Goldsource Mines has been on resourceINTELLIGENCE's radar more or less since that company made its first coal discovery in Eastern Saskatchewan in 2008. News of that discovery sent the company's share prices soaring to about $20.00 per share. Of course overtime, calmer heads prevailed and the company share prices have been in a holding pattern since, as they drill out coal deposit after coal deposit. So far the company has identified approximately 17 coals deposits on its Border project in a series of interesting sub basins and here to tell us more about that is Scott Drever, the company's president.
RI: Thanks for being here Scott
SD: Thank you for having me Doug. It's my pleasure.
RI: So Scott, it really looks like you're keeping the pace on the Border project, but how much progress would you say you've made?
SD: Oh, I think we've made good progress Doug. We've started little less than 2 years ago on this project to bring it to where it is now. We're reporting something in the order of 170 million tonnes of coal in all categories and that's a huge step forward in the time frame that we've had to work with
RI: Indeed. You drove a 126.5 meter coal intercept on the Border project. Is that not your widest hole zone to date?
SD: That's correct. I think our widest to that point had been just about a 100 meters, so that's 25% more in one hole, so these are huge widths that you normally don't see in coal deposits.
RI: So you've identified 17 coal deposits in a number of different sub basins today. What does that mean?
SD: We've identified generally an area from the geophysics where we think there has been perhaps subsidence and an area that's more attractive for the occurrence of these deposits. So the sub basin is simply a broad generalization of an attractive area whereas the deposits themselves are where the coal occurs.
RI: So Scott, you've now got a resource estimate on the Border project and we can pull that up on the screen here. Investors can go to resourceintelligence.net/riq at home to look up Goldsource's profile and open up the calculator for the Border project. In the inferred and the speculative categories we've added them together here and stated that in the notes. You've got 108.3 million tonnes of coal; in the indicated category you've got 63.5 million tonnes of coal. So is the plan then to take some of those inferred and speculative tonnes and move them over to the indicated category?
SD: Yes, that was certainly the main thrust of the window program, to upgrade those inferred resources to the indicated categories, but also to add total resources by drilling some targets that we have not drilled before
RI: Let's talk about your strip ratio. Which is strip ratio at Border and what does it mean to a potential mining operation there?
SD: I think in most of Canada that number is around eight and half to one or maybe 6 and half to eight and half somewhere in that range, depending in what mine you're at. Our strip ratios are about three and half as low. Three and a half and probably average. If you take all seventeen deposits the average would be something in the order of five and half to one.
RI: How does the thickness of the coal deposit affect the overall tonnage? When you have one of these as mines in the south of Saskatchewan for example, they've got a thinner resource but it's spread out over a long distance? On the Border project you're much deeper although it's got a narrower footprint?
SD: That's the point on these particular deposits. I think people view them as being pods, is the term I prefer to apply to them, but because of that thickness you can stick 25 to 30 million tonnes in an area that's probably 400 meters across and maybe a 1000 meters long. So although they are discrete deposits, we can stick a lot of tonnage into a smaller area, because of the thicknesses.
RI: You were the first to find coal in this part of Canada and I guess being first also means that you have the first opportunity to determine how to find coal there. You've come up with a technology called the coal identification matrix. Can you explain what that is?
SD: Yes. The coal identification matrix was a name we gave to the process that we go through in combining a number of different technologies, in order to give us a target. As we move forward with the process, the ability to ground proof or compare the airborne geophysics with the drilling and with the downhole e-logs that we got subsequent to the drilling, enable us to put a matrix together if you will, that enables us to better identify those areas that were more likely to contain coal than not.
RI: What's the upside then of a coal identification matrix?
SD: The upside is that we've been able to be very efficient in the utilization of our funding, to build that resource base as quickly as possible. We've taken a step beyond that, in that we have agreed with Wescore that we would apply our matrix to their airborne geophysics. Wescore is a junior resource company that was first into the area after we announced the discovery and they border us north, east and south. The initial stage was for one hundred thousand shares; based on achieving certain success criteria we were to then receive an additional one million shares of Wescore, plus twenty percent in all of the Manitoban Saskatchewan properties. This first effort obviously has been quite successful for us. Wescore has announced four holes I think it is, that run forty, fifty, sixty meters of coal. So in fact we own or have earned twenty five percentage of tonnages that come out from their exploration work.
