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Interview with 2009GRR: Goldsource Mines New Coal Licenses and Drill Results
Company: Goldsource Mines Inc.
Title: Interview with 2009GRR: Goldsource Mines New Coal Licenses and Drill Results
Text: Goldsource is one of those classic mining stories: Diamond exploration outfit makes good by discovering a completely different form of carbon-namely, coal. Goldsource's share price rocketed to $19 on the spectacular drilling results on its Border project in 2008. President Scott Drever and Principal Consulting Engineer Eric Fier explain the plan for proving up Canada's first new coal discovery in decades.

GRR: Goldsource has been an incredible journey for you and for investors. How much land do you hold here?

Scott Drever: We own several different parcels. At the discovery area of the Border Project, we've got about 132,000 hectares-the actual discovery holes are almost in the center of that land package.

We have a second parcel to the northwest of the Border project that we call the Ballantyne Project. We picked that up using the knowledge we gained about the occurrences at Border. We have yet to do any work on that one but there are historical records of coal within the permit area.

We've been acquiring or filing applications in Manitoba as well.

GRR: What portion of these licenses have you drilled?

Eric Fier: Very little-between 1% and 3%.

GRR: One of the reasons you are so confident in continuing to find more coal is that you did extensive research using old oil drilling data from these properties. Tell us about that.

EF: At Border there was no previous drilling so that was a raw discovery.

On the other two properties, there was previous exploration drilling. We were able to compile this data and then basically go out and acquire that land based on the results from the database. That data is anywhere from 20 to 40 years old. A lot of it is unqualified, so this in the “historic data” NI 43-101 category.

GRR: What has your recent drilling told you about what you might have?

EF: The type of the deposit so far that we can ascertain is a thermal coal deposit. To put that into perspective, in North America coal represents 50% of our power supply, which comes from thermal coal deposits in the US and Canada.

From a geologic or technical point of view, we're within the Mannville group which is a Cretaceous formation (around 100 million years old) and that is located in stretches from Manitoba into BC. There are a lot of coal deposits that are within that formation, but most are uneconomic at this point because they are too deep.
What we're looking at are the shallower extensions of that formation.

As far as the size goes, technically it is still very early stage, but our target resource is +500,000,000 tonnes for the Border project. We're trying to use geophysics to understand the components on how to find the coal and that seems to be working in some areas but potentially not other areas. So I can't emphasize enough that this is very early stage.

GRR: How are your relations with the various levels of government and First Nations?

SD: We've met several times at several different levels with the Saskatchewan government, First Nations and have met several of the ministers involved as well as the Premier. They are all quite excited about the discovery, as are the people at the rural municipal level.

That part of Saskatchewan is not well developed and they've had a number of setbacks economically with respect to closure of pulp plants and wood chip plants. They're really keen and excited to have the potential of this type of resource being developed in their area.

I have met with several band chiefs across Saskatchewan with respect to our diamond exploration and they have valid concerns that we're working with-they are concerned about training and jobs for their community, and they want to be able to share in the economic development of resources on their traditional lands.

GRR: What about the infrastructure here?

EF: The infrastructure is very good. It's just on the edge of the agricultural developed area, so roads and power and town sites are all within 50 km of the discovery. There is a good, all-weather gravel highway that transverses the property itself, as does the CN rail line.

GRR: Hudson Bay is not far away-could you use that as a port for overseas shipping?

Answer: We haven't eliminated any potential export targets. There is certainly a need and a use for it domestically. Saskatchewan power is 50% generated by lignite coal, which is a very poor quality coal.

Once we complete drilling, we can determine at least in a global sense what kind of resources we have, and then do a scoping study. Then we'll take a hard look at what export markets might be available to us.

Also, I wouldn't limit this to simply a thermal coal product. Depending on the size of this, we could also go in the direction of coal gasification and liquefaction. There is a lot of work being done on gasification and liquefaction of coal, which would put us into a completely different market scenario. You need to have size to do that, but certainly the quality of this would be appropriate for those uses.

GRR: Have you got the capital you need to continue exploration and move on to a scoping study?

SD: Last summer, after our discovery, we were fortunate enough to complete a private placement of $18 million at $11.75 per share. We still have more than enough to carry us through this drill program, do some exploration on the other two projects and complete our scoping study. We're in very good shape.

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