The rationale for investing in this Canadian mining company is given in this BMO Capital Markets report.
In an Aug. 13 research note, analyst Ryan Thompson reported that BMO Capital Markets initiated coverage on New Pacific Metals Corp. (NUAG:TSX.V; NUPMF:OTCQX) with an Outperform (Speculative) rating and a CA$3.75 per share target price. The stock is currently trading at around CA$2.64 per share.
Thompson presented the company highlights.
One, Silver Sand, New Pacific's flagship project in Bolivia, could become a "very large, profitable project," he wrote, based on the scale of the land package, the mineralization already discovered at the main Silver Sand area and the prospective mineralized zones. "These projected zones show characteristics similar to Silver Sand, as evidenced by artisanal mining and represent several additional drill targets to be tested," added Thompson.
Two, silver majors Silvercorp Metals and Pan American Silver invested in Silver Sand, which BMO interprets as a "vote of confidence" in the project.
Three, New Pacific is on the cusp of completing a resource estimate for Silver Sand. The report is expected by year-end 2019 with a preliminary economic assessment to follow in 2020.
Four, Silver Sand is a rarity in that few silver developments projects exist in the world. As such, it is a "scarce deposit with a high amount of leverage to the silver price," Thompson commented.
Five, New Pacific signed a mining production contract (MPC) with Bolivia's state mining entity, COMIBOL, the first ever between it and a private company. The MPC "outlines a less onerous set of conditions compared to laws that were established previously," Thompson explained. "We note that the MPC must still be passed through parliament to be ratified into law."
Despite the MPC, country risk remains, Thompson pointed out. That and Silver Sand's early stage warrant the Speculative in BMO's rating on New Pacific.
The bottom line, Thompson noted, is that "as Silver Sand continues to advance, we see the potential for shares to rerate higher if the market gains a better understanding of the potential scale and economics of the project via delivery of an NI 43-101 resource estimate at year-end."