Bolivian miner acquired by New Pacific Holdings for $32m
New Pacific Investment Corporation, a subsidiary of New Pacific Investment, is set to acquire private Bolivian mining company Empresa Minera Alcira, in a deal worth $32m. The acquisition's assets include the Silver Sand property, and completion is contingent upon the results of drilling tests carried out by New Pacific, as well as regulatory approval.
2017-04-10 08:14 ET - News Release

An anonymous director reports

NEW PACIFIC ENTERS INTO AGREEMENT TO ACQUIRE 100% OF A PRIVATE BOLIVIAN MINING COMPANY AND ANNOUNCES A PRIVATE PLACEMENT OF US$32 MILLION

New Pacific Holdings Corp.'s wholly owned subsidiary New Pacific Investment Corp. Ltd. has signed a binding share purchase agreement dated March 28, 2017, to acquire a 100-per-cent interest in Empresa Minera Alcira SA, a private Bolivian incorporated mining company, from its three shareholders, free of any debt. The vendors include NingdeJungie Mineria Co. Ltd. (99-per-cent shareholder), Cai Ximing, (0.5-per-cent shareholder) and Li Chengliang (0.5-per-cent shareholder), all of which are arm's-length parties.

The target company has seven silver-polymetallic mineral properties or ATEs (temporary special authorizations) in Bolivia. The most significant property is the Silver Sand property, located in the Potosi department, which has been subjected to some small-scale historic mining and was drilled during the period 2012 through 2015 by the target company. The other six are early-stage exploration projects, which have either been subject to limited small-scale mining or historical drilling.

Major terms of the agreement:

New Pacific has paid $250,000 (U.S.) to the vendors as an initial non-refundable down payment following the signing of the agreement.

New Pacific shall loan $3.5-million (U.S.) to one of the vendors with a term of 120 days, secured by its 30-per-cent interest in the outstanding shares of the target company.

New Pacific will carry out confirmation drilling to twin three drill holes drilled by the target company within 3-1/2 months of the signing of the agreement.

If the results of the confirmation drilling match 70 per cent of the target company's drill results, New Pacific shall notify the vendors within seven days after 3.5 months of signing this agreement that it will proceed with the completion of the agreement and New Pacific shall make the second payment of $35.75-million (U.S.) to the vendors to acquire 100 per cent of the shares of the target company. In this case, the above $3.5-million (U.S.) loan will be offset against the closing payment.

If the confirmation drill results are not acceptable to New Pacific, the transaction shall not proceed, and New Pacific will forfeit its initial $250,000 (U.S.) down payment.

Within 90 days after the closing or completion of acquiring the 100-per-cent interest of the target company, New Pacific will make further payments of $4-million (U.S.).

A final payment of $5-million (U.S.) will be due to the vendors once the company has received certain specified permits and licences from the authorities of Bolivia necessary for mining and milling operations, or once the target company has commenced commercial production.

Closing of the transaction is subject to shareholder approval, regulatory approval and other conditions as set out in the agreement.

Silver Sand property

Location and history

At an elevation of approximately 4,050 metres, the Silver Sand property, having an area of approximately 3.17 square kilometres, is located in the Potosi department of Bolivia, approximately 25 km northeast of the world-famous Cerro Rico silver and base metal mineral system. The Silver Sand property is adjacent to ancient and current tin mining activities in the area. Access is relatively easy with a road distance of 54 km to Potosi, of which 27 kilometres are paved.

The property is one of the earliest discoveries, before the discovery of Cerro Rico in the mid-1500s, made by Spanish colonials. Small-scale, historic mining is evident from scattered shafts, pits, adit, declines and dumps. The property has been explored by the target company with intermittent surface mapping and sampling, underground sampling and surface core drilling, all of which occurred from 2012 through 2015.

Historical mining activities appear to have followed high-grade vein structures. However, high-grade, silver mineralization also occurs as more subtle disseminations, veinlets and stockworks in the host sandstones, which were not recognized or mined by historic operators. Currently there are still minor active artisanal mining activities by a few local contract miners on the property.

