Research Report for Nevada Pacific Gold Ltd.

Nevada Pacific Gold is like a one stop shop for the precious metals investor.  You get it all with one investment:  ongoing production, late stage exploration, grass roots projects, JV leverage, active search for acquisition targets, gold, silver…  all directed by experienced management focused on building long term investment value.  With no fewer than 5 different properties scheduled for drilling work in 2004, Nevada Pacific offers investors an opportunity to participate in an exploration story with home run potential, at an attractive and undervalued market capitalization.  I own shares of Nevada Pacific.

Overview:

Exchange:  TSX – NPG

Website:  www.nevadapacificgold.com

Head Office:  Vancouver, British Columbia

Telephone:  (604)646-0188

Share Structure:                        warrants ($0.65-1.35) - 6,860,674

                                    Options ($0.30-1.47) – 2,750,000

                                    Issued                          33,693,855

                                    Fully Diluted:              43,304,529

Market Capitalization:    $66 million

Management has the right mix of experience from years served in other successful junior precious metals companies like Bema Gold and Eldorado Gold, and along with a strong Board of Directors, have the abilities to oversee exploration activity from the grass roots stage through the resource definition phase, and on to the successful development of mining operations.  In fact under the leadership of this team ten gold mines have gone into operation.  They have contributed to the success of NPG by accumulating a high quality suite of exploration properties, closing a joint venture partnership with Placer Dome Inc., raising capital through equity offerings, effective management of resources, and a prudent acquisition strategy that has yielded the first gold production in 2004 and leveraged NPG to a robust commodity market.

The company carries no long-term debt, and has a well funded treasury in excess of $9 million ($17 million fully diluted) to allow for aggressive, simultaneous exploration projects.  The ongoing production at the Magistral open pit gold mine in Mexico will generate cash flow to help fund exploration without the need for further dilution of share capital through equity financing.  With a modest market capitalization of only $66 million, and a low share count fully diluted, NPG is leveraged to rapid appreciation following the discovery of a major mineral deposit or acquisition.

Properties:

NPG achieved gold production status after the acquisition of the Magistral Mine in Mexico, an open pit, heap leach operation.  The favorable terms of the deal provided shareholders with instant payback as the gold production is ongoing due to residual recovery from the leach pad, that will largely offset the cash costs of the acquisition.  The exploration rights to the surrounding land are included in the deal.  The known deposit has only been extended for 125 meters, yet the high-grade structure has been traced for over 600 meters.  NPG plans to explore further along strike and down dip with the objective to add to the nearly 600,000 ounces of contained gold resource.  There is also the added potential that additional ore zones will be discovered on the property through ongoing exploration efforts. 

The remainder of the company’s properties are located in Nevada, with the South Carlin property in the center of the productive Carlin Trend, and the BMX  (a JV with Placer Dome Inc.), Timber Creek and Keystone properties along the emerging Battle Mountain/Eureka Trend.  A reverse circulation and diamond drilling program was recently announced targeting the gold resources at BMX and Keystone.  NPG also holds the rights to the Clover Valley, Blue Basin, and Limousine Butte properties in eastern Nevada, and the Buffalo Canyon property in central Nevada. 

Perhaps the best exploration potential is represented in the Amador Canyon property in central Nevada.  This grass roots, blue-sky potential property has never been drill tested, but surveying, geophysics and sampling of large outcrops has revealed the presence of a large silver ore body with grades up to 75 ounces per ton.  Preliminary metallurgical work of sample material has yielded unusually high recovery rates for silver of up to 95%.  Permitting in hand, NPG has announced a drill program to test the below surface grades and outline the limits of the deposit.  If the results of this program confirm the continuity of high-grade silver deposits across a large zone, Amador Canyon could become a significant new discovery, and estimates of total ore content have ranged from 100 million ounces of silver to over 1 billion ounces.  The near surface nature of the deposit, high recovery rates from conventional milling, and the close proximity to infrastructure and the nearby town of Austin, all contribute to favorable economics for development.

Outlook:

The economic viability of precious metals mining ventures is strongly tilted in favor of operations located domestically within the United States.  Gold is priced in US dollars, and rising currencies in other nations has offset much of the rising price of gold for many offshore mining operations.  Of all domestic mining districts there is no better place to operate a mine than in Nevada.  With the emerging bull market for silver, Mexico will soon regain its attractiveness for investors as the dominant silver production region of the world, and since the country’s mining laws were revised and the doors have been thrown wide open for international development initiatives, Mexico is rapidly becoming a #### address for mining operations.  NPG has been able to assemble a package of property rights of high quality in both regions, that is almost unprecedented for a junior company. 

If the only property controlled by NPG was the Magistral Gold mine, given the potential to increase reserves and production, and the low cash cost operations, the current market capitalization would still be regarded as a bargain.  Rising inflation rates have impacted materials and construction costs, increasing the net capital investment to bring a new property into development.  Through the prudent acquisition strategy, NPG was able to deliver production and cash flow instantly, avoiding the massive capital costs and delays in construction and permitting that could be expected from a production decision of an undeveloped deposit.  It is possible that further exploration will increase the resource at Magistral to over 1 million ounces of contained gold.  Investors have assigned a valuation premium of approximately $100 per contained ounce reserve for operating gold mines, so if NPG does not succeed in adding an ounce of new reserves, the mining operations at Magistral are can still be considered undervalued for the current market capitalization.

Add in the value of the various other high quality properties and NPG appears to be severely undervalued at current prices.  Within 3 months of the writing of this report, the first results from the drilling program at Amador Canyon should be released.  A new major discovery there will add a further potential premium of $1 per ounce of silver resource to the market capitalization.

Assuming a potential increase at Magistral of 400,000 ounces of gold discovered through current exploration, and a potential discovery of 100 million ounces of silver at Amador Canyon, one would expect a market capitalization of approximately $200 million for NPG, or roughly $4.50 per share inferred value.   With no fewer than 5 high quality properties targeted for drilling in 2004 the potential remains that other discoveries may occur, further increasing the intrinsic value of the company to investors.  As the prices of gold and silver continue to increase, the multiple that investors are willing to pay for the limited number of quality junior producers will also be expected to increase.  It is likely the active management team at NPG will endeavor to close further acquisitions, adding additional value for shareholders.  Given the potential for all of the above factors to contribute to the success of NPG, it is possible that the shares could reach a level of $5 within 12 to 18 months.  Much higher gains are possible if a larger silver discovery occurs at Amador Canyon.

Disclaimer:  I have made my research and opinions available to the public as a resource to provide investors and the public with basic information.  My comments and opinions should not be interpreted as a recommendation or investment advice, which I am not qualified to provide.   While I have made every effort to maintain accuracy in the information I provide, it is possible that there are some errors or omissions in my coverage and the accuracy cannot be guaranteed.  It remains the responsibility of each individual investor to confirm if the subject of my analysis is appropriate for their investment objectives, and to conduct their own research and due diligence, and retain the services of a qualified advisor on to provide this service on their behalf.  I accept no responsibility for the performance of the companies that I feature in my coverage.  Junior mining and exploration companies are a risky market sector and investment in these companies can result in loss of capital.  Past performance is no guarantee of future success.  From time to time I may purchase stocks in the companies I feature in my reports, and I may sell some or all of my holdings.  I will disclose personal ownership in those companies that I refer to at the time of my first coverage, or after follow up reports.  I do not accept compensation from companies as payment to provide positive coverage or opinions