Goldsource Mines: Stock Jumps on Positive Drilling Results

The wild ride in Goldsource Mines Inc. (GXSFF.PK) continues. After doubling in price on Friday, shares in the diamond-turned-coal miner climbed as much as 64% before paring back gains on rekindled hopes of a legitimate coal play in eastern Saskatchewan.  But unlike Friday, when the stock jumped despite no news from the company, Monday’s increase was firmly rooted in positive drilling results.

During a halt in trading Monday morning, Goldsource released results from the latest drill hole in its seven-drill-hole program on coal permits of the Border property near Hudson Bay, Saskatchewan. The company said the new hole, drilled approximately three kilometres northwest of the initial discovery drill well uncovered coal intercepts that compared favorably to the discovery holes.

Goldsource president J. Scott Drever stated:

The coal intercept reinforces our initial assumption that there may be a main coal basin with multiple sub-basins. We believe that the discovery holes and this most recent hole were drilled within these sub-basins.

Upon trading resumption, shares immediately shot up to C$14.65, before sliding back down to close at C$9.95, up C$1.06.

On Friday shares jumped 114% from C$4.15 to C$8.89, despite no news out of the company. Goldsource spokesperson Fred Cooper said he believes some investors jumped in Friday because they felt the stock was oversold after losing more than half its value earlier in the week. Once the shares started to rise, rumours began to fly, leading others to jump in, Mr. Cooper added.  He dismissed any questions that the market caught wind of today’s results beforehand, saying drilling of the hole wasn’t completed until Saturday afternoon.

A week ago, Goldsource shares plunged more than 50% after the company announced disappointing drill results at two holes located to the south of the discovery well.  Mr. Drever stated that these holes may have been on the eastern margins of one of the sub-basins. Other junior explorers with coal permits near Goldsource’s discovery have also been on a two-day share price tear with North American Gem Inc. up 78% [NAG.V] and joint venture partners Saturn Minerals Inc. and Swift Resources Inc. {SWR.V] up 56% and 36%, respectively.

The idea of a Saskatchewan coal play first caught fire in the spring when the Goldsource discovery was made. At the time Goldsource shares, which hit nearly C$20 in late June, were trading at a mere C$0.30.

Comments

[Steven Ward:]

If this stock isn't an example of an energy bubble I don't know what is. This is more than a "jiggle". Something's not right and it just maybe a harbinger, a warning, if you will, on an overall energy bubble. This price action should be investigated. Oversold reaction my foot, with apologies to Mr. Cooper.

2008 Jul 29 08:50 PM

[iman:]

If energy is in a bubble where is the excess supply? This is a small cap stock, its volatile.

2008 Aug 06 04:04 PM

[Steven Ward:]

Small cap may account for the wild price action but the company poo pood any leaks on the drill results. Difficult to believe in its entirety.
By bubble, I mean the price people are willing to pay for something that's not even a going concern.

this is one of the wildest price actions I ever seen.
there is a manicness to it as well as some other energy stocks that are now being touted without a viable financial or production profile or projection.
That's the bubble.

2008 Aug 12 12:47 AM