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."
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Disclosures from BMO Capital Markets, New Pacific Metals Corp., August 13, 2019
IMPORTANT DISCLOSURES
Analyst's Certification
I, Ryan Thompson, hereby certify that the views expressed in this report accurately reflect my personal views about the subject securities or issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Analysts who prepared this report are compensated based upon (among other factors) the overall profitability of BMO Capital Markets and their affiliates, which includes the overall profitability of investment banking services. Compensation for research is based on effectiveness in generating new ideas and in communication of ideas to clients, performance of recommendations, accuracy of earnings estimates, and service to clients.
Analysts employed by BMO Nesbitt Burns Inc. and/or BMO Capital Markets Limited are not registered as research analysts with FINRA. These analysts may not be associated persons of BMO Capital Markets Corp. and therefore may not be subject to the FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
Company Specific Disclosures
Disclosure 5: BMO Capital Markets or an affiliate received compensation for products or services other than investment banking services within the past 12 months from Pan American Silver and Silvercorp Metals.
Disclosure 6C: Pan American Silver and Silvercorp Metals are clients (or were clients) of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., BMO Capital Markets Limited or an affiliate within the past 12 months: C) Non-Securities Related Services.
Disclosure 16: A research analyst has extensively viewed the material operations of New Pacific Metals Corp.
Disclosure 17: New Pacific Metals Corp has paid or reimbursed some or all of the research analyst's travel expenses.
Disclosure 19: BMO Nesbitt Burns Inc. ("BMO NBI") has provided a fairness opinion to the Special Committee of the Board of Directors of Tahoe Resources Inc. in connection with the definitive agreement entered into with Pan American Silver Corp. BMO NBI has been paid a fee. BMO NBI follows information control procedures which prevent its research analysts who are issuing research from having access to non-public information
received by BMO NBI's investment banking personnel in connection with the transaction. Accordingly, it is possible that individual employees at BMO NBI may have material non-public information or opinions which are not included in, and may not be consistent with, the information and advice in this research report.
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