Goldsource Confirms Saskatchewan Coal Discovery
Analytical Results and Coal Rankings Announced
Goldsource
Mines, Inc., announces the results for 47
coal samples submitted from the Saskatchewan
coal intercepts for two core holes representing
26 meters and 32.5 meters respectively of
coal seam, including 22.6 meters of continues
coal in each hole. On the basis of proximate
analyses, most of the coal from the two
intercepts is ranked, in accordance with
standard ASTM-D388, as High Volatile Bituminous
C and Sub-Bituminous A. The analyses and
rankings confirm the "visual characteristics"
reported in the company's news release dated
April 28, 2008.
I. Scott Drever, President, stated: "In
light of the apparent nature and quality
of the coal, we are truly excited with this
new coal discovery in Saskatchewan. The
information to date suggests the potential
to establish a significant resource tonnage
in a relatively short time. We believe that
the thickness of the seam, its apparent
low geologic complexity and excellent thermal
characteristics will make it unique, certainly
to Saskatchewan and perhaps to Canada. Our
next step will be to attempt to determine
the aerial extent and thickness of the seam
from our geophysical database. We will follow
up with confirmation drilling in June or
as soon as weather and permitting allow." |
|
Q: Was GSX the
first one who hit coal?
A: Yes.
Q: But he was in the silver business.
A: Actually, could I just clarify
that. He wasn't actually the first one to hit coal. What
happened was on the second day, May 6, 2008, was that
I got a phone call from another diamond company that had
hit coal. But they hit it a year ago March. And they didn't
think it was that significant enough at the time with
the Goldsource discovery on the other side of the basin.
A friend of the directors knew me, and they told me about
it. Then I did a deal with them and then acquired their
property, which they got the coal right for and we staked
all around it.
Q: Now coal is becoming a more
important issue because of the very rapid rise in oil
prices, right?
A: Yes. And even more important,
this is high-grade coal.
Q: It's high-grade coal and easy
to mine, correct?
A: Yes.
Q: Let me just go through it, because
not everybody understands mining. You have staked the
territory where there are coal reserves, correct?
A: We don't have reserves yet.
We're going to have to go find them. But this coal is
usually much like potash. It usually just kind of spills
out and it's very uniform. So it's quite likely that if
Goldsource has it where they are, it's all over the basin
up where we are, especially since we have coal. It's on
a little bit of an upper shelf. The other guy was looking
for diamonds, too.
Q: You have this territory and
you applied for a license, correct?
A: Yes.
Q: Now, Goldsource applied for
a license apparently. They got some license.
A: I haven't heard that they've
got anything yet. Have you heard that?
Q: Well, I'm only reading from...
"Goldsource received Ministry confirmation of priority
status for coal application."
A: I was just on the phone before
you called. The guys at the Ministry is saying that next
week we will have a comfort letter telling us what land
we have. I don't know if it'll be all of it, because I
don't know if we'll get all of it, and we might get more
than one comfort letter.
Q: So in other words, you are getting
a comfort letter. In that case you can search for coal,
or what is the practical step?
A: That's going to tell us the
basically our land is in the queue, to make sure that
all the checks went through and things like that. It'll
have a permit number on it. We'll get an official permit
after that.
Q: And what can you do with the
permit?
A: Really just start preparing,
putting the plan in place.
Q: And what comes after that?
A: We're going to do electromag
survey, Air-Borne. We already have a fair bit of geophysical
data from the diamond company, especially Met North western
part. Not in the southern part but up where we staked
around the guy that discovered coal before. So we have
his data and the only thing we're going to add to it is
electromag. I'm also probably going to go in there and
twin his holes. Because when we assayed for coal, the
coal had been sitting out for 14 months. So coal deteriorates.
Usually when they drill for coal, they basically feel
it right away so it doesn't oxidize and they don't lose
any of the value of it. So go in there right away, even
though we're doing the electromag and doing another five
or six holes, maybe a couple lower down, one up by where
we know he hit.
Q: Then you can ascertain that
you have coal in the territory, correct?
A: We have coal.
Q: But when do you know that you
have valuable size and minable coal?
A: That probably depends on fast
we get through the electromag surveys and things like
that. But I don't think we would be in that phase until
next fall. As far as doing some big step-out holes in
hidden coal, it could take a while. It could take a year.