RI: Ok, Scott lets talk about some of the potential end uses for coal that you might find on the Border project. There are three coal fired power plants in the province of Saskatchewan. More than seventy percent of Saskatchewan's coal is generated using coal fired power plants. The province is now putting together a 1.4 billion dollar deal to develop a new clean coal facility refurbished from an old one actually. So it sounds like there's a lot potential demand to you locally?
SD: From a power point of view that's absolutely correct. You see varying figures but somewhere between three hundred and six hundred megawatts are required almost immediately to accommodate the expansion in the potash business, the oil and gas business and the number of the industrial minerals areas. We also have the potential for Uranium mines coming on stream in the northern part. So there's no shortage of need for coal and additional power plants.
RI: This could bode well for you. The coal that you're producing is potentially of a cleaner burning kind than the types burned elsewhere in Saskatchewan. For example, the government of Saskatchewan says "Coal produced in Saskatchewan is lignite, which is of lower quality coal and relatively low heating value, although it does have a low sulphur content". But it sounds like your coal can potentially be better than that mined elsewhere in the province?
SD: By definition we do, in that it is sub bituminous versus lignite. The principal difference I think, between what they're burning now in our particular coal is that our coal has a higher heat value. It probably has lower ash or we can produce a lower ash which affects the heat value as well. And, we do have a little bit more sulphur than what they have in that part of the world, but that can dealt with in your scrubbers and things on your plant.
RI: Scott what then is on the to do list to get the Border project to the next level?
SD: The to do list is to complete the preliminary economic assessment and in that we will review mine ability. We will look at capital cost for a mine site production. We will look at transportation. We will look at potential markets and probably as importantly we'll look at a number of alternative technologies, for example the possibilities of gasification, liquefaction and also the power plant aspects of utilizing the coal source.
RI: What about the time frame for the project. How long between now and production?
SD: There's obviously a number of variables that go into that timeline. If we were only doing a mine for feed to a power plant or some place else or an export market, that timeline is a lot shorter. On average a mine will take you five to seven years to put into production and that's probably pretty fast track in this part of the world. So I think you're looking at 3 to 5 years to probably complete feasability again depending on whether it's a stand alone mine or whether it has some other attachments to it. But you're looking at somewhere between 3 and 10 years to get to the end result.
RI: You've done a lot work this year. You've put out a successful resource estimate. So I imagine at some point this year you'll probably go back to the markets and raise some capital?
SD: We've been spending at a fairly aggressive rate as you may appreciate, to get to where we are within terms of the resources, resource definition. After this winter's program, we'll probably have something in the order of three million dollars in the treasure. So we'll be looking to do some financing over the course of the next six to eight months probably.
RI: One of the most important aspects of your project could be considered the infrastructure, because you've got a lot already in place being so close to the town of Hudson Bay. So tell us about that?
SD: As you know coal is all about quantity, quality, transportation and markets and we're getting a very good handle on the quantity and quality of the coal that we've discovered. The next stage is to deal with transportation, infrastructure and potential markets. The Border project has a railway that runs right over the corner of it. In fact we drive over the railway to get to some of the drill sites. So that aspect of it is certainly beneficial to the ongoing development of the coal. That railway ties into the trunk lines that transgress Canada and would lead us into the US and in fact that particular line goes to the north of Churchill. So it opens up a number of marketing potentials that are very, very important with a bulk commodity like coal.
RI: How important is the community support for you there? What's the attitude like from the Hudson's bay? Is the mayor on board with this project?
SD: Absolutely. In the Hudson Bay we've made it a point of keeping the mayor and the councilors up to speed on how the project is progressing. They are very interested in it because they've had some serious setbacks in terms of economic developments with respect to the lumber business that had been their mainstay. We've also had numerous meetings with the first nations groups in the particular area and at this point we have some very good support from them as well to go forward with this project.
RI: Yes, that really makes the big difference. It's really exciting to see how much you've accomplished in two years and of course we hope to have you on the show again and look forward to seeing the progress that you've made in the interim.
Disclosure: No Positions