Yes, Riverside Owns a BDS!

Dear Resource Windfall Speculator,

This week’s update is entirely about Riverside Resources (RRI:Toronto, RVSDF:Pink Sheets) since I’ve just returned from visiting their Arizona gold project called Sugarloaf Peak. The property is a mere 100 miles from where I attempted to grow up many decades ago. A short visit with family was also in order and the entire trip was most memorable.

Riverside’s President, John-Mark Staude, led the analyst tour and was friendly, sharp and accommodating as usual. You can well imagine that I’ve talked with a lot of exploration company executives since plunging into this market niche some 17 years ago. John-Mark made a comment during the tour that I have never before heard or even imagined hearing from an executive of a micro-cap company.

I’ll get to what exactly he said after providing you a little Riverside background. RRI only has 22 million shares outstanding and this tight share structure provides investors massive upside potential. The company intends to maintain this advantage. At a recent $.56 Canadian Riverside has an overall “market cap” somewhere near $12 million (shares outstanding multiplied by present stock price). That means the market is only assigning $12 million of value even though Riverside holds $3.5 million in cash, more in securities, several gold projects as well as enormous talent and determination.

Riverside is quite the bargain and this opportunity won’t last long.

So, what exactly did Dr. Staude say that caught my attention so profoundly? He stated, rather matter of factly, that his goal is to create a $1 billion company! Yes, he wants to grow Riverside by a factor of 830 or so in the coming years. I have bought stock in a similar early stage company in the past near $.30 per share and sold shares near $30 for an eye popping 100 fold return. Still, Dr. Staude’s goal, should it come to fruition, would make that trade seem like paltry interest payments from a Certificate of Deposit.

How in the world can this man dare to dream so big? Should we take him seriously?

While his statement may sound preposterous coming from a company that is a mere 3 years old I think we should definitely pay attention to how big they are thinking. This is much more than just a dream. Time to dig deeper.

John-Mark received his Ph.D in Economic Geology from my alma mater the University of Arizona. He next earned a Masters of Science from a school almost as highly regarded, Harvard (smile). He has over 20 years of diversified mining and exploration experience and has worked for several of the Big Boys … Kennecott, BHP-Billiton, Teck Cominco and others. These companies utilized his unique talents and he is responsible for economic mining discoveries in Mexico and Chile.

Obviously, this is an especially talented man with an enviable track record. In setting up Riverside he decided to work for himself and company shareholders as opposed to working for a corporate giant. You’ve often heard me say the greatest geological talent lies within small, mobile, aggressive and motivated exploration companies like Riverside.

When a geologist makes a discovery for a Teck or BHP he receives a pat on the back and a fancy watch. When he makes it for himself and his own company he can buy the watch factory.

Some around John-Mark call him a geological genius and there can be little doubt about that being valid. Still, it takes a lot more than brains to create success as our streets are full of intelligent misfits. John-Mark has exceedingly unique processes used to select and evaluate key mineral projects. For now let’s just call it a proprietary database. His organizational skills are exceptional. Combine these attributes with the ability to dream big and you’ve found yourself a thoroughbred race horse in need of a jockey. I wouldn’t bet against him and the team he’s assembled.

This is a photo of John-Mark with a pick in his hand. I’m the guy next to him in the red shirt.

The Sugarloaf Peak project is a perfect example of the Riverside process in selecting key projects on the cheap. Prospecting friends of John-Mark brought the project to his attention. It had previous exploration for copper and other minerals since the 1950s to the tune of $4 million. John-Mark and the Riverside team searched their proprietary database and found Sugarloaf to their liking for its potential as a large scale low grade gold system.

A previous owner was demanding $2 million just for exploration access to Sugarloaf but Riverside was able to pick it up from the prospectors for $300,000 and a work commitment of $1.5 million.