Q: So that's ascertaining or identifying
the territory and the reserves. Let's go to the end of
the second part of 2008. At that time you would know roughly
what the value at a certain price of your coal reserves?
Or you are just still in the preliminary stage?
A: Sorry?
Q: Let's go to the second part
of next year. Would you at that time now roughly whether
you have minable coal reserves and what it would mean
in terms of value to the company?
A: We would certainly have a good
idea. We staked over a million acres, so I can't say that
it would all be explored. But we probably would have a
good idea what we're chasing.
Q: At that time
would you also know how much money you would need to carry
on mining?
A: Probably.
Q: What's the maximum amount you
see that you may need?
A: The numbers that I'm thinking
right now just for the exploration phase is $10-20 million.
Q: For the exploration?
A: Yes. Not for the mining.
Q: And for the mining?
A: We'll probably get bought out,
that somebody will come and buy this.
Q: But to evaluate it, can you
calculate it? What would it cost to mine the coal to bring
it to the surface?
A: I'm not exactly sure what that
would be. I know that this coal is probably going to get
$200-300 a ton on the market.
Q: How much tonnage are you expecting?
A: I couldn't say. You know, even
if you look at the Goldsource scenario where they hit
those two holes a mile apart, 21 meters of thickness,
how many tons would that be? That would be crazy. That's
why the stock went from 20¢
to $8. That's a lot of coal. I couldn't even fathom it.
We've staked basically 1600 square kilometers.
Q: So once the value and the size
is established, it has become actually market value for
a company?
The
Projected History of a Coal Discovery
|
| Staking |
|
| Government
license: |
Comfort
Letter |
| |
$10M
capital |
| Mining:
Configuration of coal reserve |
| Validation
of reserves and final products |
| |
|
| e.g.
|
$10
per reserves/ton |
|
$280/ton
market sales |
| |
Evaluation
of the region |
|
|
A: Yes.
Q: And if it costs you let's say
$10 per ton to mine, it would cost $10 for any public
company of much bigger size. Therefore, for a bigger company
it is worth paying more than $10, particularly for stock,
to buy your stock, and they put in the money and they
create a cash flow for themselves.
A: Yes. Sure.
Q: Is it impossible to ascertain
that you have an annual production capability of let's
say five million tons?
A: I think it sounds quite high.
The beauty of these properties is we have two major rail
lines going right through them. We have High Joe, we have
roads, and that's the biggest thing with coal deficits.
You have to be able to transport it.
Q: You have to have an infrastructure.
A: Yes. And we have that.
Q: If you mine one million tons,
and it costs you $10 to mine it, the current price is
over $100.
A: Yes.
Q: So you have $100 operating profit
and on a million, it is $10 million. And $10 million profit
for a company with 100,000,000 fully diluted shares is
$10 per share. Correct?
A: Yes.
Q: But I don't know how much of
it will be feasible to transport out of the gate. We still
have to look at all that. But the coal is worth a lot
more than $100 a ton, more like $300 a ton.
A: $300 a ton? Then it's $30 per
share.
Q: Yes. But you've got to walk
before you run.
Q: I have done the same calculation
once on Dimondfield Resources in 1994. You have 100,000,000
shares. You have molybdenum and uranium assets which are
worth 10¢ before. It's worth
probably more than 10¢ now
because prices have gone up. But out of your 25¢,
10¢ is for other products,
other resources, so it's 15¢
a share. Now, 15¢ a share on
100,000,000 shares is only $15 million. So basically speaking,
if for somebody, or for you if you raise all the money
alone, you can bring in three years a million tons out
of the ground and sell it for $200, we come up with a
number which is maybe fifty to a hundred times bigger
than the 13¢ per share which
we are calculating today. Correct?
Potential
Value of NAG
|
| Shares
outstanding: |
100,000,000 |
| Current
price: |
25¢ |
| |
|
| Original
deposits/reserves: |
10¢ |
| Cash
|
2¢ |
| |
|
|
| 1
MT |
$3.00 |
|
|
|
| |
-.10 |
|
|
| |
$2.90 |
|
|
| |
|
|
|
| Cost |
.40 |
|
$2.50 |
| |
$2.50 |
|
$2.62 |
| |
|
|
| Value
as going concern: |
$3
- $10* |
| (Estimate) |
|
|
*Aspects of size of coal field |
|
|
A: Yes.
