American Pacific Mining (USGD) - JV Model with Rio Tinto and Others

April 16 2021, 10:48 GMT+01:00

American Pacific Mining

  • Shares Outstanding: 65.4M
  • Share price C$0.15 (06.04.2021)
  • Market Cap: C$10M

American Pacific Mining is a Gold exploration company focused on precious metal opportunities in the Western United States. The Company entered into a definitive agreement with Madison Metals to acquire the Madison Copper-Gold Project near Silver Star Montana, USA. The Madison Project is currently under an earn-in, joint venture agreement, whereby Kennecott Exploration Company, part of the Rio Tinto Group (ASX, LON: RIO) may spend USD$30M to earn up to 70% of the Madison Project. The Gooseberry Gold + Silver Project and the Tuscarora Gold Project are 2 high-grade prospects located in prime districts of world-renowned Nevada. American Pacific is Eyeing a Gold Discovery amidst gold’s next bull market.

We recently completed an in-depth interview with Warwick Smith, CEO and Director of American Pacific Mining, a junior mining company operating in the western United States. He gave us an update on some recent interesting activities at his company.

Company Overview

American Pacific Mining is a Vancouver-based precious metal exploration company focused principally on high-grade gold opportunities in the Western United States. This small ($9M) company specializes in ferreting out gold and silver opportunities with big upside potential. Once identified, they typically farm-out risk and development costs through joint ventures with other companies.

The company was incorporated in 2017 and taken public in 2018. There are approximately 33 million shares outstanding.

Management, Directors, and Advisory Committee

In addition to Warwick Smith, the management and directors of the company include Eric Saderholm, President and Director; Ken Cunningham, Norman Wareham, Joness Lang, Directors; Alhnesh Mohan, CFO and Corporate Secretary; and Ralph Ruston, Advisor. These individuals bring extensive business, marketing, corporate financial, and geological mining expertise to American Pacific.

Company Assets

The company’s flagship asset is the Madison Copper Gold Project near Silver Star in Montana. Madison boasts a rich mining history of high-grade copper and gold; it produced 144,000oz of gold in the 19th and 20th centuries. The Madison asset was acquired in 2020 and American Pacific has a joint venture on the property with Kennecott Exploration Company, part of the Rio Tinto Group. Through the earn-in agreement, Rio Tinto must spend USD$30M to earn up to 70% of the Project. 

American Pacific has 2 other highly prospective projects, the Gooseberry Gold and Silver Prospect, Nevada, and the Tuscarora Gold Project, also in Nevada.American Pacific Mining (USGD) - JV Model with Rio Tinto and Others

American Pacific’s Preference for the Joint Venture (JV) Business Model    

Smith was upfront with us, stating that it was “A terrible time to start a junior mining company” in 2018. Gold was hovering at $1,250 for a long time then. He told us: “It was difficult to raise money at the time. There is no doubt, especially for juniors, and the shine was on cannabis, tech and everything else other than junior mining”.

That time period made the JV model attractive to him. Smith already had experience with the JV model, and had bought that approach to American Pacific. As he said: “I like the JV model. It was quite popular in the early 2000s and there were companies that had a great deal of success with it.

He described that the way that they look at it is, “If you are a retail investor, if you are a small fund or a small institution and you're looking at junior miners, you're ultimately looking to get involved in something that you hope to have that 10x return” He believes that lining up a JV with a mid-tier or large player bring these company’s “due diligence” expertise into play. As he put it: “When a Rio Tinto comes in or an Oceana comes in, they do a hell of a lot of due diligence. You have to have your ducks in a row for them to be able to review the project”. They have to look at it carefully take it on only if it's a great project “That's the upside of the joint venture model,” said Smith.

We asked Smith if the JV model had been unsuccessful for him anytime in the past. He replied that this is true, generally when mining is out-of-favor. Nevertheless, he believes that the model works well for his patient, small-cap company.

