Solace Resources SOR-V

A Staking Coup at Thor Lake

Solace Resources Corp SOR-V

SP… $0.20
Shares Out… 15.2M
Fully Diluted… 21.2M
Market Cap… $3 million


Initiating coverage @ $0.20


Sometimes it is better to be lucky than good and in the case of Zimtu Capital’s prospecting partner Jody Dahrouge, he has put the two qualities together to generate one of the best rare earth exploration opportunities anywhere in North America. As luck would have it, Jody was browsing the NWT Mineral Titles Online System when he saw claims covering the Blachford Lake Intrusive Complex to the west and north of Avalon Rare Metals didn’t have a clear owner. Further investigation with the mining recorder in the NWT revealed that a clerical mistake had been made as government maps continued to show the claims in good standing, however official records revealed that they had lapsed during the crash of 2008. Stumbling across such highly prospective claims left open for staking in your office is certainly a once in a life time stroke of luck, especially when those claims put you within 1,500 meters of the heart of Avalon’s Nechalacho Heavy Rare Earth Deposit. A major coup in the area as Avalon would never intentionally allow for claims to be staked in such close proximity to their flagship project. Jody immediately teamed up with Zimtu, hired a helicopter out of Yellowknife and started staking claims covering the rest of the Blachford Lake intrusive complex.

The helicopter activity in the area got Randy O’Keefe (Avalon’s camp manager) wondering what they were up to and after a quick walk of the property he realized that someone was staking land next to Nechalacho in Thor Lake. From the fact that O’keefe was unable to stake some of the highest priority claims, just 800 meters west of T-Zone North, leads me to believe that the helicopter activity caught O’keefe completely off guard. Avalon was able to stake only portions of open claims, 40% of which are now under dispute with Solace. The other 60% of the claims have been granted to Solace and now make up the company’s Blachford Lake Rare Earth Project. Even if the staking dispute goes against Solace Resources, at minimum Solace stands to have a material position in the area right next to Nechalacho in a known mineralized trend.

Avalon’s Nechalacho $2B Project

The Blachford Lake Intrusive Complex is host to a 315Mt @ 1.36% TREO heavy rare earth deposit currently under development by Avalon Rare Metals. The Nechalacho project is a massive 20 year mining project worth net present value of $1.77B at a 10% discount rate. The project is valued at relatively conservative long term rare metals prices and is slated for production in 2015. If valued at current rare earth prices, their project balloons to a jaw dropping $7.65B at 10% and $9.22B at 8% which is extremely rich for any type of mining project. So having staked land that lies within 800 meters of a project with such robust economics is a major coup for Jody, Zimtu, and Solace Resources who have acquired the properties from Zimtu Capital. It is also a great opportunity for the market to speculate on Thor Lake as there is now a highly leveraged explorer advancing properties in the area along with Avalon Rare Metals.


The Solace BLAT 2 Claim Covers the Potential NW Extension to Nechalacho

The crown jewel of the package is BLAT 2, which lies 800 meters west of T-Zone North. The claims are on strike with Avalon Resources Nechalcho deposit centered 1.5 km to the southeast and a rare earth showing 5km to the northwest called the TAL showing. This one claim that Avalon was unable to stake has arguably the highest priority targets within the area outside of Avalon's claims. Solace Resources has all the ground covering any possible expansion of Nechalacho to the northwest. BLAT 2 covers almost 2km of prospective strike expansion to Nechalacho and is at the heart of a developing rare earth mineralized trend.

The prospects look great for SOR making a rare earth discovery as magnetics also confirm an identifiable trend crossing the BLAT 2 claims towards the TAL showing several kilometers to the northwest from Nechalacho. Solace Resources will have a crew on the ground this summer doing initial prospecting and geophsysical work in preparation for an exploratory drill program later in the year to test the extents of the mineralization at the Blachford Lake Intrusive Complex. Solace has made one of the more exciting acquisitions of summer making a big splash into a highly prospective area that Avalon had exclusivity to before this winter’s staking rush at Blachford Lake.

Bachford Lake REE Project highlight’s…

• 800 meters from T-Zone North and 1,500 meters from the heart of Nechalacho's Lake Zone
• Magnetics indicate trend to northwest
• Rare earth mineralization on either side of the property
• Potential for unique or favorable mineralization within the complex
• Covers potential NW extension to the Nechalacho deposit

Building Material Shareholder Value

Considering the company is currently valued at a mere $3M market cap at $0.20, there is a very good opportunity for Solace to build shareholder value from the bottom up exploring just 800 meters west of one of the largest heavy rare earth projects anywhere in world that is slated for production. Avalon is a $600M market cap company which is almost 200 times the size of Solace Resources market cap and has a project that is worth almost $10B at current rare metals prices. If everything works for Solace, they will have a land position that is close to half the size of Avalon’s original claims so a premium will build into Solace’s share price just on their land position beside Nechalacho. Blachford Lake Intrusive Complex is a highly sought after area for heavy rare earth exploration and development with mineralized showings from one end of the intrusive complex to the other. Having the right address is everything so this acquisition will bring a speculative element to the area as SOR is the only highly leveraged micro cap explorer to speculate on in the Thor Lake area.