Q: You are at the moment facing
mainly regulatory issues and research, identification
issues. If these issues are overcome, the value becomes
bigger because it gets nearer to production, even if you
are not Wilbur Ross or General Electric, which has the
money to mine it.
A: Yes.
Q: Today resource is the most important
item on the agenda, whether it's fertilizer, oil, coal
or uranium, and therefore big buyers will come out and
go after the resources that you have. Correct?
A: Yes. The first phase is exploration.
We've got t prove it's there. Coal is one of the simplest
commodities to mine, and Saskatchewan is one of the most
mining friendly provinces or places in the world. So once
you know it's there, we are off to the races.
Q: And at that time you may resort,
as the stock goes up because the valuation becomes clearer,
at that time you may be doing various smaller financings
to have more cash in the company, which is important because
if a company comes along which wants to buy your company,
the more cash you have the better.
A: Yeah.
Q: It's very simple. You have 100,000,000
shares. If you have no cash or very little cash and they
pay with stock for your stock, they have to put in all
the cash. But if you raise some money and at least let's
say half of their production expenses are already there,
they are willing to pay a much higher price for your stock.
A: Yes.
Q: You follow?
A: Yes.
Q: The last question is how to
convey the impression of the values in the company and
how to market the company as well as its resources at
a time when the world is hungry for resources like oil,
uranium or coal. That's really the task ahead of you.
A: Yes.
Q: And if you make it credible
that this is possible, that there is coal, it's minable
coal, there is big profit, the valuation will follow.
A: First, let me say that next
week we're going to have some very credible mining people
start coming on our advisory board. So I'm more like you,
somebody that raises money, but I have some really cool
people coming. So I think that will be really good for
the market.
Q: You really have to explain to
the world what you have and eventually prove it.
A: First we have to know what we
have.
Q: How long would it take you then
where you can really tell a friend like me that we have
so much minable coal?
A: Well, it's going to take a bit
of time. We need to start the exploration phase.
Q: In six months will you have
a better picture?
A: In six months we'll have a lot
better picture.
Q: So it's only six months to get
a much better picture?
A: We're going to have a much clearer
picture than we do now. We will probably have coal reserves
by then is what I'm saying.
Q: Listen, you are in a very enviable
position. Incidentally, are there foreigners like the
Far East, China or the Middle East, are there buyers like
that circulating around you?
A: I think the biggest interest
is China and Japan in coal right now. There are all kinds
of coal uses in Canada as well, but one of my friends
was talking to Mitsubishi yesterday. They were in Vancouver
for some natural gas thing, and he asked them about coal
and they just went, Why are you asking that? They were
very very interested in the coal.
Q: Today I got a call from one
of the companies I'm consulting with. I've been with them
for a while, an African gold company. We tied up about
$17 million in Chinese financing and we could be the biggest
gold mining company in Tanzania. So these are the kinds
of transactions today people are looking for, like you.
A: I'm not dealing with [smoke].
I've been in this speculative business for a long time
and this is just the first step. Now we've got to go prove
it.
Q: Listen, you shouldn't think
that this is a speculative business. When I left Hungary,
two and half billion people lived in this world. But out
of the two and half billion, at least a billion didn't
count. India, China, they didn't count in anything. Then
today you have 7 billion people working in the world.
And each and every one of them wants to eat steak or meat
and wants to have a heated home and wants to have a car,
and certainly a college education. So when you have 7
billion people working, which is the 21st century, the
issue is becoming resources. We have to have the resources
because without resources, life stops.
Now the demand for heat and electricity is so enormous
and growing that a little company like yours may become
a subject of a bidding war between China and Dubai because
they both needs your assets. It's not that you are speculative.
As a matter of fact, you were in the right area at the
right time.
I envy your position. It's an interesting situation. It
fulfills some ambition and uses intuition and I'm sure
that you will succeed, and we'll stand behind you a hundred
percent.
A: Thank you. Don't get me wrong. It's
a guarded optimism, but I know how to proceed, I know
how to pragmatically explore for this.
