BORDER PROPERTY

The Border Property is Goldsource Mines’ flagship with 128,352 hectares in coal permits which focus on a recent coal discovery.  Exploration drilling of geophysical targets in 2008 revealed the potential for a major coal deposit. The Company is currently in the process of delineation drilling which will hopefully lead to a resource estimation and preliminary assessment.  Other targets are also being investigated as potential coal basins outside of the main 2008 discovery area.

Location and Property

The Border Property is located on the eastern edge of central Saskatchewan. Several world-class mining districts and mineral deposits already exist in Saskatchewan, including a high-grade uranium deposit, the world’s largest potash reserve and diamondiferous kimberlites.  Saskatchewan has a history of resource development and is open to mining.

The Border Property is situated along the Durango Coal Trend, which continues to the southeast and northwest of the property. Infrastructure around the Border Property is excellent. The town of Hudson Bay is located 45 km south and with approximately 2000 inhabitants and includes a skilled labor force.  Both Provincial Highway 9 and a CN railroad line transect the property and are within 5 km of the coal zone discoveries.  A 230kv power line is located 70 kilometres north and water resources are present.  

The property is comprised of 183 coal permits and measures approximately 35 by 35 kilometres in size or over 128,352 hectares.  Goldsource Mines Inc. has a 100% interest in the project.

History

In April 2008 while drilling geophysical anomalies for diamonds, Goldsource Mines Inc. intersected approximately 23 metres of coal in two discovery drill holes, 1.6 kilometres apart.  Both returned significant intervals of high volatile bituminous B to sub-bituminous C thermal coal in the Chemong target area.  

In the summer of 2008, a total of 9 core holes (including 2 twins of the April 2008 holes) were drilled as follow-up to earlier results in the Chemong area.  Coal zone intercepts were encountered in 7 of the holes. The most significant “continuous” coal zone intervals were found in;  hole BD08-05, (with approximately 36 metres of dull to bright coal with minor coal partings), and hole BD08-06, (with 24 metres of similar visual coal characteristics).  

A 2009 winter program was planned to follow-up on the 2008 drilling.  From January to March 2009 this drill program has been underway and successful in further delineating the Chemong area targets as well as identifying new areas of coal occurrence.  The Pasquia area, which extends north of the Chemong, has returned very encouraging results, particularly around 2008 holes BD08-2 and BD08-5.  Further work is required to fully understand the lateral extent of this area.

Geologic Setting

The Durango Trend is a term coined by Goldsource Mines Inc. to identify a NW to SE trending zone of similar geology containing geophysical signatures indicative of basinal settings conducive to coal deposition.  The Durango Trend continues from Lac Longe, Saskatchewan to Dauphin, Manitoba and is approximately 600 km in length.  Goldsource has completed coal applications and acquired coal permits along this trend to establish exploration projects, of which the Border project is the most advanced.   

Deposit Geology

Geologically, the setting for coal deposition is currently assumed to have formed in fresh water to marine estuarine environment similar to that seen in the present day Florida everglades with low-velocity water flow (low energy environment) and with vegetation accumulation into basins, sub-basins and troughs during the Cretaceous Period. For example, a continuous coal zone interval of approximately 36 metres represents potentially 300 metres of vegetation which accumulated over millions of years.  Vegetative environment of this sort are influenced by both marine and fluvial variations.   

The stratigraphy of the project area is comprised of Cretaceous Lower Colorado and Mannville Group rocks overlain by glacial till and muskeg. Faulting has been recognized in drill core and its relationship, (if any) to sub-basin distribution is being investigated.

Regional geology and geophysics, suggests several large structural lows or sub-basins occur within the project area.  From the holes drilled to date, a number of the broader sub‐basins appear to be discrete features containing significant coal zones commonly greater than 30 metres with their limits defined by underlying Devonian limestone. The paleo-surface of the underlying Devonian limestone continues to be a critical factor in defining the sub-basins.  Sub-basins with greater coal zone extent are interpreted to be deeper and/or open ended and to have endured sustained low energy environment overtime.

Geochemistry

Coal zones are defined as zones saturated in carbonaceous components and are comprised of both coal and coally intervals.  Coal analyses are carried out on all coal zone sections to determine coal quality.

Coal samples from core drilling received thus far have returned results indicating good quality thermal coal exists which ranges from sub-bituminous C to bituminous C in rank. The coal ranges in calorific value from 20,640 kj/kg (8,874 Btu/lb) to 23,358 kj/kg (10,042 Btu/lb) on a “dry” basis. Coal samples tested from 2008 drilling have  raw ash values ranging from 11.4 % to 18.7 % and moisture contents from 24.8 % to 37.9% on an “as received basis”. Once air dried, the moisture contents drop significantly to as low as 4%. This decrease in moisture can positively impact the calorific value and marketability of the coal for various potential markets.

Within the coal zone other intervals of carbonaceous or coally material have ash contents greater than 25%.  These intervals may be amenable to upgrading through washing.  The Company is still awaiting the results of further washability tests.  Preliminary washability tests, completed by Loring Labs on the two discovery hole samples in 2008, indicated the potential to significantly upgrade the quality of all of the coal by reducing the ash and sulphur content.  Ultimate analyses by Loring on select coal samples show that much of the sulphur is inorganic in nature and therefore potentially amenable to reduction in the washing process.

