-- Posted Thursday, 5 October 2006 | Digg This Article
October 3, 2006
There is one company that I’ve been thinking about all summer long and its Nevada Pacific Gold. I would urge you to consider it for your portfolio because it has all the qualities I look for in a junior mining company. I’ve been a shareholder in the company for seven or eight years and have always appreciated David Hottman and how he and his team have endeavored to increase shareholder value.
Nevada Pacific certainly meets my five criteria of excellent management, solid properties, the ability to fund, the ability and willingness to promote while demonstrating integrity in all they do.
I’ve known David for years and I recently met Erick Bertsch at the Las Vegas Gold Show. We immediately hit if off and though we’ve spoken on the phone many times, he was even more dynamic in person than on those phone calls—one very sharp cookie. What impressed me the most was how he had such a grasp of all the elements of Nevada Pacific, the Nevada Mining Scene, the “Mexican Dynamic” of the company and the Junior Exploration Companies in general. To boot, he is acutely aware of the needs and the expectations of NPG shareholders and the dilemmas they are currently facing.
Dilemmas! What Dilemmas?
What dilemmas, indeed. Well, there is no sense dancing around the issue because its all anyone wants to talk about. That’s a mistake because they should be talking about Mexico! But I’ll have more on that later.
The fly in the ointment here is that Rob McEwen’s company called US Gold Corporation has made it known that it would like to acquire four companies in the Battle Mountain-Cortez trend, NPG being one of them. US Gold has created certain share price formulas to utilize in the acquisition of each company. As such, they are premiums, and incentives to motivate the shareholders in those four companies to throw their weight behind this US Gold plan as it unfolds. Mr. McEwen would like to create the largest “junior” in Nevada and while there are positives to the plan, there are also most assuredly negatives.
Such is the life in the junior mining company fast lane. As this gold bull market unfolds, expect to experience a plethora of mergers and acquisitions or at least the proposals for such.
I want to be clear and let you know that I do some consulting work for Nevada Pacific and as a long term shareholder, I am biased and opinionated. But I am also biased because I’ve been friends with the company for so long and know first hand how diligently they’ve been working to create said shareholder value.
Through this entire proposal process, since its inception in March 6th of 2006, I believe that Nevada Pacific has maintained their integrity and the commitments they’ve made to their shareholders over the years. You can’t ask too much more of a company than that; especially under these circumstances.
The unknown element that NPG shareholders are dealing with is how the intentions of Rob McEwen of US Gold will affect Nevada Pacific in the long term. Is it a positive for them or a negative for them? For now, let me just say that Nevada Pacific is a very forward looking company but they are dealing with the here and now and have been doing so all summer and into the fall.
“By the Book” and The Fat Lady Has NOT begun to Sing!
What I’m endeavoring to get across here is that as NPG awaits further developments in terms of this proposal, it is business as usual and has been so since the news was first announced over 7 months ago. It has been “by the book” every step of the way.
In the end, the Nevada Pacific shareholders are going to participate in this process, and they will be making the ultimate decision; and even though Mr. McEwen holds a large block of shares in NPG, it does not mean this is a done deal.
Based upon my conversations with many NPG shareholders over these past many months, the one thing “I get” is that there is incredible loyalty to this company by its shareholders.
It is my opinion that we all stay the course and hold firm until an offer is forthcoming? And remember, this is a negotiation and in all negotiations, it ain’t over until the fat lady sings. I hesitate to use that saying for fear of offending someone but in actuality it is a compliment. In opera, the mezzo or coloratura soprano usually closes the last act before the curtain comes down; you know right before the hero or heroine meets their demise. Usually those women are, shall we say—well they have amazing voices and as such need the physical stature in order to present their vocal instruments in the most optimal way. Hence, we have the saying.
I want you to picture two Mafioso types at an opera and the boss wants desperately to leave and the underling turns in his seat and whispers “ya can’t go yet boss, it ain’t over until da fat lady sings”! And so a cultural phenomenon was born that worked its way into the common vernacular. That’s probably more than you ever wanted to know about the fat lady singing.
And now, back to our story. Consider also, that negotiations are not completed until all the documents are signed by all parties involved in the transaction. The first offer on the floor is not necessarily the last one out the door.
