Goldsource shares fall on Border coal intercepts

Vancouver – Investors battered the share-price of Goldsource Mines (GXS-V) after it released its latest coal intercepts from the Border property in Saskatchewan. Its share-price lost 87¢ to close at $1.53.

Goldsource president J. Scott Drever blames the share-price drop on high expectations that the market has saddled the company with after it discovered wide intercepts of coal at the property last April.

“People are expecting 30 to 40 metres widths over huge areas and I’ve seen estimates (on Border’s potential resource estimation) 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 coal intercepts paint a more complex picture at the Border property than in previous press releases. 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-togography – 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 132,000 ha. 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 km by 1.5 km. It is open to the west with most coal intercepts in the 20-40 metre range. Within the same sub-basin area BD08-05, where Goldsource has intercepted coal widths between 2 and 30 metres, the extent of the area is so far 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 be 300 metres by 500 metres in extent. Coal intercepts from both range between 2 and 116 metres with the bulk in the 20-40 metres range.

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

Overall most coal intercepts start at a depth 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.

“And so when you have thicknesses like we have (20-40 metres) you don’t need a lot of aerial extent,” Drever says.

Secondly he points to the Border’s property’s size (132,000 ha.) and its unknown potential as a place where nobody expected coal to be discovered in the first place. With the company’s geological model still in its infancy 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 he says that so far Goldsource has “a handle” on the geophysical signature of coal to the point that “we’re pretty much guaranteed to hit coal when we drill a specific type of signature”, what Goldsource 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 lead us down that path…to find things that are not so constrained,” he says.

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

Fortunately for Goldsource it 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. So Drever expects to end the year with about $6 million after it pays for another round of drilling at Border and completes an initial Border property resource estimate by the end of 2009.

“On the cigarette package basis I’m pretty comfortable in saying that most of what we’ve encountered is or will be economic,” Drever says.