Market Equities Research - Silica the New Gold

Shares of publicly traded U.S. silica producers have been on a tear and select junior miners with solid high-purity silica prospects are apt to rise on news

Bloomberg noted last week that the stock price of publicly traded silica producers have been on an impressive and steady rise (view Bloomberg article here). The growing use of fracking (extracting oil and natural gas from shale formations) has contributed to a surge in share prices of U.S. companies which supply high-quality sand to energy producers. When used in the fracking process, silica helps prop open fractures in shale, which eases the flow of oil and gas. Bloomberg reported that investor demand does not look set to stop anytime soon, quoting “Sand is the new gold” from Ivaylo Ivanov, founder of Ivanhoff Capital. Additionally, Ole Slorer, a New York-based analyst at Morgan Stanley, expects demand for fracking-grade sand in 2016 will be 96 percent higher than last year’s level. He expects shortages for years, with supplies in 2016 trailing demand by 10 percent.

A quality grade of silica is required for fracking, however even greater margins are available to silica producers with exceptional grades as high-purity silica is used to create fused quartz for high-tech manufacturing such as solar panels, semiconductors, LCD displays, and lithium batteries.

Noteworthy silica producers on a tear:

Emerge Energy Services LP (NYSE: EMES) is a Southlake, Texas-based partnership that made its initial public offering at $17 a share in May-2013 -- it changed hands for more than $140 last week;

click here to access chart

Hi-Crush Partners LP (NYSE: HCLP), based in Houston more than tripled during the past year;

click here to access chart

U.S. Silica Holdings Inc. (NYSE: SLCA), based in Frederick, Maryland more than tripled during the past 15 months;

click here to access chart

One strategy for astute investors seeking extraordinary returns is to establish a long position on a junior miner that is highly prospective for high-purity Silica results of significance, one such Company is Rogue Resources Inc.

Rogue Resources Inc. (TSX VENTURE: RRS) (US Listing: GCRIF) last week announced it has closed the first tranche of its $2.5 million private placement previously announced on July 30, 2014, for gross proceeds of $2,073,240. With ~35.3 million shares outstanding (~55.2M fully diluted), RRS.V has a tight share structure, and is apt to rise on good news. The Company appears undervalued with a market cap under $4 million; it is well capitalized to execute on near-to-mid-term objectives (with recent (August 26, 2014) closing of ~$2 million financing), and clearly possesses large inherent value in its diversified portfolio which justifies a market cap several times the current.

Shares Outstanding
Fully Diluted Shares
Cash Position
Debt
35.3 million
19.9 million
~$2 million (as of Sept 1, 2014)
Nil

RRS.V is a uniquely diversified/de-risked junior miner currently advancing projects on several commodity fronts, three of which present substantial near-term catalyst potential and make RRS.V an exceptional risk-reward scenario.

1) Silica - RRS.V is strategically positioned to capitalize on the demand for high-purity silica (SiO2) at its recently acquired >99.9% high-purity SiO2 target project in Quebec which is poised to advance quickly to resource.

2) Gold - RRS.V is conducting one of the most exciting Gold exploration programs in Canada this summer at it's high-grade East-West Gold Project deposit in the heart of Val d'Or, Quebec. Historic near-surface drill results Rogue intends to build on include 72.4 g/T Gold over 3.2 m, 84.48 g/T Gold over 3.97 m, and 123.96 g/T Gold over 2.14 m -- all of the aforementioned results were drilled between surface and 200 m vertical. NOTE: RRS.V's technical team is the same team that was responsible for the success surrounding Integra Gold which discovered and advanced the Triangle Zone, the highest grade resource in its project area (adjacent the Sigma and Lamaque Mines) despite Teck having held the ground for 80 years prior.

3) Nickel - RRS.V possesses an advanced-stage Nickel project that has received in excess of $7 million in development, and contains a sizeable high-grade Ni resource (18 million lbs of Nickel in all categories, see below for breakdown), with most of the resource in the high-grade Indicated category near surface a further rise in nickel prices has the potential to generate substantial interest.

4) Iron - RRS.V also has exposure to Iron commodity prices from a project holding that was prepped for full production in the 1960's.

