Exposing the Short Sellers Manipulating Golden Star Resources

By Adrian Douglas

On December 3, 2005 I wrote an article entitled “Golden Star Resources – Straight Talk”

http://www.lemetropolecafe.com/Pfv1.cfm?pfvID=5053&SearchParam=straight%20talk

In that article I brought to light the unusually high short position in GSS stock. I suggested that this may well have been illegal shorting to manipulate the stock. Having had e-mail exchanges with Allan Marter, CFO of GSS he agreed that GSS would investigate the short selling in their stock.

Look what happened! On the Monday morning following the posting of my article, Immediately, on the open, 110,000 shares were purchased in a single transaction. Daily volume exploded 300% for the next four days and GSS was the second largest volume trader on the AMEX second only to Newmont. There was no news that could have accounted for this activity. The short sellers were clearly rattled. Unfortunately on December 8, 2005 GSS announced a rights issue of 29 million shares to raise money for their Bogoso/Prestea development. This gave the short sellers a temporary stay of execution.

Let’s have a look at the short interest in GSS. The following graph shows the total short interest in GSS on the left axis and the stock price on the right axis for the last 12 months.

In 2003 GSS had reached a high of over $8 per share. By April 2005 GSS had started to finally bottom out after a punishing two year decline at around $2.40. Not surprisingly the short interest started to decline as the shorts started to cover. But in September an entirely new trend emerged. Suddenly the short interest in GSS started to skyrocket. In January 2006, according to the Wall Street Journal, the short position in GSS increased a stunning 71% from December. In fact GSS was the third highest short interest increase on the entire AMEX exchange!

If we look at the one year graph of GSS stock price we can see quite clearly the manipulative effect of the short selling on GSS. GSS had been trending in a well defined channel since May 2005. Then in mid-September just as the stock was challenging the top of the price trend, the short interest increased, and the stock price plunged and was forced out of its rising price channel. You don’t need to be Eliot Spitzer to see there is something seriously wrong with this picture!

Perhaps the shorting is related to the gold price? Here is the one year graph of the gold price. Good grief! Just when the short interest started to gallop higher in September 2005, the gold price started to rocket higher from $430 to $556 today. This would hardly seem like an intelligent time to short a premier junior mining stock!

Many Café members who were or still are shareholders have become disgruntled with GSS and with good reason because the stock has fallen so far from its peak. They have picked up on some of the undeniable mistakes of the management of GSS for the demise of the stock. GSS management has made some mistakes but this company has reserves plus resources of over 10 million ozs. They will produce 300,000 ozs this year increasing to 500,000 ozs by 2007. I challenge anyone to find a “junior miner” that has that sort of resource base and production profile. We will shortly find out, when GSS releases fourth quarter results, as to what impact a $65 rise in the gold price during the quarter made on its profitability. My guess is that it will be quite impressive.

Investors should be upset with GSS management for having made several serious mistakes, but they should be OUTRAGED by what is happening to the stock price due to manipulative shorting.

I urge you not to let the short sellers win and pitch in your shares. I for one am committed to exposing them.

GSS after initially dismissing the short selling activity as “normal trading”, has now taken my claims seriously and are investigating.

Any short seller who is operating purely with motives to manipulate GSS has chosen the wrong stock at the wrong time.

Adrian Douglas

January 24, 2006