And of course, remember that no formal offer has yet been made. Mr. McEwen’s intention to consolidate a portion of the Battle Mountain/Corzez Trend remains an on gong story line. When and if the time comes, there will be ample time for discussion and for decision making.
NPG Will Land on Their Feet
So with that in mind, why would I offer the opinion that you add Nevada Pacific Gold to your portfolio? Well, mainly because of what I’ve just said. When the going gets tough the tough get going and that is exactly what NPG has done—they’ve been going and going, drilling and drilling without respite just like the Ever-Ready Bunny. And the coloratura soprano has not sung the final act.
It is my personal belief that Nevada Pacific Gold will land on their feet. After all, this is a group of people that are experienced in the ways of the world and have been involved in the development of some major gold projects such as Bema and Eldorado Gold.
Nevada Pacific has had the drills turning all summer long and they’ve done a great deal to increase (everyone, all together now) — shareholder value. It has almost become a mantra with them. I would like you to visit their web site at www.nevadapacificgold.com and perform your own due diligence. Read the press releases (especially October 3, 2006); review the projects, and draw your own conclusions.
Remember that Magistral and the other Mexican Properties are a significant part of this NPG equation and that work has been progressing in a very positive way at those locations.
Ongoing Exploration of their Nevada Properties
Currently, nothing has changed with regard to that one central fact—exploration of Nevada Pacific’s very promising land base that encompasses approximately 85 square miles of prime property in the heart of Nevada’s mining territories. Much of it is positioned on major mineralized trends where promising drill targets have already been identified.
Some of their properties are quite large in size such as Limousine Butte (LB) which is a “district sized” 30 square miles. LB contains a mineral estimate of 620,000 ounces in five different areas of the property.
Then the BMX property is 20 square miles in size and is located in the heart of the Battle Mountain Trend. It is surrounded by more that 25 million ounces of gold by way of seven different mines that are within 7 miles of the property boundary. Newmont's Phoenix/Fortitude Pit, the Lone Tree & Trenton Canyon mine, as well as Glamis Gold's Marigold Mine are all within that 7 mile parameter. Incidentally, does Nemont’s Phoexnix Fortitude Pit ring a bell? It should because Madison Minerals is “right next door” putting Nevada Pacific in some very elite company.
This year's first round of drilling at BMX yielded a 65 foot intersection that averaged 1 gram per ton gold with 1.83 ounces per ton silver. Over at the Cornerstone property there is a 60 foot intersection averaging 1 gram per ton gold. A second round of drilling is expected to begin at Cornerstone in the late September-early October 2006 time frame and run straight through until Christmas.
The Magistral Mine
When the gold price began to appreciate in 2006, NPG’s management began implementing a plan that would bring Magistral, their Mexican Gold Mine, back into full production. The current mine plan calls for the extraction of 185,000 ounces of Gold over a six year period at an average price of $323/ounce. In February, Nevada Pacific made the decision to update the Technical Report for the mine. Pincock, Allen, and Holt - PAH, the engineering firm that produced the initial report, was re-commissioned to recalculate the current reserves/resources and optimize a new mine plan for the company. That news was announced in a Press Release on October 3, 2006. Nevada Pacific Gold Ltd. - News Releases 2006 - Nevada Pacific Receives Updated Technical Report for Magistral Mine - Tue Oct 3, 2006
Once Magistral is operating at full capacity, it will become a financial instrument; a “cash cow” if you will, which will enable the company to underwrite future exploration projects. Although it's still a bit too early in the overall scheme of things to discuss the financial benefits of this small producer, the ability to maintain a tight share structure while facing the challenges of financing large drill programs is clearly evident.
Add the resource expansion possibilities to the mix and it's easy to see why so much time and effort was allocated to this acquisition just over 2 years ago.
Mexico – the Wild Card in the Deck
Properties-Discoveries-Options
The millions of dollars generated from this operation will allow for sufficient working capital to 
dramatically advance numerous exploration programs while reducing or eliminating the need for equity financings.
It is every junior’s best case scenario if the numbers crunch out. They do.
This is the proverbial big deal because it means that a company has infinitely more control over its own destiny. It can advance a grass roots project through to feasibility without having to drastically dilute its shares thereby making the existing shares more valuable.