What makes SOR even more highly prospective for a material discovery is the complex nature of the rare earths. In this industry where everyone is starting from the ground up, all the deposits are being analyzed to see which ones have the best metallurgy, mineral composition and mining project. It is an industry where mining companies tailor their product to end use more than any other industry. Finding a new mineralized zone at The Blachford Lake Project could give SOR many possibilities, including having unique rare earth composition, higher grades or an area of softer host rock or courser mineralization which would be better for processing. Whatever the case, if SOR can demonstrate unique qualities to the rest of the mineral complex then it could spell for a quick takeout by Avalon who will be intent on producing from the most amenable areas in the intrusive complex.

Any rare earth discovery of any size or composition will have material value to SOR’s share price as the company is just so cheap. The share price has no expectations built into it and has barely budged after announcing the acquisition. In fact it is not even close to the year highs of the previous shell at $0.40. There is already huge value built into this stock and the market has just missed this one.

Solace's Blachford Lake Project is worth much more than the $3M market cap implies.


Solace Resources Investment Highlights

• The only leveraged investment to Avalon Rare Metals
• Potential premium for highly sought after address
• High probability of exploration success
• Currently undervalued – extremely cheap for project
• Established land position regardless of dispute process
• Management team (Zimtu) is successful in building grassroots rare metals companies – Commerce Resources

The Option Agreement

Zimtu has optioned the Blachford Claims to Solace Resources SOR-V which was a shell company with a very tight float of about 6.7 million shares. The deal requires SOR to issue 2.5 million shares to Zimtu and cash payments of $200,000. It is structured to be non-dilutive to Solace and shows confidence in the future prospects for success of the company building shareholder value with taking an initial 30% stake in the company. SOR has also announced seed financing of $600,000 at $0.10 and a full warrant at $0.15 which should get Solace Resources through the initial exploration program this summer.


Initial Comparisons for Valuation

It is hard to value early exploration companies, certainly where there are no other juniors. A good comparison would be Search Minerals SMY-V who is exploring a property in the area of Strange Lake where Quest Minerals QRM has a very large heavy rare earth deposit bordering Labrador and Quebec. Search Minerals currently trades around a $20M market cap which would be a great initial target for Solace Resources as they start exploring, identifying and refining targets this summer. They are different plays yes, but SOR has a great story developing with explroing a possible nw extension to Nechalacho. A $20M market cap would put Solace at $1 fully diluted value which is 5 times its current value which should highlight the extreme investment opportunity with Solace. Search is a highly prospective explorer near QRM and SOR is a highly prospective explorer near AVL. Explorers are often valued on speculation with SMY and SOR having somewhat equal speculative value. SOR is right at the beginning of its story and has no where to go but up with an extremely tight float, very little selling, and the word just getting out about the staking coup at Thor Lake. Anyone buying Solace today is buying it to see this highly prospective story develop at Blachford.


SOR has all the key elements of a great story

Luck so far has been on Solace’s side getting a key acquisition in this highly sought after area. They are even luckier that O’Keefe was unable to stake the highest priority areas. SOR is free to work on the BLAT 2 claim and portions of two others while the rest of the claims are in dispute. This leaves Solace in an enviable position of not being at the mercy of Avalon or the Mining Recorder’s Office, and have a nice little package to develop ASAP. Any claims added to this package will compliment SOR’s highly prospective BLAT 2 claims covering a possible NW extension of Nechalacho.

No matter what happens in the dispute process, Avalon has a new neighbor who is exploring only 800 meters west of their T- Zone North. SOR is worth a lot more than the current $3 million market cap implies. There is a good arbitrage opportunity here as Solace starts to spread the word that they are a player in by AVL. Solace is the cheapest rare earth company on the market with one of the most enviable speculative rare earth properties an explorer could possibly have.

This is a perfect fit for the TFSA as the Blachford Lake Rare Earth Property could develop into a significant rare earth trend where a discovery will bring immediate value to SOR. At $0.20 cents this is the best rare earth opportunity on the market with little downside risk, is extremely undervalued and one of the highest leveraged companies to discovery.

SOR has all the key elements of making a great story. It is in the right area beside a giant like Avalon exploring possible extensions to Nechalacho, it is priced right, and the float is extremely tight. The story has just begun and has the chance to develop into something big located beside what is considered a very strategic and extemely valuable heavy rare earth project. Solace Resources is one of the best ground floor investments on the market this summer and is rated an extreme buy based on perceived value of its highly prospective project and the growth potential. SOR has a very high chance of success in defining possible extensions to Avalon’s 300Mt Nechalacho Rare Earth Deposit.

SOR is a 5 star extreme value speculative growth buy with no where to go but up.



Disclosure: $5k investment in the recent financing.