Goldspring Inc. (OTCBB: GSPG)

Goldspring Inc. (GSPG) engages in the business of mining precious metals in the Nevada, United States. The Company holds claim to various underlying royalties in the Silver City and Comstock mining districts, Storey County and Lyon County, Nevada.

Founded in 2003, the Company is headquartered in Virginia City, Nevada.

Source: Reuters.com, SEC Filings.

Financial Summary

Analyst Consensus

No analyst rates shares of GSPG at this time.

Investment Highlights

Gold Market Drivers

Market demand for gold is driven by three factors, including jewelry–mostly from India, investment and industrial demand. During times of monetary inflation and central bank balance sheet expansions, investment demand increases and becomes the most important source of demand in a gold bull market.

Since the popping of the NASDAQ equities bubble of 2000, central banks worldwide increased money supply at rates not matched since the decade of the 70s, as central banks fight to protect consumer spending and economic growth. As a result of easy monetary policies of the world’s central banks, investors, money managers, sovereign wealth funds and, just recently, some central banks have been purchasing gold as an inflation and currency hedge against further declines in the U.S. dollar, including other currencies loosely pegged to the dollar.

Trading partners not wishing to experience the exporting headwinds of a strong currency have debased their countries’ currencies as well. For the first time central banking history, nearly all central banks have embarked on a currency debasement policy in response to the drastic drop in world GDP and the Fed’s policy of “quantitative easing,” or money printing-the prelude to future consumer price inflation. Gold remains as the ultimate hedge to higher future commodities prices, higher taxes and a declining purchasing power.

At its peak in 2008, money supply grew by double-digit rates in almost all significant currencies of the world. Today, preservation of wealth has become an important strategy against further financial system failures and debasements of fiat currencies, globally, not just in the United States and the U.S. dollar.

After the “deflationary scare” of the first quarter of 2009, which continued into the entire second quarter–brought on by the liquidity crisis following major financial institution failures-investment capital has now moved back into the commodities market, especially the markets traditionally attractive to currency debasement havens such as gold, silver, oil and other commodities.

Today’s Silver Market

Silver analysts expect the silver price to follow gold’s direction during this protracted credit crunch and insolvency issues in the financial sector, with the silver price expected to rise faster than the gold price during a bull market. Inversely, the silver price will fall faster during a bear market and bull market corrections.

Analysts point to the “natural” price ratio between gold and silver prices of 12:1, reflecting the relative rareness of the two metals “in the ground.” Gold has trade between $900 and $1020 since May 2009, while the price of silver has traded in a range of $12.50 and $17.50; the price ratio between the two metals has traded between 58 and 72. Clearly, if the bull market in precious metals continues as many analysts suggest, the price of silver is expected to outperform gold and approach the natural 12:1 ratio.

Professional investors and funds managers typically purchase miners that are already in production during the early stage of the gold bull market, moving into mid-tier and junior producers later in the bull market cycle. Nearly 30 years ago, the price of silver in U.S. dollars reached an intra-day high of $52. In inflation-adjusted terms, the price of gold in U.S. dollars would need to top approximately $130 before the bull market in silver could be truly considered mature. The leverage mining companies provide to the price of the underlying metal price attracts investment in mining stocks from the professional investor community.

Precious Metals Mining Outlook

Gold analysts expect gold’s direction during this protracted credit crunch and insolvency issues in the financial sector to point higher. The oil price relative to spot gold remains as one of the principal considerations of gold/silver mining investors. Oil’s relatively low price in relation to spot gold allows mining companies to make a profit, as lower oil input costs raises operating margins and earnings potential.

Record oil prices without significantly higher precious metals prices hurts miners. As the ratio of gold to oil reached all-time lows at nearly 6:1 in the summer of 2008, miners’ costs of extracting and processing precious metals eventually closed many mines operating at relatively high costs. The ratio has since expanded to approximately 14:1, giving many more precious metals miners much better operating margins and earnings power.

Profession investors, endowments, trusts and hedge fund managers typically purchase miners already in production during the early stage of the gold bull market, moving into mid-tier and junior producers later in the mid-phase and blow-off stage of the bull market cycle.

The leverage mining companies provide to the price of the underlying metal price attracts investment in mining stocks that otherwise would be moved into the bullion market. As the bull market moves into its blow-off stage, junior mining companies are expected to be the biggest percentage gainers as investors realize that the shares of major produces have traded far beyond fundamentals. Just as newly-traded tech companies garnered huge investor intention late in the bull market in tech stocks during the second half of the 90s, junior miners will receive all the capital they’ll need to develop properties as the bull market gathers steam. Price earnings ratios-if existing -are expected to expand to unrealistic levels reminiscent of the tech boom blow-off of 1998 and 1999.

Recent Company News

On October 14, GSPG announced the appointment of Robert A. Reseigh as the Company’s interim CEO. Reseigh served as director of the Company in 2008, and has extensive experience as a consultant for tunnel, shaft and mine development projects.

On October 7, the Company announced the acquisition of a mining lease for nine patented mining claims and 16 unpatented mining claims for its Comstock Mine Project on 344 acres. The lease includes rights for nine town lots and a rural parcel in American Flats.

The acquisition brings the mineral estate to 4,607 acres, including 680 acres of patented mining claims. “This is the largest land position in the Comstock ever consolidated by a single company,” Rob Faber, president and CEO of GSPG stated. “Each addition of properties to our portfolio in the Comstock creates new opportunities to increase our mineral resources.”

Technical Analysis

Source: www.quotemedia.com

GSPG trades at its 13-day moving average. This neutral sign is significant because the 13-day moving average is flat.

The MACD for GSPG currently indicates a bearish signal. The MACD is below the signal line, a 9-day moving average. The MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower. Overall, the chart is neutral.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

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