Geology and mineralization

At Silver Sand, the host rocks of the silver mineralization are Cretaceous-aged quartz-rich sandstone, which were strongly silicified and now occur in gentle, open folds, dipping shallowly to the north. The Cretaceous rocks unconformably overlie Ordovician- and Silurian-aged rocks, all of which were intruded by Tertiary-aged porphyritic igneous dikes, plugs and sills. Tin mineralization also occurs on the property and is generally associated with the sills.

The silver-mineralized structures occur in a belt that extends in a northwesterly direction and are subvertical to east dipping at high angles. In addition to silicification, alteration of the host rocks includes widespread oxidation grading into and strong iron oxide staining on structures. Where not replaced by iron oxide minerals, ore and gangue minerals consist of disseminated and vein/veinlet pyrite argentite, cerargyrite, native silver and freibergite.

A total of five mineralized zones (1, 2, 3, 4 and 5) were defined by surface geological mapping work, with zone 1 being the most prominent with a mapped strike length of at least 1,500 metres and a horizontal width of up to 100 metres.

Historical exploration

The vendors had acquired the target company in 2009 along with the Silver Sand property. After acquisition, the target company conducted a limited amount of exploration at the property during the period 2012 through 2015. This exploration included surface geological mapping, 1,628 metres of channel sampling (containing 846 surface and underground channel samples) and drilling of eight core holes, among other work. The results of the historical channel sample are listed in the associated table.

From these channel sample results, five significant mineralization zones (zones 1, 2, 3, 4 and 5) were identified with the zone 1 mineralization extending over 1,500 metres long and up to 125 metres in width.

RESULTS OF SURFACE AND UNDERGROUND CHANNEL SAMPLES FROM ZONES 1, 2, 3 AND 5 Interval Average silver Number of samples Distance from Section 76 Section (m) (1) (g/t) (m) (2) 50 62.7 174 31 1,300 52 71.4 110 35 1,200 54 112.4 127 59 1,100 56 105.0 122 54 1,000 58 83.0 93 44 900 21.4 263 10 900 60 125.7 120 68 800 62 90.7 233 48 700 72.1 207 36 700 8.0 185 4 700 64 48.0 124 25 600 66 71.9 145 38 500 68 64.7 105 31 400 70 33.8 131 18 300 6.7 141 4 300 72 11.8 163 6 200 1.5 356 1 200 16.9 198 9 200 74 18.1 105 11 100 1.2 473 1 100 76 14.8 125 12 0 1.5 535 1 0 (1) Channel samples from adits PD62 and PD19 are believed to be close to the true width as they are nearly perpendicular to the zones. (2) Section 76 is the southernmost northeast-southwest section on the property to date.

Two short vertical diamond drill holes, targeting shallowly dipping tin mineralization, were drilled in 2012 but did not intersect silver mineralization. Two angled holes drilled in the same period but in the footwall (west side of the zone) did not intercept the silver mineralization. Four holes, totalling 1,558 metres, were drilled in 2015, consisting of three angled holes from the hangingwall (east side) of the zone 1 mineralization, which intersected significant silver mineralization and one vertical hole collared in footwall of zone 1, which did not intercept silver mineralization. The results of the three, historic drill hole intercepts are listed in the associated table.

RESULTS OF THE HISTORICAL DRILL INTERSECTIONS AT ZONE 1 Drill Average sample Mineralized interval hole length From To Length Average Ag No. (m) (m) (m) (m) (g/t) ZK4601 1.28 m 83.3 85.6 2.3 60 122.0 277.2 155.2 179 Incl. 122.0 145.4 23.4 261 Incl. 170.9 231.3 60.4 266 Incl. 258.6 277.2 18.6 290 ZK5401 1.27 m 151.1 346.4 195.3 168 Incl. 151.1 177.9 26.8 302 Incl. 195.2 249.5 54.3 303 Incl. 304.0 321.7 17.7 284 Incl. 336.4 346.4 10.0 321 ZK6601 1.33 m 51.9 243.2 191.3 246 Incl. 51.9 108.1 56.2 329 Incl. 132.1 182.6 50.5 316.0 Incl. 200.3 243.2 42.9 282.5 Notes: g/t -- grams per metric tonne. All data from owner. Intervals are drill core length in metres. True widths are not known but are estimated to be 40 to 55 per cent of the drill widths. A 30 g/t Ag minimum grade was used to determine the average silver (Ag) grades. No more than two sequential assay values, less than or equal to 30 g/t, were used in the compilation.