Madison: The Flagship Asset

The 2,514-acre Madison project is located in the prolific Montana copper and gold belt about 38 km southwest of Butte. The deposit consists of a high-grade skarn-over-porphyry system. It contains the historic Broadway and Madison mines, which produced 21Bn lbs of copper, 715Moz of silver, 2.9Moz of gold in addition to zinc, lead, and manganese when it was in production between 1955 and 1982. Recent geologic work has identified multiple priority target areas at depth believed to be associated with large-scale porphyry mineralization.

American Pacific inked a major deal with Rio Tinto to kick off a new exploration program at Madison. Rio Tinto brings in cash and expertise.American Pacific Mining (USGD) - JV Model with Rio Tinto and Others

The company is fully employing the JV model at Madison. The JV enables Rio Tinto to earn in at several opportunity points. Smith elaborated: “They spend USD$5M, they can earn 55%. They spend $15M, they can earn 60%. They spend $30M, they can earn 70%. They can only earn it once; we know they like the project so we believe they'll spend the full $30M and 70%, until then we don't have to spend anything”.American Pacific Mining (USGD) - JV Model with Rio Tinto and Others

Tuscarora Asset

Tuscarora is a high-grade, epithermal early stage gold deposit located in a prime precious metal district near Elko, Nevada. Total production between 1867 and 1990 amounted to over 500,000oz of gold and 7,632,000oz of silver from mineralized quartz veins stock work. This was the first asset of the American Pacific portfolio and was bought from Nova Resources.

According to Smith: “We came into it saying that we were going to mine it. We are exploration guys, so for the most part we will look to develop these things then transact on them. That's really what we look to do. Tuscarora came through Nova Resources, they were spending most of their time down in Australia, and they had just drilled this asset just outside of Elko”. Because most of Nova’s attention was focused on Australia, they were able reach “A nice deal” with them.

Smith continued: “We drilled it ourselves in 2018. Got some good results and one of the mid-tiers came knocking”. Long story short, they ended up developing a joint venture with Oceana Gold.American Pacific Mining (USGD) - JV Model with Rio Tinto and Others

News at Gooseberry

Gooseberry is about 45 miles from Reno, Nevada. It was a productive subsurface gold and silver mine for almost a century, until 1994. The ore is associated with a low-sulphur, epithermal vein system. The vein network is underlain by is underlain by Miocene propylitic-altered andesitic to rhyodacitic lava flows. Current exploration targets are focused on quartz-carbonate veins up to 10+ feet wide.

American Pacific owns it with a joint-venture partnership with GRAC, currently a privately help company in the final stages of negotiating a public listing. Smith indicated that he has “Lined up a 15-hole drill program” with GRAC, “8 holes to start”.

GRAC may earn up to 80% of the asset by making cash and share payments to American Pacific, spending $4.5M in exploration expenditures and completing a positive feasibility study.American Pacific Mining (USGD) - JV Model with Rio Tinto and Others

What is American Pacific’s Edge?

During the interview, we asked Smith about his view on American Pacific’s business edge. He gave a large amount of credit to the President, Eric Saderholm, as well as others on the direction board: “A large part the edge is Eric: he’s done a fantastic job. And he's been doing this for 36-years, and all credit to him. He's picked up some great assets along the way. I've got a fantastic board. Ken (sic, Cunningham) does a great job for us as well. Ken found Gooseberry for us. We staked Gooseberry, so that cost USD$20,000. “To answer the question directly”, he asserted, “The team around us is our difference maker”.American Pacific Mining (USGD) - JV Model with Rio Tinto and Others

Portraying the Growth Story

Smith is bullish on American Pacific’s growth potential: “We are in acquisition mode in that we've reviewed 50-60 assets over the past 12 months. We're constantly reviewing things and we came quite close to something recently that we didn't end up taking on”.

Nonetheless, American Pacific isn’t buying casually. According to Smith: “The one point I will make is that you can't find good assets quickly. That's one thing for sure - you can find assets but finding good assets takes time. We're doing that work. A lot of the day-to-day is reviewing things and seeing if we can make a deal that makes sense”.

To find out more, go to American Pacific Mining.

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