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Independent Reviews for Venture Investors

RRS.V: Nickels and dimes.

Coverage of Rogue Resources (RRS.V) has been initiated on June 9. At heart, was the progress on the Silicon Ridge Project.

On our last note, we addressed the delay in permitting of Silicon Ridge, and our concern with the fiscal requirement of Radio Hill as an additional risk to the Silicon Ridge's project timeline. The day of the Radio Hill announcement (August 17th), RRS.V's closed at $0.32 ($0.30 was 52 week low). We had speculated that the stock would get back at $0.40 to $0.45 cents range in the medium term.

Well, we were wrong! The market's response to Radio Hill was much more negative than we anticipated. RRS.V retracted to $0.18 cents (a new 52 week low) from $0.32 - see the blue zone in the above chart. Nonetheless, since our last update, there has been a number of positive developments for RRS.V.

Sep. 6 - Announced an agreement with PCC SE ("PCC") and Thorsil ehf ("Thorsil") for the purveying and developing new quartz deposits.

Oct. 6 - Fundamental Research issues a buy recommendation with a $2.18 price target.

Oct. 20 - Intent to Acquire the Snow White Project, a Permitted Silica/Quartz Quarry in Northern Ontario. The term of the deal are 1) $750K and a 1.15M shares (12% dilution) for 96 hectares which is less than 1km sq. 2) potential rolyalties (2%) which can be bought back at $2M from the seller.

Oct. 24 - Private placement at $0.18 for $0.4M with warrant at $0.25 cents. Also announced were $1.8M flow-through common shares ("FT Shares") from RRS.V to one or more disclosed principals at a price of $0.22 per FT Share. It was also mentioned that the intent of the private placement was for "project acquisition expenses and general corporate purposes".

We believe that the last four announcements are material.

1) The agreement by PCC and Thorsil indicates confidence in RRS.V as the silica partner to supply their business.

2) Fundamental Research's "buy" recommendation is also important for the company. Silicon Ridge is already stripped and awaiting permit. However, the timing of recommendation (one month after the PCC and Thorsil agreement) is duly noted.

3) The intent to purchase Snow White is good for shareholders as it indicate that RRS.V is clearly moving ahead with its Silica mandate.

4) RRS.V's private placement further confirms the intent towards preparing itself for the Snow White acquisition. In addition, the flow through common share deal increase insider ownership which was lacking.

The risks and issues we see present for RRS.V are as follows:

1) the company has yet to indicate that it will not pursue Radio Hill. This has caused and cost RRS,V a serious devaluation (40%). However, while the company maintain that it want to remain "metal agnostic", clearly it's action have been towards further specialization in Silica.

2) Snow White is not a done deal yet. However, we believe that closing the aquistion could be a catalyst for RRS.V re-evaluation. Nonetheless, even if Snow White is approved, important details on operational and logistic cost will need to be formalized.

3) Silicon Ridge is still not yet permitted and there still might be additional delays.

4) RRS.V is dependent on PCC and Thorsil's. Both facilities are under construction. Hence, any changes in scheduling there can affect it.

As of Friday evening, there was a gap in valuation on Level II. Overall, the bid and ask look "normal". However, the bid is very thin above $0.20, with $0.23 (6,500 shares) being the highest. The ask, $0.25 (500 shares) is the lowest, but orders from $0.28 to $0.35 cents were much larger indicating resistance.

Remember, the current private placement is at $0.18 with warrant at $0.25 cents and flow-through shares are at $0.22. On one hand, RRS.V is clearly undervalued with all account is should be trading higher than $0.33 cents (post Radio Hill announcement). On the other hand. the timing for the private placement is interesting as the Canadian tax season's loss is also just around the corner. Moreover, the recent trading activity (below) also suggests that there are some interesting dynamics taking place. RBC (002) did cleared the bids on October 26th from a high share of anonymous (001) sellers.

Our forecast for the week is below. We believe that the price will eventually correct but in the mean time use your nickels and dimes carefully.

DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.


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