Riverside is always thinking big. They put together data from 4 previous operators with 4 different concepts as to Sugarloaf’s potential. Riverside consolidated this data as well as surrounding land claims. The historic documents show 1.2 to 1.5 million ounces of gold present in low grades but RRI strongly believes the ounces will multiply.

The term Big Damn System was repeatedly used to portray Sugarloaf during the tour and a few fellow analysts took to calling the project BDS. The rocks that hold the gold mineralization are whiter to the eye than the surrounding rocks. These white rocks can be seen for 2 kilometers in one direction. They also extend to depth according to the limited drilling that has been done to date.

Clearly, this is a BDS but what are the grades? The historic grade is .6 grams per ton. There is a fairly low threshold for production from mines of this type because ore is near surface and amenable to heap leach and other technologies developed over the last 20 years. Our own New Gold is operating the Mesquite Mine across the Arizona border in California. Mesquite holds 3.6 million ounces of .51 g/t gold and operates at $573 per ounce of gold produced. Another “comp” is Capital Gold’s El Chanate mine in Mexico that is producing gold at a grade of .69 g/t with a cash cost of $366 per ounce.

The present goal is to get an indication of exactly how big Sugarloaf is. Gold has been tracked on surface at 1 gram per ton over 1.5 miles and it keeps growing. The project saw little drilling beyond 100 meters deep yet the rocks that tend to host gold mineralization are found much deeper. A very recent drill was continued to 230 meters instead of the planned 150 meters due the gold hosting type rocks still being present. An old drill hole went over 800 meters and was still within this BDS.

Riverside currently has a five drill hole program going and results should be in by the end of the year. The goal is to get better information as to exactly how this BDS formed geologically. Unlocking the geological concept behind Sugarloaf will lead to more extensive exploration and drilling.

Historic drilling was done with reverse circulation drills. RRI is now using core drilling methods which provide more information and frequently return 10 to 20% higher grades than reverse circulation. That would be especially nice. This program will also aim to confirm the historic drilling data.

This large property has some other diverse and interesting aspects. Some of the washes (creek beds) present are being worked by hobby prospectors for gold nuggets. There are some diggings where a small scale miner is recovering gold at one half ounce per ton grades. Rock samples at the northern end of the project show copper at a very attractive 1% grade. The copper may become a future exploration target but seeing exactly how much gold is present is the present priority.

Only 25% of the overall project has been drilled. Major companies love open pit, heap leach projects of sufficient size and grade. We’ll have a much better grasp on the overall picture over the coming 12 months. Riverside will aggressively advance it as events play out.

The company is looking to multiply the gold ounces at Sugarloaf and that will undoubtedly happen with this BDS. The key will be the grades. If they hold up at the .6 g/t level or even improve this project will go to the highest bidder. It’s not hard to envision 3-5 million ounces present but the Truth Machines (drills) will eventually clue us in.

What could Sugarloaf be worth with ideal size and grades sufficiently present for a major to put it into production? That is really a loaded question because there is so much conjecture present and we’re still early stage with this BDS. That being said, it’s not unusual to see proven economic gold deposits go for $200-250 million. That would be quite a down payment towards a $1 billion company.

Dreams are great but it takes talent and motivation to get the job done. That’s exactly how the world is changed. Riverside is thinking big and swinging for the fences.

The market is giving Riverside close to zero credit for Sugarloaf. That creates quite the opportunity for you. Riverside’s 1.2 million ounces are valued at approx. $4.29 per ounce while Canplats Resources’ gold ounces are valued near $31.23. These are similar companies and that gap will close as RRI continues proving up more ounces.

Riverside is set to succeed with or without Sugarloaf as they hold six other projects and are constantly prowling for more. John-Mark’s old buddies, the majors, love doing deals with him and are now advancing some Riverside’s Mexican properties.

This is exactly the type of company that Resource Windfall Speculator was founded upon. Riverside is primed for mega success. Make sure you’re aboard with a meaningful position.

Invest Resourcefully,

Rusty

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