A Silver Lining in Bolivia?: New Pacific Metals Corp. (TSX-V: NUAG)

Countries looking to develop their mineral assets require experienced investors and mine developers. Bolivia is no exception, however a dearth of foreign investment and mineral development has left the country with an inefficient mineral industry and dwindling mineral reserves despite its geological endowment.

This presents opportunities for well managed and connected companies and their investors.

New Pacific Metals Corp. (TSX-V: NUAG) hopes to define the next mineral resource in Bolivia with a management team that has deep experience and a sterling reputation in the country that is looking to increase its mineral reserves.

Bolivia is historically known for its mineral wealth, with some metals such as silver having been in exploitation since the Spanish conquest in the 16th century.

Other sources of valuable minerals are gold, zinc, tin, copper, antimony, rare earths, iron ore, lead, lithium, nickel, magnesium potash and tungsten.

However over the years, mining investment in Bolivia has suffered from nationalistic policies, which have included a few cases of expropriation or nationalisation, some of which are currently being contested by international arbitration under bilateral investment treaties.

By the time mining was nationalised after the 1952 national revolution, tin had long since supplanted silver as the main mineral product. The industry was privatised again in the 1980s during the era of neoliberal shock therapy, starting with the notorious Decree 21060 of 1985.

In 1985, under the fourth (and final) term of President Paz Estenssoro, the economic situation in Bolivia was undermined with aggressive hyperinflation, inherited from previous administrations, and the country was unable to pay its debt to the International Monetary Fund (IMF).

Bolivian President Víctor Paz Estenssoro on 29 August 1985, issued the decree which imposed neoliberal economic policies in order to end Bolivia's twin crises of international debt and hyperinflation.

A plan was drawn by Jeffrey Sachs, an American economist and professor at Harvard University, and at that time active as economic adviser to the Bolivian government. Bolivia was the first country where Jeffrey Sachs tested his theories.

With Sachs advice, the IMF approved the decree and gave the Bolivian government $57 million in credit and the World Bank began lending money to the country again.  

This resulted in massive cutbacks to the nationalized Bolivian mining industry.

By 1991 at least 45,000 state mining jobs had been eliminated. More reforms in the 1990s further reduced the state’s role in the sector. This culminated in the 1997 mining code, which is what the current reforms are replacing.

Due to the lack of substantive mining policy after the enactment of the Constitution in 2009, no significant amount of interest from new large investors until 2014.

Evo Morales is pegging his hopes on building a complete lithium battery supply chain from the ground to the factory.

https://www.dw.com/en/bolivias-evo-morales-plans-lithium-mining-offensive/a-39727810

Mining rights cannot be held by private companies or associations having any kind of direct or indirect partial or total foreign equity ownership when mining rights are located within 50 kilometres of Bolivia's international borders, unless authorised by of the Bolivian Congress.

In addition to the various state mining projects, the main projects in the private/mixed sectors are:

-The San Cristobal Project (a Sumitomo Corp. 100% venture).

- The San Bartolome Project operated by Empresa Minera Manquiri SA, a wholly owned subsidiary of Coeur d'Alene Mines Corp.

-San Vicente, 95% project of Pan American Silver.

-Bolivar project run by Sinchi Wayra company (a subsidiary of Glencore in association with the state mining company COMIBOL).

However, the renewed interest in metals/lithium and a stagnating national mining industry, Bolivia is again considering developing its mineral resources.   

Since 2016 there has been legislation that serves to promote interest on the part of both old and potentially new investors.

Bolivia now has a complete set of rules in relation to mining, although some of these are not favorable to private investment.

However, this history has left the country in need of new mines and jobs for its citizens.    

According to Bolivia's Mineral Plan “Plan Sectorial de Desarrollo Integral Minero Metalurgico”, the goal is to increase its mineral reserves by 746%.   

There is only way to increase mineral reserves and that is through exploration and resource delineation.

The current state of mining in Bolivia requires investors with experience and large enough budgets to help the nations mining industry.

Development of lithium mines and industries is the primary focus, however, it is not the entire story, since the country is host to some of the most mineral prospective land packages in the world.

This is where Rui Feng and Ross Beatty step in with their silver exploration company, New Pacific Metals Corp.    

New Pacific Metals: The Junior Miner Advantage  

A history with a long history of disruption in mining investment creates opportunities for first movers in a geologically well endowed country such as Bolivia.

New Pacific (TSX-V: NUAG) has unique access to an undeveloped market based on their experience in the country and in particular for their affinity for silver.

The company acquired the Silver Sand property though the purchase of the private Bolivian mining company, Empresa Mineral Alcira S.A. back in April 2017, for $45 million (U.S.)

Rui Feng is the chief executive officer with Gordon Neal serving as president, who both have extensive experience working in the silver industry through Silvercorp.  

Silvercorp has two on directors and one officer with the New Pacific and shares office space and provides various general and administrative services to the company.

In addition, Pan American Silver became a shareholder of the company acquiring 35 percent of the company and the right to appoint a director to the board.  

The company’s flagship projects the is Silver Sand project in Bolivia, located in the Potosí Department, which has been subjected to some small-scale, historic mining and was drilled during the period 2012 through 2015.

The property is one of the earliest discoveries, before the discovery of Cerro Rico in the mid-1500’s, made by Spanish Colonials.

 

Approximately 4,050 metres above sea level, the Silver Sand property (3.17 square km in area), is located in approximately 25 km northeast of the world-famous Cerro Rico silver and base metal mineral system near Potosi.

Access is relatively easy with a road distance of 54 km to Potosi, of which 27 km are paved. The climate is conducive to year‐round mineral exploration activities.

New Pacific received drill permits for the Silver Sand property in October 2017, and is now progressing through a 56,000-metre drilling program which the company expects to be completed by October.   Results are pending.

In addition the company acquired further claims to contiguous to the Silver Sand property.   

New Pacific’s Bolivian subsidiary, Alcira, has signed a memorandum of understanding with Corporacion Minera de Bolivia (COMIBOL), allowing the company to explore and develop 38 mineral concessions adjoining south and west of the current Silver Sand Land package.

The company has a cash position of $35,212,000 CAD  and no debt, the company is a strong position to conduct significant exploration to reveal the potential on its property and in Bolivia.

With 132,274,479 million shares outstanding, the company has a market capitalization of $205,180,000  as of August, 22, 2018.  

We believe that now is a good time to consider investing, given the current depressed silver price and the potential for improved silver market but also discoveries beyond just silver and access to Bolivian mineral wealth.

Despite its past, Bolivia presents significant opportunities for discovery and the investors that have deep experience working in this country to build a mine.

We see the potential, but more research is needed.

New Pacific Metals Corp. trades on the TSX Venture Exchange under the symbol “NUAG”.  

Investment questions we are currently researching about NUAG:

- What is an agreement between the government, the company and communities going to look like? What are the terms and financial arrangements?

- What will further drill results look like?

- What is the plan to mine?

Company website: https://newpacificmetals.com/

*we currently do not have a position in NUAG but we are looking to buy