “The area has dominantly been the pulp and paper industry for the most part, and the pulp industry has gone through much harder times, with lots of layoffs from the two mills that exist in Fort Frances,” Threlkeld notes.

“We will not need a camp for operation like many of the projects in northern Canada,” Threlkeld points out. “With a camp, people come in and work two weeks on or off, fly in or out of the camps – it costs a lot of money.”

“Our infrastructure cost is low relative to others,” he asserts.

Open Pit and Underground
The open pit mine could supply from 20,000 to 40,000 tonnes of ore daily along with approximately 2,000 tonnes from an underground mine. “The average grade of the gold deposit is over 1 gram of gold per ton,” Threlkeld calculates. “What you have to do to get an ounce is mine about 30 tons of rock. You have to mine and process that material, but it’s worth doing if you look at today’s prices – 1 gram is worth about $50, and we can process for less than $8 per ton.”

Rainy River Resources Ltd. also anticipates producing approximately 500,000 ounces of silver annually. “This is a very good project with good rates of return,” Threlkeld emphasizes. “Rainy River is truly an up-and-coming company. We believe the Rainy River Gold Project is going to be producing gold and metal for at least 20 years.” EMI