Both the nickel and iron projects have large inherent value, yet present no drain on capital.

1) Lac de la Grosse Femelle High-Purity Silica Project, St. Urbain, Quebec (100% owned)

Figure 2. Sitec adjacent RRS.V

Figure 3. Sitec adjacent RRS.V

RRS.V's silica property is located adjacent to the Mine Sitec which has been in operation for the past 50 years. Sitec produces ~250,000 tonnes of SiO2 annually. RRS.V's silica property has very good infrastructure support with multiple transportation options (Baie-Saint-Paul on the St. Lawrence River is only 42 km south). The property is easily accessible and traversable.

Hosting 98.5% to >99.9% SiO2 - good thicknesses - continuity - and possibility to discover more

A May-2014 Technical Report on RRS.V's Lac de la Grosse Femelle Silica Project references historic sampling and exploration findings (non 43-101 compliant) revealing thicknesses over 200 metres and on average 150 metres, with 275 metres width and a strike length of at least 365 metres. The 'G' lens located on RRS.V's silica property appears to host grades superior to what Sitec is mining, the area has not been mapped extensively, and there is the possibility to discover significantly more. Rogue Resource's Lac de la Grosse High-Purity Silica Project hosts zones that were identified as part of a historic (non 43-101 compliant) resource estimate from 1979 that encompassed the project in part -- RRS.V's technical team will be targeting >99.9% purity silica quartzite. The nature of the material allows for low cost exploration, quick to resource, and quick to market.

High-grade high-purity silica deposits are rare. Uncommon geological formations exist in Quebec that host high-grade SiO2 (with low impurities), and significant investment is being made to advance this sector; Spanish based Grupo FerroAtlantica, one of the largest silicon metal producers in the world, has announced plans for a $382 million silicon metal plant. FerroAtlantica's Port Cartier Plant is located under 400 km from RRS.V's Lac de la Grosse Project. The Port Cartier Plant will be operational in 2017 and produce 100,000 tons of silicon metal. With prices for economic high purity silicon ranging from $130 to >$5,000 per tonne (depending on % purity), it puts RRS.V in play. RRS.V's quartzite silica deposit is top-notch/superior-grade and purity compared to more prevalent quartz sandstones deposits, the superior nature lends the deposit to specialized high-tech industrial interests, and the proximity of RRS.V's high-grade SiO2 project to the ports of the St. Lawrence make it a coveted asset.

Figure 1. Stripped & washed section of East-West Gold Project, never meaningfully tested below 200 metres.

2) East-West Gold Project, Val d'Or, Quebec (100% owned) -- RRS.V is ripe for major high-grade Gold discovery on this recently acquired Gold project located along the prolific Cadillac Trend, part of the Abitibi greenstone belt which has seen over 170 million ounces of gold production history. The project is situated in infrastructure-rich Val-d'Or where several gold mills with excess capacity are within a few kilometres. More than $4 million has been spent on mapping near surface anomalies and shallow drilling, approximately 180 historical holes have been drilled since 1980. Rogue's technical team is constructing a 3D model of the geology and mineralized zones, and will be executing a targeting sequence on the Gold vein system of the deposit this Q3 2014. Historic near-surface drill results Rogue intends to build on include 72.4 g/T Gold over 3.2 m, 84.48 g/T Gold over 3.97 m, and 123.96 g/T Gold over 2.14 m -- all of the aforementioned results were drilled between surface and 200 m vertical. Little drilling has been performed below 200 m to date, which is encouraging for RRS.V as the narrow-vein high-grade system is similar to major deposits in the area which have shown to increase in grade and size at depth -- such is the nature of these intrusive plugs. Think of the veins they are intersecting near surface on the deposit now as fingers -- the palm is theoretically just below.