Zone 1

This zone is the most prominent alteration and structural feature on the property. Zone 1 has been traced on surface for more than 1,500 metres in a northwesterly direction. Its silicification alteration envelope is interpreted to range from about 50 to 125 metres width and its depth extension is 300 metres and open at depth. The zone cuts the folded lower, middle and upper Cretaceous-aged sandstone units and is projected to extend farther to northwest, north of the property, into a block of Tertiary-aged intrusion into a cluster of northwest-striking structures and artisanal mining. The zone is also believed to extend in the south direction as silver mineralization is exposed by channel sampling in the southernmost Section 76.

Crosscut PD62, the Dolores adit, was developed near the centre of zone 1 approximately 200 metres below the top of the zone on Section 62. The adit has a total northeast to southwest length of 173 metres. Channel samples were collected along the ribs of PD62. Using a 30 Ag g/t cut-off, the length-weighted average grade of silver mineralization is 72.1 metres grading 207 g/t. Zone 5 was intersected near the collar of the Dolores adit. Channel sampling along the ribs yielded length-weighted silver values of eight metres grading 182 g/t for zone 5.

About 200 metres southeast of adit PD62, core hole ZK6601 was drilled on Section 66 to a length of 284 metres. This section is approximately 500 northwest of the southernmost Section 76. Hole ZK6601 crossed zone 1 yielding a total drill width of 191.3 m grading 246 silver g/t starting at a downhole depth of 51.9 m extending to 243.2 metres. Within this interval, three higher-grade subzones were defined. Near the collar of hole ZK6601 is an adit (PD25) and a dump outside adit portal. The owner took one grab sample from the dump in 2014, which returned a silver grade of 220 g/t. During its due diligence, NPHC took four grab samples from the dump, which returned silver grades of 296 g/t, 448 g/t, 59 g/t and 452 g/t.

Four hundred metres to the northwest of PD62, core hole ZK5401 was collared on Section 54 and extended to drill depth of 413 metres and crossing zone 1. Sampling yielded a total core length of 195.2 metres grading 168 silver g/t silver starting at 151.1 metres downhole, extending to 346.4 metres. This drill hole length included four higher-grade subzones.

Farther to the northwest, approximately 400 metres from ZK5401, core hole ZK4601 was drilled on cross-section 46 in an area of overburden covering the projected strike of zone 1. Hole ZK4601 intercepted zone 1 for a total drill width of 155.2 m grading 179 g/t silver starting at a drill depth of 122 metres, extending to 277.2 metres downhole. This interval also included three higher-grade subzones.

Zone 2

This zone is parallel to, and situated 300 metres northeast of, zone 1. Exposures of zone 2 are more subtle than those of zone 1. It has been traced, using sporadic outcrops of silicified, veined and oxidized sandstone, over 1,400 metres in northwest strike and up to 25 metres in width. The zone cuts the lower, middle and upper Cretaceous-aged sandstone units. There are no drill holes in zone 2 but channels have been collected from a small adit and decline (adit PD19) on Section 58. Assays on these samples by the owner yielded a total channel length of 21.4 m with a length-weighted average silver grade of 263 g/t. It is noted that the first and the last channel samples were taken in mineralization. The adit occurs at the intersection of the trend of the zone and a contact between the middle and upper sandstone units. Examination of the surface above, and to the northeast of, the adit revealed widespread oxidation, which may suggest the zone is wider than currently estimated.

