Channel Resources: Two Steps Forward, One Step Back

Channel Resources is a bit of a mixed bag: it's got a gold project in Burkina Faso and a brine project in a heavily-drilled natural-gas field in Alberta. The brine contains lithium, potash, borates and bromine. That Fox Creek brine project is at the stage where a resource estimate is about to be commissioned.

Channel's Tanlouka Gold Project in Burkina Faso is far away from a resource estimate of its own, but has had some good drill results - including a very good hole announced last January 20th. That length of drill core contained an interval of 12 metres containing 21.25 g/t of gold, which is a great grade over a nice length. Most of the other holes drilled in the program were far less exciting, but they hit a near-surface gold deposit that (if all goes well) could be the rock for a profitable strip mine. Unspectacular, but potentially profitable if further drilling makes for a resource estimate.

Some African projects with good or even great drill results have been dogged by hard-to-interpret findings when all the drill holes for a certain deposit are put together. As an example, Appleton Exploration's Manalo project in Mali - particularly the vaunted Dialafara Zone. The two-dimensional map looks good, but a three-dimensional drill map shows continuity oddities that have placed question marks on the zone. There seems to be the same concern over Channel's Tanlouka.

On the same day that the latest Tanlouka drill news was released, pre-market open, Channel went down 14.6%. After getting as high as 44.5 cents at the end of October, it's now trading at almost the same price as the close on Jan. 20th: 21 cents.

The stock was as low as 6 cents earlier in the year. Energized by earlier drill results from Tanlouka, whose best holes were not as good as the January 20th one, it shot up from 8.5 cents in mid-August to 44.5 at the end of October. An oversubscribed private placement added to the excitement. Since the beginning November, it's lost more than half its value as the frenzy dissipated.

Here's its one-year chart, from Stockwatch.com:



The Moral Of The Story: Exciting drill results can often get a former dullard rocketing, particularly if the overall market is hot, but even better holes can bring down a stock if the hype gets too much. When good drill results meet with a bad market reaction, it's best to pull back and wait to see if the balloon is going to deflate some more.


Disclosure: None.