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New Pacific Metals

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February 7, 2019 - 10:35am

We’ve had our eye on select Bolivian Assets over the past several years but with the uncertain geopolitical landscape, we’ve opted to avoid many of these assets with one exception-Prophecy Development, which is a multi-mineral, multi-country company.

However, with recent developments, notably over the last six months, one company has garnered our attention and while it’s an early stage exploration play, we think the future is very bright indeed and that its flagship silver asset will eventually become a very robust silver mine.

New Pacific Metals is an exploration and development company with precious and base metal assets in China, Canada, and South America (Bolivia). Its principal asset, the Silver Sands Project in Bolivia, has the potential to become a world-class silver operation in the future.  We aren’t the only ones optimistic on New Pacific Metals and mining in Bolivia in general, as two prolific primary silver producers have sizeable interests in the company.

These two important strategic shareholders are Silvercorp and Pan-American Silver, which hold a 29.80% and 12.1% interest, respectively. Pan-American currently has one operating mine Bolivia and may be looking to expand further into the country when conditions permit (it is currently digesting the sizeable acquisition of Tahoe Resources). Regarding Silvercorp, there is some overlap between the companies-namely the Chairman and CEO for both companies in Rui Feng, who personally holds a 7.8% interest. Further, Silvercorp doesn’t have anything of substance in its development pipeline, and the Silver Sands Project could fit the bill. The Silver Sands story is still very new as it was only acquired in July 2017, for $40m, yet quite a bit has been accomplished.

COMIBOL, the mining corporation of Bolivia stifled domestic and foreign investment into the mining sector and as such there was rather severe underinvestment for a prolonged period of time. This has been a shame, especially for the silver space, as there are only a few countries so highly prospective for the gray metal. We’ve slowly watched what we think will become changing of the guard in Bolivia and believe there is a very real possibility it will soon begin attractive material foreign investment.

Many government officials in Bolivia are pro-mining, especially the president and the mining minister, Cesar Navarro, but progress, particularly regarding new mines coming online in the mineral-rich country, has been sluggish. We place a fair amount of blame on the Former president on COMIBOL, Jose Pimentel, who talked a good talk but nothing changed under his watch. In 2018, prior to the typical election of the COMIBOL president, Zelmar Andia was appointed the new president. He previously oversaw mining operations and believe he is pro-mining as we already are beginning to see initial positive developments. 

In addition to New Pacific Metal’s private land package, On July 25th, 2018, the company signed a memorandum of understanding (MOU) with COMIBOL, allowing the company to explore, develop, and mine 38 mineral concessions adjoining south and west to the Silver Sands project. The MOU established a process for the parties to negotiate and complete definitive agreements on the mineral concessions. This was then approved by Bolivia’s Ministry of Mining and Metallurgy, and a signing ceremony was held in Potosi on January 14th, 2019, where Cesar Navarro, the mining minister, Zelmar Andia, the President of COMIBOL, and Bernado Peredo, Representative of the Embassy of Canada in Bolivia, among others attended. This was very important because it brought many of those responsible for oversight of the mining together and more importantly this illustrated progress being made on the mining front and strengthened ties between New Pacific and key government officials.


Key Terms of the contract:

·         Covers an area of up to 57 Sq. km, involving two areas. The first area, located directly west of Silver Sand consists of 29 special temporary authorizations; and the second area, which may include an additional 201 mining grids to the north, east, and south of Silver Sand.

·         The contract is valid for 45yrs, or three phases of 15 years each. The initial 15yrs will include 5 years of exploration, environmental studies (if necessary), engineering studies, pre-feasibility and feasibility studies, as well as development and pilot production. The second and third phases will cover, full commercial production, environmental studies, and mine closure.

·         Alcira, a subsidiary of New Pacific, is required to spend $5.94m during the fist five years on exploration or related activities.

·         If commercial production commences, COMIBOL will receive a 4% gross sales value of minerals produced from the COMIBOL areas in accordance with the contract.

Initial Limited drilling and exploration took place by the vendor of the asset but it did hit some nice intercepts. Confirmation drilling was carried out by New Pacific Metals and illustrated relatively high-grade silver over long intervals which are near-surface. Some highlights include:

·         86 g/t Ag over 108m

o    Including 134 g/t Ag over 58.5m

·         162 g/t Ag over 187.5m

o    Including 150 g/t Ag over 18m

o    Including 293 g/t Ag over 55.5m

o    Including 256 g/t Ag over 43.5m

·         197 g/t Ag over 102m

o    Including 264 g/t Ag over 39m

o    Including 251 g/t Ag over 33m

 

When we first heard New Pacific was aggressively trying to grow its large land package, we had a strong feeling the on-going exploration results would be very robust. That is exactly what we got in Mid-January.

The first batch of exploration results was recently released from the drill program that commenced towards the end of 2017. To date, assay results of drill core sampled of 98 holes have been received and analyzed, 94 of which intercepted silver mineralization. Highlights include:

·         76.6m @ 383 g/t Ag

·         135m @ 240 g/t Ag  

·         273m @ 84 g/t Ag

o    Including 56.3m @ 216 g/t Ag

o    Including 13.44m @ 205 g/t Ag

·         179m 96 g/t Ag

o    Including 18m @ 362 g/t Ag

·         106.4m @ 154 g/t Ag

·         76m @ 205 g/t Ag

o    Including 61m @ 251 g/t Ag

·         62m @ 181 g/t Ag

o    Including 32m @ 304 g/t Ag

·         21m @ 269 g/t Ag

·         5m @ 1,104 g/t Ag

·         16m @ 265 g/t Ag

Though preliminary, Initial metallurgical tests have been encouraging as the Technical Centre of Zhaogin Gold Mining carried out the following recovery tests in 2015 for one sample;

 

·         Conventional flotation test (head grade of 356.64 g/t, grinding to 78%), yielded total recovery of 86.79%, with concentrate grade 4978 g/t and tailing grading 55 g/t.

·         CIL Cyanidation (head grade of 384 g/t, grinding to 85.32%), yielded silver recovery of 92.73% with tailings grading 28 g/t.

·         Flotation + Tailings CIL Cyanidation (head grade of 353.35 g/t), flotation recovered 83.3% silver with tailings grading 65 g/t. Tailings then leached and had an 89.69% silver recovery for a combined total silver recovery of 98.31%.

 

We will keep a close eye on key developments with the company, notably additional exploration results, metallurgical tests among many other factors, and will update our subscriber base accordingly. As our readership knows, there are very few primary silver exploration and development companies worth keeping an eye on but this is one which warrants our attention.

 

We believe, when all is said and done, the Silver Sands project will have a silver resource base well in excess of 100m oz.



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Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Because individual investment objectives vary, this Summary should not be construed as advice to meet the particular needs of the reader. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice. Any action taken as a result of reading this independent market research is solely the responsibility of the reader.

The Morgan Report is not and does not profess to be a professional investment advisor, and strongly encourages all readers to consult with their own personal financial advisors, attorneys, and accountants before making any investment decision. The Morgan Report and/or independent consultants or members of their families may have a position in the securities mentioned. Mr. Morgan does consult on a paid basis both with private investors and various companies. Investing and speculation are inherently risky and should not be undertaken without professional advice. By your act of reading this independent market research letter, you fully and explicitly agree that The Morgan Report will not be held liable or responsible for any decisions you make regarding any information discussed herein.

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About David Morgan / Commentary Author

Seduced by silver at the tender age of 11, David Morgan started investing in the stock market while still a teenager. A precious metals aficionado armed with degrees in finance and economics as well as engineering, he created Silver-Investor.com

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