The Free Swelling Index (FSI) tests received to date, that may be an indication of potential coking coal characteristics, did not produce any positive results. However, as only 11 holes have been analyzed to date in the permit area, potential still exists to find coal with coking characteristics.

Geophysics

The Company completed an airborne geophysical survey of the area in 2006 for diamond exploration and has re-processed the 5,700 line kilometres of EM geophysical data in an effort to delineate the aerial extent and the thickness of potential coal zone occurences.

The relationship of the geology, the sub‐basins and the apparent deposition of the coal encountered to date is somewhat more complex than first anticipated but the current drill results, airborne geophysics and down‐hole geophysics are being utilized to develop a comprehensive geological and geophysical model defining the lateral continuity of the coal zone and stratigraphy within the discovery areas. 

The Company is also investigating the application of other cost-effective geophysical tools including seismic techniques to further define the coal seam and the paleo-surface of the underlying Devonian limestones which is believed to be one of the controlling factors in the deposition of the coal.

Drilling

The 2009 winter drill programme commenced in January with the installation of a 36 man camp and the completion of road access to drill sites.  Approximately 75 km of access routes were completed to the Chemong, Pasquia, Split Leaf and Red River North target areas.   Three diamond drills were contracted to complete this approximately 75 day programme.

A total of 58 holes (7,000 metres) were originally planned to be completed from January to late March.  Of these, thirty nine holes were planned to delineate the Chemong and Pasquia areas for  possible resource estimation.    An additional 15 holes were planned to test the Split Leaf (North and South) and Red River North targets within the 132,000 hectare project area.

As of mid-March 2009, a total of 70 core holes (approximately 9,200 metres) have been completed, with efforts concentrated largely on understanding the extent of coal zone intersections found in discovery holes BD08‐03, BD08-05and BD08‐06.  Significant coal zone intervals were also found in hole BD09‐20 (with approximately 50.9 metres of dull to bright coal with minor partings) and hole BD09‐22 (with 47.0 metres of similar visual coal characteristics).  Both of these holes were step out holes to test a specific geophysical target, approximately 2500 metres to the south and west of the BD08‐03 discovery hole.

A series of -50˚angle holes (BD09-29, 34, 40, 43 and 47) were drilled from the BD08-03 and BD08-06 discovery hole sites in the Chemong area. Hole BD09-40 drilled at 010 degrees azimuth from BD08-03 and encountered 115.7 metres of combined dull to bright coal within an approximately 132.6 metre (est. 100.0 metres true thickness) coal zone with partings. Hole BD09-34 drilled 250 degrees azimuth from BD08-03 and encountered 72.9 metres of continuous dull to bright coal within an approximately 72.9 metre (est. 55 metre true thickness) coal zone with minor partings. Hole BD09-43 drilled 155 degrees azimuth from BD08-06 and encountered 28.5 metres of combined dull to bright coal within an approximately 54.2 metre (est. 41 metres true thickness) coal zone with partings.

The Pasquia area extends to the north of the Chemong area for approximately 6 kilometers and covers at least 2 interpreted sub-basins.  Recent drilling here has found potential coal zone continuity over an open-ended area of approximately 1square kilometre in the BD09-05 area where a 36.05 coal zone had been encountered in that hole.  Importantly, Hole BD09‐41 intercepted thick coal intervals of 25.5 metres of continuous dull to bright coal within an approximately 35.3 metre coal zone including partings.  As of mid-March, drilling continued to determine the limits of this particular sub-basin with holes BD09- 32, 36, 37, 42, 45 and 46 drilled as step-outs to BD08-05Hole BD09-37 intersected a 43.3 metre coal zone including a 21.5 metre interval of combined dull to bright coal as well as an underlying 10.9 metre coal zone.  Further work is required to further define this area.

Hole BD09-30 located near BD08-02 intercepted two coal zones measuring 34.8 and 21.4 metres respectively for a combined thickness of 56.2 metre of dull to bright coal.  The area around BD08-02 represents the second basin in the Pasquia area again measuring approximately 1 sq. km.

Core samples of coal zone intervals have been continuously sent to Loring Labs for analyses to determine coal quality and characteristics.  

A new coal discovery was recently made in the Split‐Leaf target area.  Two sub-basins are interpreted (Split Leaf North and South) in this area and have been drilled during the 2009 Winter Programme.  Encouraging results were returned from holes BD09-39, 41 and 43.  

Through additional drilling, Goldsource has increased its understanding of the geological and depositional settings of the coal at the Border project.  Data compilation and geological modeling will follow the 2009 winter program and this work will contribute to resource estimations going forward.   

Exploration Objectives

Powder River Basin (Peabody Energy)- 20 metres of coal,  Border Property has 100 metres of coal

From the holes drilled to date, the sub-basins appear to be comprised of discrete features containing exceptional coal zone intervals of up to approximately 100 metres thick with their limits defined by certain geophysical signatures and the underlying Devonian limestone. It is believed that the contours of underlying Devonian limestone continue to be a critical factor in defining the sub-basins and this information is being used to target other areas of potential coal deposition at Border and the Company’s other properties.

Goldsource’s objective for the remainder of 2009 at Border is to complete a resource estimate and continue to identify additional priority areas that may contain significant quantities of coal. Depending on the results of resource estimation, a Preliminary Assessment may be completed.