Interesting comparative analysis on narrow vein deposits,

News from Rainbow Resources (RBW, TSX-V) yesterday was highly significant in our view as the company reported drill results from two additional holes from the southern part of Gold Viking (GV-12-04 and GV-12-03) that were even better than the first two.  Below is our explanation as to why these results, including 17.3 g/t Au over nearly 2 metres near-surface, are so important.

This particular area of British Columbia (Slocan Valley) has a rich history of high-grade deposits, and of course right next door to the Gold Viking Property is Rainbow’s Ottawa Property that is part of the past producing Ottawa Mines – the Slocan Valley’s #1 Silver source in the early 1900′s.  Nearly 2 million ounces came out of the Ottawa Mines at an incredible average production grade of 61 ounces per ton.  Ottawa is developed on nine levels, five of each are serviced by adits driven at vertical levels of about 30 metres.  A broad shear/breccia zone in coarse-grained, porphyritic, Nelson quartz monzonite comprises two well-defined lodes with most of the historical work completed on the east lode that is 0.6 to 6 metres wide.   Narrow veins, but very high grade.

Importantly, the first four holes EVER drilled at Gold Viking show continuity of a vein system (more than one vein was hit in these initial holes) that likely “pinches and swells” and could lead Rainbow into a stockwork system, a rich mineralized “shoot”, a breccia pipe or some other type of significant high-grade underground deposit.  Where there’s “smoke” in this particular region, there’s often “fire”.    These high-grade deposits in B.C. can be very economic to mine as Huldra Mining (HDA, TSX-V) is discovering at its Treasure Mountain Property near Hope, B.C., a silver-lead-zinc fracture-controlled deposit where veins occur in proximity to the Treasure Mountain Fault and a feldspar porphyry dyke that partially occupies the fault.

Huldra has been a great success so far as it has managed to fast-track Treasure Mountain into production which began in the fourth quarter of last year.   In 2011, Huldra completed a 51-hole drill program (5,000+ metres) over its main mine development area at Treasure Mountain.

Out of 51 holes drilled at the main mine development area, here is what Huldra reported:

- A total of 67 significant intercepts

- Only 15 of the 67 intercepts were 2 metres or more in width (drilled lengths, not true width)

- 23 of the intersections graded 100 g/t Ag or better with several in excess of 1,000 g/t

Treasure Mountain includes no Gold – just Silver, lead and zinc.

The point is that you don’t need long intercepts to make these high-grade situations work.  You just need HIGH GRADE at reasonable depths, in an area close to infrastructure.  Huldra is extracting rich ore using short mining widths.  They are shipping the ore to a 200-tonne per day mill they constructed just over an hour’s drive away in Merritt, then it heads off to a smelter.

Out of the first 4 holes drilled at the Gold Viking Property, here is what Rainbow has reported NEAR-SURFACE:

- 1.9 metres grading 17.3 g/t Au and 65.6 g/t Ag – the Silver grade will increase as there was 1 over-limit Ag sample

- 2.7 metres grading 34.1 g/t Ag and 2.4 g/t Au – again, the Silver grade will increase as there was 1 over-limit Ag sample

- 4.6 metres grading 45 g/t Ag and 0.6 g/t Au – again, the Silver grade will increase as there were 2 over-limit Ag samples

- 1.2 metres grading >100 g/t Ag and 1.1 g/t Au – again, the Silver grade will increase as this 1.2-metre sample was 1 over-limit Ag sample

In this case, the Gold mixed in with the Silver makes the situation at Gold Viking particularly interesting, plus the fact of course THAT THIS PROPERTY HAD NEVER BEEN PREVIOUSLY DRILLED.  It is rare these days in the exploration business that a company will hit high-grade intercepts like this in the first holes drilled on a property.  Importantly, Rainbow now has a trail of mineralization to follow for the next phase of drilling.  And that’s when they could start hitting the “sweet spot” with even thicker intersections of higher grade. Given the area, it would not be surprising to see a system that also hosts plunging ore-shoots.  It’s important for investors to understand how these type of mineralized systems can work.  Gold Viking is a completely different situation than Rainbow’s International Property.

Keep in mind also that Rainbow completed a Fugro heli-borne electromagnetic survey at Gold Viking that revealed a very prominent low resistivity feature that corresponded with a multi-element geochemical anomaly that extended beyond the areas drilled in the Phase 1 program.  There appears to have been a lot of hydrothermal activity in this area.  Given the Slocan Fault, the Nelson Batholith and the thrusting effect of the nearby Valhalla Metamorphic Complex, all the necessary “plumbing” exists to have created the heat and fracturing necessary to produce late stage quartz veining and a significant mineral deposit.

Rainbow is gearing up to get a drill rig back at Gold Viking for Phase 2 drilling shortly – in the middle of the winter, which demonstrates the importance and urgency of this discovery.  As the structure and orientation of this vein system is better understood, the company has an excellent chance of drilling even better intersections in the next round.  This is something we expect the market will be anticipating which should keep interest in this play at a high level.  And of course, more results from the recently completed drill program are still pending.

Gold Viking is a large, intrusive body in the right structural setting for the discovery of a deposit.  In addition – and this is critical – the property is right off the main road from Slocan.  Easy access plus a power line in an area with a mining history.

Just 8 miles to the north, Discovery Ventures (DVN, TSX-V) has plans to put its underground Willa deposit into production.  A possibility we see for this general area is consolidated ownership of the Camp – gold-silver production from a few different mines with ore processed at a local concentrator.

Rainbow is well-positioned for success at Gold Viking, an attractive early-stage property.  We like the fact that drilling is planned to start again shortly.  Between Gold Viking and the more advanced Jewel Ridge Project in Nevada, this should be an exciting first quarter of 2013 for Rainbow.