New Pacific Metals Corp.

In the mining industry, good property is not easily won or lost. Acquiring companies and property, funding feasibility studies and enduring lengthy permitting processes are all part of the game. But if the return dwarfs the investment, then mining companies and their investors will consider the process to be well worth it in the end.

New Pacific Metals Corp. is hoping for that exact outcome, and the company is confident it will happen despite a brief interruption in its exploration program. The company acquired the Tagish Lake Gold-Silver Project in December 2010 after acquiring Tagish Lake Gold Corp. Albert Siega, vice president of mining, says the company has since invested $5 million to double its employee camp to house 50 people, and installed services such as power, water and communications at the camp. It also refurbished its 6,000-square-foot geological office and core logging facility.

For its 2011-2012 exploration program, the company planned an aggressive 60,000-meter drilling program and has completed 12,000 of those meters. The company took a hiatus this October and expects to be back drilling at Tagish Lake soon with the approval of a five-year permit to continue exploration..

“Once we get back in there we will continue our drilling program,” Siega explains. “But in the meantime, we are currently working on our preliminary economic assessment [PEA], which will give us a good idea about the project economics.”

From historical resource reports, outsiders can gather an idea of why New Pacific Metals has decided to invest in this small but valuable property. The property has three major zones – Mt. Skukum, Skukum Creek and Goddell – with a new zone, Raca, possibly emerging. Mt. Skukum was mined by a separate company from 1986 to 1988, producing 233,400 tons of ore containing 77,790 ounces of gold.

New Pacific Metals has since explored other veins on the property, drilling 2,482 meters across 16 holes and determined that there are more resources to extract there. However, its primary focus lay in the Goddell and Skukum Creek zones. The 2007 and 2003 historical resource summary of Skukum Creek and Goddell shows an indicated resource of 488,467 ounces of gold.

“There was mining done at Mt. Skukum, but our primary deposits are un-mined and those are Skukum Creek and Goddell,” Siega says. “The grades are high and the zones are wide enough that it’s possible to mine them. Once we finish the PEA and move to the feasibility study we will have a very good understanding of the project and its economics. It might not be a huge mine, but it can be an economically viable, smaller production mine.”

Siega explains that New Pacific plans to develop a production facility at Tagish Lake. The company says it has “initiated environmental and feasibility work to support a quartz mining license application for a 300-ton-per-day operation with possible expansion to 450-tons-per-day and then 600-tons-per-day in two successive phases” at Skukum Creek and Goddell. However, prior to that, the company must complete its 60,000-meter drilling program, which it is eager to do.

The 2012 capital program has set aside $4.4 million to finish drilling 23,000 meters at Goddell and $3.1 million to complete 13,000 meters of drilling at Skukum Creek. The budget also includes $4.6 million to explore other areas of Tagish Lake, including a zone called Raca. The $4.6 million investment will cover 5,500 meters of surface drilling at Raca and 18,500 meters of drilling in various other areas. It also covers geophysical surveys of Raca and other areas.

Including permitting, surface infrastructure, equipment and general operations, the total 2012 budget tops out at $16.5 million. However, one of the great upsides to Tagish Lake is what doesn’t have to be done.

The property is located one hour from Whitehorse in southern Yukon Territory, bordering British Columbia. It is reachable from Whitehorse via an all-weather access road. It also has an extensive underground network and roads to each project.

“One of the beauties of this project is that a lot of the development has already been done,” Siega says. “At Goddell, we have 800 meters of tunnel development done. To have a contractor do that today, it would be $5,000 per meter. And at Skukum Creek we have 3 kilometers of tunnel development. If you were to do those tunnels again today, it would be a significant cost.”