The real goldmine for Goldsource: coal

VANCOUVER–Goldsource Mines (GXS-V, GXSFF-O) has started a Saskatchewan coal craze.

The diamond-seeking junior that instead hit coal has scaled the stock markets, its share price rising to the $6.70-range from a mere 30 in just three weeks. In the six months prior to news of the coal discovery, only 3.2 million Goldsource shares had changed hands at an average price of 22. Since the April 22 announcement, daily trading volume has averaged 1.2 million shares.

“I was a bit surprised by the market’s reaction,” says Scott Drever, president of Goldsource. “It took a couple days for any number of people to react but it’s a pretty hot coal market. And twenty-five metres is roughly a seven-story building — that’s what people are trying to get their minds around. It’s a really big intercept.”

In early April, Goldsource started a 22-hole drilling program on its mineral claim blocks in central and eastern Saskatchewan. While none of the first six holes showed any diamond-bearing kimberlite, two holes at the Border property, roughly 50 km north of Hudson Bay, intersected a coal seam.

The two intersections are very similar: one shows coal over 26 metres and the other over 32.5 metres. The top 22.6 metres of both holes contain few visible partings, while the lower portions are mixed coal and sandy-silty partings. The glacial till and mudstone overlying the seam is consistent between the two holes and there is only 1.6 metres difference in the depth of the top of the coal seam between the holes, even though they are 1.64 km apart. The seam starts roughly 80 metres below surface.

Goldsource immediately applied for coal permits covering the area of interest — in Saskatchewan, coal exploration is regulated by the Coal Disposition Act and is separate from exploration for other minerals. Drever is not yet discussing the size of the claim block for which Goldsource applied, since the application has not been granted yet, but says it is a “substantial piece of ground.”

He adds: “Trust me, we took enough that we’re comfortable we have the bulk of it covered.”

Analyses of the coal samples determined that most of the coal is ranked as high-volatile bituminous C and sub-bituminous A. The coal appears to be from the Mannville-Swan River group of Cretaceous age. Of 47 samples, one was high-volatile bituminous B, 21 returned a rank of high-volatile bituminous C, 20 were sub-bituminous A, four came back as sub-bituminous B, and one returned sub-bituminous C. The average calorific value was 21,000 kilojoules per kg and the average initial sulphur content came in at 1.5%.

The deposit is thought at this point to be a Low-Type B in geological complexity and could be designated as a surface deposit.

Tests for a free swelling index (FSI), which can indicate that a coal has coking characteristics, came back negative. However, Goldsource was not using proper coal drilling techniques in these first holes and therefore the absence of FSI numbers may be due to the presence of excess drilling fluids.

Saskatchewan is already home to three coal mines but the province has only ever produced lignite, the lowest-ranking type of coal, mined at opens pits to depths of less than 35 metres. The three operations in southern Saskatchewan feed mouth-of-mine power plants that produce some 70% of the province’s electricity.

Goldsource’s discovery is the first occurrence of a significant bituminous coal seam in the province. According to Jason Berenyi, industrial minerals geologist with the Saskatchewan Ministry of Energy and Resources, the only previous intersections of sub-bituminous coal in Saskatchewan came from a similar area and from the same geological formation but were located at 150 metres depth and were considerably thinner.

Gary Delaney, director of the Northern Geological Survey and chief geologist for the ministry, likens this discovery to the start of the potash run in Saskatchewan a few years ago.

“Coal right now is like potash two years ago — then no one knew much about it but now it’s very significant,” he says. “The coal excitement stems from the substantial thickness as well as the rank or grade. And it’s still very early days but it’s a tremendous time in Saskatchewan.”

Certainly it was the thickness and the apparent grade that Drever, who worked in the coal industry for 10 years near the beginning of his career, first noticed.

“When my geologist called and said there was almost 40 metres of (coal in the drill core) my partner and I got on a plane right away,” Drever says. “When we looked at the core boxes, at row after row after row of coal, what struck us was it was black, it was hard, it was bright, and there were almost no partings in the upper twenty-five metres.

“We sort ofstood thereand looked at each other with our mouths open.”

Goldsource’s desire to hit the ground running with this discovery is being hampered by the fact that the ground in question is a “fairly large, damp swamp,” according to Drever. The company is still permitted for another seven holes but will not be able to start drilling those holes until late June or early July, when the ground dries out.

In the meantime, the Resources Ministry can sort of the cascade of coal claims. It wasn’t long after Goldsource began its meteoric share price climb that other juniors jumped on the train and started applying for coal permits. Now Delaney says his department is processing applications for more than 10,000 sq. km of coal permits in the areas around Goldsource’s claims.

The first to announce an adjacent coal claim was Saturn Minerals (SMI-V, SAEUF-O) on May 1. Interestingly, while Saturn had often seen days pass without a trade, more than 7.7 million shares changed hands and the junior’s price almost doubled to 27.5 the day before the coal claim news. After the news, Saturn gained another 21 but has since lost some of that ground, trading around the 30-mark.

The next to jump aboard was Swift Resources (SWR-V), which also made impressive gains on vague news about applying for coal claims “in the area of Goldsource Mines’ recentlyannounced coal discovery.” Swift jumped to 74.5 from 30.5 directly following the news; its share price has fluctuated considerably since and at presstime was 43.

Canasia Industries (CAJ-V, CANSF-O) joined the fray next, followed by North American Gem (NAG-V, NGEMF-O), WestCan Uranium (WCU-V, WCURF-O), Geo Minerals (GM-V), Wescan Goldfields (WGF-V, WEGOF-O), Kent Exploration (KEX-V) and Alix Resources (AIX-V). All made initial gains on the move but have since lost ground in the absence of further news.