Goldsource Falls On Border Coal Results

VANCOUVER — Investors battered the share price of Goldsource Mines (GXS-V, GXSFF-O) after it released its latest coal intercepts from the Border property in Saskatchewan.

Goldsource president J. Scott Drever blames the drop — which saw the stock close 87¢ lower at $1.53 apiece — on the high expectations the company has been saddled with since discovering wide intercepts of coal at the property last April.

“People are expecting 30-to 40- metre widths over huge areas and I’ve seen estimates (on Border’s potential resource) as high as 49 billion tonnes,” Drever says. “Well, Mother Nature sometimes doesn’t work that way and there’s a bunch of punters and short-termer types in this particular market and they may interpret this thing as not a slam dunk, sure thing, easy route. . . so (they’re) gone.”

The issue in part appears to be that the latest intercepts paint a more complex picture at Border than previous results did. Coal seams, sometimes as wide as 100 metres, that were once wide open in all lateral directions now appear to have firmer margins with deposit widths swelling and pinching.

Drever says coal intercepts may be 100 metres in one place but that 300 to 400 metres away, intercepts may fall to a few metres. The culprit?

“We suspect it’s the underlying Devonian limestones — the paleo-topography — that are controlling it,” Drever says. “But we haven’t quite got a really good handle on where these things occur and where their limitations or constraints might be.”

The drilling to date has better resolved the margins at a half-dozen of Goldsource’s top targets on the 1,320-sq.-km property 50 km north of the town of Hudson Bay.

In the Pasquia sub-basin, the extent of area BD08-02 so far looks to be 1.5 by 1.5 km. It is open to the west with most coal intercepts in the 20-to 40-metre range. Within the same sub-basin, area BD08- 05, where Goldsource has intercepted coal widths of between 2 and 30 metres, is so far about 2 sq. km. It is open to the northwest.

About 3.5 km southeast of Pasquia in the Chemong sub-basin, two areas, BD08-03 and BD08-06, appear to extend 300 by 500 metres. Coal intercepts from both range between 2 and 116 metres with the bulk in the 20-to 40-metre range.

In the Split-Leaf sub-basin, about 12 km southeast of the Chemong area, zone BD09-39 is about 1 sq. km. Here, drilling from three holes has returned coal intercepts ranging between 10 and 40 metres.

Overall, most coal intercepts start at a depth of between 60 and 100 metres.

From Drever’s point of view, the market reaction is unwarranted on two fronts. First, while the pinching intercepts may disappoint some investors, he notes that companies working the coal fields of the U. S. prairies often exploit deposits 10 to 15 million tonnes in size from multiple seams that are mere metres in width.

“When you have thicknesses like we have you don’t need a lot of aerial extent,” Drever says.

Secondly, he points to Border’s size and unknown potential as a place where nobody expected coal to be discovered in the first place. With the company’s geological model still in development, he says he hopes Goldsource may yet hit even more extensive coal seams as it develops a better understanding of the geophysical clues controlling the coal deposition.

While Drever says Goldsource is “pretty much guaranteed to hit coal when we drill a specific type of signature,” what the company is now looking for is a signature of those broader areas bearing coal in wide seams of high quality. To that end, Goldsource will be flying more aerial geophysics in the coming months and will test a number of additional targets.

“We hope it leads us down that path. . . to find things that are not so constrained,” Drever says.

In addition to further exploration in 2009 at Border, Goldsource is waiting on permitting at two other properties, one next door in Manitoba and the other northwest of Border in Saskatchewan.

Fortunately for Goldsource, the company completed an $18-million private placement at the peak of excitement over the Border discovery last year and still has about $9 million of that left. Drever expects to end the year with about $6 million after the company pays for another round of drilling at Border and completes an initial resource estimate by year-end.