Zone 3

This zone is situated about 130 metres to the east of zone 2 and is parallel to zones 1 and 2. The alteration envelope of zone 3 has been mapped over approximately 1,000 metres of strike and up to 75 metres in width. Zone 3 occurs entirely within the lower sandstone. There are no drill holes in zone 3. Samples were collected on surface from two sections cutting zone 3. They yielded mineralized intervals of 15 metres grading 137 silver g/t and 16.9 metres grading 198 silver g/t.

Zone 4

This zone occurs about 100 metres due west of zone 1, intersecting a circular breccia body on the southeast. The zone is interpreted to be less than 10 metres in maximum width and dipping shallowly and variably from northeast to southwest. There are no drill holes in zone 34.

Zone 5

This zone is located about 400 metres north of the collar of core hole ZK6601 and is parallel to zone 1. The strike length of this zone is approximately 25 metres. As mentioned in the description of zone 1, adit PD62 interested zone 5 near the portal. Sampling there cut a mineralized interval of eight metres grading 185 silver g/t. No drilling has been performed on zone 5.

Initial due diligence

The company did its internal due diligence in November, 2016, and a separate due diligence by the independent qualified person in December, 2016. The due diligence work includes a thorough reviewing of the historical exploration results, site visit and examinations of mineralized outcrops, and artisanal mining sites as well as quartering of the drill cores, taking numerous check samples from previous channel sampling sites, drill cores and pulp rejects, and finally visiting and observing the procedures of the in-house lab of the target company in Potosi, Bolivia, which did sample preparation and geochemical analysis of all historical exploration samples. The check samples were sent to internationally accredited analytical labs (ALS Global in Oruro, Bolivia, and in Lima, Peru, and SGS in La Paz, Bolivia) for preparation and analysis. The results of the check samples are generally consistent with the historical assay results provided by the target company.

Sample preparation and assay results

The target company's in-house lab applied its own quality assurance/quality control procedures during sample preparation and analysis. The procedures are similar to those implemented by internationally accredited analytical labs. The results of check samples of New Pacific from ALS and SGS did not show any significant bias.

During the due diligence check sampling of New Pacific in November and December, 2016, no field certified standard reference materials, blanks or duplicates were inserted into normal sample runs.

Confirmation drilling

As per the terms of the agreement, the company will carry out a confirmation drilling program to twin the three historical drill holes that intercepted significant silver mineralization. The company has commenced the process of assembling a Bolivian team, and hiring two drilling rigs to complete the confirmation drilling. This drill program will be implemented by the common standards of the best practices of industry to assure the quality of drill results.

Private placement of subscription receipts

The company will raise up to $32-million (U.S.) to finance the acquisition, by completing a non-brokered private placement of subscription receipts, through issuing up to 40 million subscription receipts at a price of 80 U.S. cents. The proceeds of the private placement will be placed in escrow following closing to be held by an escrow agent.

The escrowed funds will be released to the company once the confirmation drilling yields satisfactory results and New Pacific selects to complete the acquisition of the target company. Upon the release of the escrowed funds to the company the subscription receipts will automatically convert into common shares of the company on a one-to-one basis. In the event that the confirmation drill results are not acceptable to New Pacific, the transaction shall not proceed, the escrowed funds will be returned to the subscribers and the subscription receipts will be cancelled.

It is anticipated that Silvercorp Metals Inc., a 16-per-cent shareholder in the company, will subscribe for 50 per cent of the private placement.

The acquisition of the target company by the company will constitute a change of business under TSX Venture Exchange policies and the company will be seeking shareholder approval to the transaction. Following completion of the acquisition it is anticipated that the company will be classified as a Tier 2 mining issuer on the TSX Venture Exchange. Trading in the company's shares is currently halted and it is anticipated that trading will remain halted until completion of the change of business. The company will be seeking a waiver from the sponsorship requirements of the TSX Venture Exchange.

The company is in the process of preparing an information circular which will be communicated to shareholders prior to a shareholders meeting to be held to approve the change of business. It is currently anticipated that this shareholders meeting will be held near the end of June with closing of the acquisition to occur in July.

Donald J. Birak, an independent consultant geologist and qualified person as defined under National Instrument 43-101, has reviewed and approved the scientific and technical information in this news release.

We seek Safe Harbor.