RRS.V has identified 1.6 km of favourable geology on the deposit in three main zones (West, Raven, and East). The mineralization has hallmarks of significant gold potential, similar to the original showings of the nearby Sigma Mine (historically Placer Dome) which was mined to 2000 metres and produced ~4.5 million ounces of Gold. RRS.V's technical team is the same team that was responsible for the success surrounding Integra Gold which discovered and advanced the Triangle Zone, the highest grade resource in its project area (adjacent the Sigma and Lamaque Mines) despite Teck having held the ground for 80 years prior. Rogue Resources' technical team has proven itself with the type of deposit it now faces at the East-West Gold Project deposit, it is skilled in orientating these vein systems, and knows how to delineate gold-laden material contained within the related intrusive plugs -- RRS.V plans on an initial 8,000 m drill program on the West zone, and 12,000 m on the Raven zone to a minimum depth of 1,000 m.

3) Langmuir Nickel Project, Timmins, Ontario (100% owned) -- This advanced-stage nickel project is located 35 km SE of Timmins, only 30 km south of Xstrata's Timmins Metallurgical Facility which has an idle nickel circuit. The property is within 3 km of the recently (March 2014) reopened Redstone Nickel Mill/Concentrator. RRS.V has a high-grade Nickel resource on the Langmuir Nickel Project deposit that was discovered in 2007, the discovery hole was 72 m of 1.14% Ni, which is exceptional high-grade. When discovered in 2007 Ni prices were at US$24/lb, Ni prices crashed to ~$4/lb, and have since rebounded to near $9/lb (a doubling) which makes the asset extremely valuable. Over $7.5 million has been spent on the project, over 80 holes have been drilled on the deposit, and over 18 million pounds of nickel has been defined; the resource sits at:

Open Pit - Indicated: 12,816,000 lbs Ni + 840,000 lbs Cu (590,000 T @ 0.99% Ni, 0.06% Cu)
Open Pit – Inferred: 2,437,000 lbs Ni + 157,000 lbs Cu (125,000 T @ 0.88% Ni, 0.06% Cu)
Underground – Indicated: 1,997,000 lbs Ni + 149,000 lbs Cu (87,000 T @ 1.04% Ni, 0.08% Cu)
Underground – Inferred: 923,000 lbs Ni + 53,000 lbs Cu (46,000 T @ 0.91% Ni, 0.005% Cu)

Click to view recent surge in Nickel prices and to access historical charts of Nickel ===>

Besides exceptional high-grade Nickel, the deposit also has quality PGM (palladium and platinum) credits; e.g. In May, 2007 drilling by the Company intersected 1.14% nickel over 72.45 metres, including two separate heavily mineralized intervals of 2.23% Nickel (Ni), 0.22% Copper (Cu), 0.20 g/t Platinum (Pt), and 0.50 g/t Palladium (Pd) over 17.50 metres of drill core, and 1.74 % Ni, 0.12% Cu, 0.20 g/t Pt, and 0.47 g/t Pd over 13.10 metres of drill core. The big upside potential of the property exists in deep geophysical targets not fully tested with diamond drilling -- there exists the possibility of finding a number of these type of deposits throughout the property.

4) Radio Hill Iron Project, Timmins, Ontario -- The Radio Hill is a valuable asset that RRS.V can leverage when iron prices improve -- in 1965 the deposit was tested through to the feasibility stage, historically (non 43-101), by FENCO. FENCO was preparing for full production only to be stopped by low iron ore prices. The historic feasibility showed values that would allow for the commercial production of iron ore pellets, with soluble iron concentration at 68.3%, and low values for deleterious elements. Extensive drilling has been carried out on the project, including 140 drill holes into anomalies. In 2011/2012 RRS.V conducted over 10,000 metres of drilling (when iron prices were riding high) and was entertaining metallurgical testing to take the project to resource. With iron prices low the project is in abeyance. Geophysics indicate the possibility exists for considerable expansion/new discovery. The CN Rail mainline crosses through the property ~3km south of the deposit.

Market Equities Research Group has identified the following related research links on Rogue Resources Inc.:

- Rogue Resources Inc. corporate website: www.RogueResources.ca
- SEDAR Filings for Rogue Resources: http://sedar.com/DisplayProfile.do?lang=EN&issuerType=03&issuerNo=00008485
- Recent Mining Journal article: http://miningmarketwatch.net/rrs.htm

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Contact information:
Simon Levinson, Editor in Chief

Market Equities Research Group
s.levinson@marketequitiesresearch.com