The Magistral Gold Mine claim boundary is a very substantial 510 square miles. In late April, the company announced its work on 5 projects, located on the Rocio Trend, within 20 km (12 miles) of the mine.
Revancha Area - Over the course of the spring, 63 grab samples and 585 soils samples were taken. Earlier prospecting turned up silver assays from float samples in the multi kilogram per tonne range with the highest assay weighing in at 8.2 Kilograms per tonne silver. That's over 260 ounces of silver per tonne. Trenching in the area also began in the spring of 2006 where 1,029 samples were collected in 29 trenches. 2,283 meters later, they mobilized a diamond drill rig to the site and began drilling. Although assays are pending, the exploration team is very impressed with what they’ve discovered and results should be available in the not too distant future. The most significant intercept from recent trenching shows 20 meters of 158.3 g/t silver and 1.55% lead including 2 meters of 1,195 g/t silver and 6.86% lead. These are very impressive numbers to say the least.
Other areas open to discovery are the Cobre Lomas area and the Palmarito. All of this information is on the company web site. However, a quick word about Cobre Lomas. It is advancing to the drill-ready stage where grab samples have returned values up to 22.6% lead, 2.21% copper, 231 g/t silver, 0.605 g/t gold, and 0.38% zinc." Ladies and Gentlemen, again these are excellent numbers!
Based upon Company Reports, I’d also like to remind you that Palmarito has a pre 43-101 resource estimate, based upon 74 RC drill holes completed in 1996, of 12.7 million ounces of silver.
Management believes that with silver over $10 ounce the Palmarito Silver Project looks very promising as an open pit style development target.
There are other projects on the Rocio trend and work is being continually advanced through mapping and sampling while keeping an eye out for potential drill targets.
Other projects in Mexico
NPG also announced the El Tule Gold project back in April. Located some 200 kilometers south of Mazatian, in the state of Nayarite, the project reported very favorable trenching results earlier this year. This is a gold project highlighted by Trench 4 that assayed 21 meters grading 5.03 g/t gold over its entire length, including 3.0 meters grading 12.52 g/t gold on the southern end and 1.5 meters grading 8.47 g/t gold on the northern end. Both ends of trench 4 remain open and of the 173 channel samples from trenching received to date, the lowest gold value is 0.005 g/t with the highest value being 35.1 g/t. Nevada Pacific is currently seeking a drill to explore this project.
Conclusion
Nevada Pacific is a buy. Yes, there are some ambiguities that need to be sorted out but that can be said of any junior mining company. This company has excellent experienced management, a huge land mass in Nevada to explore, results that have been more than promising and wild cards by the way of their Magistral Mine and other promising exploration properties in Mexico. I want you to especially remember the Rocio Trend in the Sinaloa State in Mexico. Good things are going to happen there and you want to be a part of it. Make Rocio a part of your vocabulary (Rose-i-o).
Again, in Mexico, think Cobre Lomas because it is an extremely promising area. It is important to remember that there are well thought out reasons that Nevada Pacific is expending so much time, energy, and resources on their Mexican Properties. Those reasons have been substantiated by the results that have been ascertained from the excellent sampling, mapping, and drilling programs that have been forthcoming. Exploration in Mexico is offering Nevada Pacific an entirely new dynamic and that simply means more options for the company. Please, do not lose sight of this.
Let the rest of the equation play out as it will. In my opinion, the gold and silver market is poised for a turn around after this heart-wrenching downturn. All quality juniors will participate. Nevada Pacific is a quality junior; therefore it will participate. Be prepared and be proactive.
My personal opinions are that conservatively speaking, NPG is a solid buy up to $1.50 US, and now, early October 2006, is an excellent time to be considering it.
Until Next Time,
D. Stewart Armstrong
Consultant to the Junior Mining Company
Disclaimer: D. Stewart Armstrong owns shares in Nevada Pacific and is a consultant to the company. All material is presented for informational purposes and is not a solicitation to buy or sell any securities. Due Diligence is a vital part of every investment decision and we encourage all investors to perform their own.
-- Posted Thursday, 5 October 2006 | Digg This Article
