Renforth Resources: Deposits in the Right Place

I just bought 100,000 shares in Renforth Resources (C.RFR). Full disclosure and all.

Let me tell you why.

Nicole Brewster is the most “matter of fact” junior resource CEO I have had the pleasure of encountering. In a business where over promotion is the norm, Brewster is a welcome change of pace.

Speaking on the phone after Renforth Resources reported back to back resource estimates on two of its properties – Brewster was phlegmatic. Over 500,000 ounces? Well yes. Shallow? Yup. Close to mills. Well there is that.

Seriously, Renforth Resources has not one, but two 43-101 compliant resources which would be easy to mine and which are in the same neighbourhood as many mines which are running out of reserves. Nicole, you can be excited. Really. It’s ok.

The press releases covered the deposit at New Alger (62,000 ounces indicated, 188,000 inferred) and the deposit at Parbec (104,000 ounces indicated, 177,000 inferred).

“We really have not done any marketing,” said Brewster in our conversation. Marketing is alien to Brewster. She knows her share price is hurt by her lack of marketing but that is not what she does.

As her Renforth bio states she worked in “the investment/capital markets world, including certifications in securities, options and derivatives and financial planning, functioning in the capital markets and high net worth investors area, was entered, but eventually left in order to raise a family.”

She knows what promotion is, she has been pitched by the best. But that is not her style. “Just the facts.”

OK, the facts are these. Renforth has announced 43-101 Resource Estimates on two properties in Quebec. In total over 500,000 ounces of gold in the indicated and inferred categories. Not very big. But very strategic.

Real world, these deposits are, literally, “just down the road” from mines which are running out of economic reserves. Mines which have mills which need gold bearing rock to keep running. Mines which are running out of reserves just as the price of gold is rising fast.

What is gold in the ground worth? Well, if it is 1000 meters down, not all that much, say $25 to $50 an ounce. But pitable, at surface? $100 an ounce starting. Which suggests, at the low end, that Nicole Brewster has resources worth $50,000,000. Fully diluted, Renforth has a market cap of $8,230,000. It’s a $0.04 share. It won’t be for long.

The $100 per ounce benchmark makes a lot of assumptions about the mineability of the rock. What it does not account for is the accessibility of infrastructure – roads, power, people – and the ability to permit an operation. Get those ducks lined up and a more reasonable valuation is $150 an ounce in the ground at a gold price of $1725.

For Renforth, all the ducks are directly lined up. This is one of the great gold mining districts in Canada and in the mining “very friendly” jurisdiction of Quebec. One deposit is, literally, under a highway. Power is not a problem and finding the people to run the bulldozers and haul trucks is dead easy.

Renforth is moving towards bulk sampling at New Alger. Which is grand and will give prospective buyers even more reason to take out the deposit. But, realistically, as the price of gold rises the other mining companies surrounding Renforth have to make what Brewster calls “the risk of asset versus the risk of time” call. (Not an investment banker for nothing.)

The Renforth deposits are not large, yet. But they are minable pretty much right now. For a major or, more likely, a middle level, company, adding near surface gold to reserves becomes very attractive as the gold price moves. Renforth is obviously open for offers on one or both of the assets it has proven up. Being able to acquire 250 or 500K ounces of gold with the deposit open is becoming more and more attractive. The question is, who will pounce?

“We have one serious miner looking at us,” said Brewster. The fact is that a less “matter of fact” CEO would have said “several” and not have been technically wrong.

Brewster told me that Renforth was setting up to take the bulk sample this summer and run the tonnage through a toll mill to understand the rock and make some money. She is well aware of the danger of dilution and the fact that a bulk sampling program could produce enough gold so that a private placement would not be needed to finance the advancement of the program.

I didn’t invest based on the bulk samples or the metallurgical program. I invested because Renforth has two assets which are saleable for, collectively, between 50 and 75 million dollars and a market cap just over 8 million.

Despite Nicole Brewster’s “Aw shucks,” presentation, Renforth is an easy five bagger and likely closer to ten. There is no reason at all that Renforth can’t hit $0.50 in the next six months even if gold sticks at $1725….which it won’t.

I rather doubt Nicole Brewster will become a marketing maven in the next few months. She doesn’t have to. Her results speak for themselves.

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