North Springs Resources (OTCBB: NSRS) continues to astound as the development stage mining company has seen shares jump to a new 52-week high of 1.49 on Monday with trading volume surpassing the 29 million mark by mid-afternoon. Triggering the surge was the company’s news release announcing they had received initial sampling results from phase one exploration conducted at the Imperial Gold Silver Property, located about 13 miles south of South Peak, Nevada, in the Railroad Springs Mining District.
NSRS President, Harry Lappa, commented on the results, stating “Results of phase one sampling of the underground workings at the historic Imperial Mine site are back from the lab and the results are extremely positive – testing showed gold in every sample taken. These results help confirm historic data and are excellent in their own right, but only represent gold content. We anticipate similarly positive results for silver content later this week.”
This phase one exploration plan for the Imperial Property, which NSRS holds a 100% interest, has been outlined as a “four month $250,000 exploration program that will include geochemical and environmental studies, followed by a reverse-circulation drilling program intended to test previously identified mineralized zones and potentially increase the 50,000 ounce gold resource estimate made by previous operators.”
Potential is always a big sell to investors but it losses some luster when it is associated with estimates and this is all that NSRS has at this point as it relates to their Imperial Property. NSRS is still far from proving gold reserves and while they have said they found the presence of gold in their samples that hardly confirms what they want to convey to investors, ownership of a property that is nothing short of a gold mine.
Of course NSRS hasn’t placed all their bets on their Imperial Property; they have also spent considerable time updating investors on the development of their Goldstar/One Arm Joe Gold Project, of which they own a 20% interest. Back on February 2, 2012 NSRS distributed a press release in which they stated they had “positively re-analyzed the potential reserve estimates for the Goldstar/One Arm Joe Gold Project made by previous operators. Surface observations and new data collected from the ongoing drill program at Goldstar, along with historic references to the property, comparable mines in the surrounding area, previously available sampling and exploration data pertinent to the Goldstar site, and based on industry standards, indicate that the possible reserve estimate for the property could be as high as 2,769,230 tons grading 0.7 oz. gold/ton, or 1,938,461 ounces of gold.”
Again this is potential reserves and has yet to be proven yet NSRS is pushing the idea that previous estimates may be significantly lower than what possibly exists. Now NSRS already holds a 20% interest in the Goldstar Property having supplied funding of $500,000 for the current exploration and development program but they also have the right to acquire an additional 15% interest by supplying $3 million in funding for further exploration and development.
Judging by the comments made by Lappa it would appear that NSRS will do everything it can to acquire that additional 15% interest. In that February 2, 2012 release Lappa said “Our new found knowledge of the property and area indicate that we could be sitting on up to 2,000,000 ounces of gold at Goldstar, which, if realized, could be worth approximately $3.2 billion at today’s gold prices. Exploration and drilling will continue as we strive to prove up this possible massive resource.” A few lines latter in that release NSRS covers itself by stating “Though there are no actual reserves currently identified at Goldstar, the Company’s ongoing exploration activities are aimed at proving up reserves at the Goldstar site.”
What’s particularly fascinating about the potential presence of 2,000,000 ounces of gold is the fact that earlier estimates had placed the figure around 350,000 ounces of gold. The massive revision is certainly eye-catching but is it even remotely believable?
It should be remembered by investors that in the company’s last quarterly filing they reported having $16 in cash at October 31, 2011 while holding total assets of $60,589. Those kind of figures don’t exactly excite investors so NSRS’s popularity has been spiked by promotional campaigns, several of which have been in existence for some time. Of course what happens when these campaigns ends is yet to be seen but if history is any indicator then the days of 1.48 will become a distant memory.
That’s not to say that NSRS won’t see their share price climb in time given the fact they make it their business to enter into a number of LOIs to purchase interest in mining properties or strike joint venture deals, popular methods of creating a buzz among investors. The problem is NSRS will eventually have to prove reserves or investors will get tired of this game. According to the company their portfolio now contains five separate gold exploration and development projects, including their North Springs Gold Property in Esmeralda County, Nevada as well as the Rio and Belo Properties in Guyana (which is still a bit unclear at the moment) and the Edum Banso Gold Project in Ghana. These three projects are being sold to investors with potential in mind but NSRS has yet to convert potential into reality.
