GoldSpring, Inc. (OTCBB: GSPG) is on our Radar Screen

GoldSpring, Inc. (OTCBB: GSPG) has popped up on our radar screen this week due to the intense trading volume in its common stock. The miner of precious metals (mainly gold & silver) has traded more than 671 million shares over the past 22 market sessions and gained quite a bit of notoriety along the way.

The stock currently trades in the upper echelon of its 52-week range of $.0004 - $.0065 with just over 3 billion shares outstanding and a market cap of 128.22 million. Goldspring gained nearly 20% this week on 101,329,399 shares traded, hitting a intra-week high of $.043 today before closing at $.0425.

Risk Vs. Reward

As we all know, the most fundamentally sound stocks aren't always the ones that thrive. However, a quick glance at the company's financial reports reveals that GSPG does in fact leave quite a bit to be desired from an operational standpoint.

I'm not saying that there's no upside potential here folks, but with negative net tangible assets of more than $17 million, zero dollars in revenues and a negative net income of approximately $2.5 million at the end of their most recent quarter, Goldspring has yet to generate any cash from its precious metal properties.

Test-Drilling Results Look Positive

According to the company's most recent 10Q filing on 8/8, GSPG's long-awaited test drilling program commenced in December 2007 and provides substantial hope for its future. Initial 3rd party assays on 38 of Goldspring's drill holes back in June revealed the following:

A resource of 4,926,000 tons grading 0.080 ounces per ton gold containing 392,000 ounces at a cutoff grade of 0.030 ounces per ton, highlighted by a 930,000 tons grading 0.209 ounces per ton gold containing 194,000 ounces of gold using a 0.100 ounces per ton gold cutoff grade.

With Gold now selling at $775 an ounce, these findings are quite promising indeed, although no gold has been mined to date.

Look out for the Convertible Debt!

A very interesting topic brought up in the most recent Q is the potential danger that one investor and his affiliates own more than 21% of GSPG's voting stock and can, with 61 day notice, waive their 4.9% ownership restriction and convert 100% of their convertible debt - now more than $8.5M - into common shares. At today's closing price, that would equate to more than 212 million shares, or about 2/3's of the volume over the past 22 trading sessions.

Net-Net
Despite being severely under-capitalized, having way too many shares on the market, and posting ugly financial reports to date, Goldspring is located on one of the most attractive precious metal mining properties in the world.

If the company can push forward into a second stage of exploration and production, current levels will surely represent an attractive entry point. However, for now, I wouldn't suggest rushing into any investment decision here without conducting some extensive due diligence on your own behalf.

I'll do some more digging here and also attempt to reach management for a more in-depth view into GSPG's business plan. For now, since the stock has traded like a madman over the past month, but remained relatively flat in regards to PPS, I'd look for a move past $.0435 as a very bullish sign. Until next time, folks. Have a great weekend!