EXCLUSIVE: American Pacific CEO Discusses Rio Tinto Partnership, Junior Mining Trends, Why 'Days Of Dismissing Environmental Impact Are Over
Following American Pacific Mining Corp‘s (OTC:USGDF) initiation of a 2024 drill program at a Palmer Project in Alaska, Benzinga spoke with its CEO, Warwick Smith, and Managing Director Eric Saderholm about the state of the commodity markets, policy issues, and the company’s future.
BZ: After years of neglect, the mining sector is now attracting younger investors — a large portion of Benzinga's readership. How would you describe American Pacific to them?
Smith: We focus on high-grade assets in the western U.S. that are attractive to major mining companies. Major mining companies have already been involved with us. Rio Tinto (NYSE:RIO) and Dowa Metals & Mining have thoroughly vetted our projects. This gives the average investor confidence in the due diligence that has been done.
We stayed in the Western U.S. because of Eric. He is our competitive advantage, but we love the jurisdiction. As a former head of exploration at Newmont, he has seen many of these assets. Still, in contrast to a larger firm, we're more flexible in our threshold — finding smaller deposits and looking for pathways to grow them from 1.5-2 million ounces of gold into 3,4,5 million — all in the familiar, domestic jurisdiction following the environmental regulations. The days of dismissing the environmental impact are over. As a publicly listed company, we want to be held to high standards.
BZ: Eric, you spent many years with Newmont and then transitioned to smaller projects. What appealed to you about this decision to go small?
Saderholm: At big companies, you don't get the opportunities to work in many places or build projects from the ground up. You often inherit projects rather than create them. While the experience at Newmont was great, there's a sense of pride and accomplishment in taking on a project and working on it with a small team that is free from corporate bureaucracy and overhead. This freedom allows for more personal satisfaction and impactful work.
BZ: You have notable assets in Alaska, Montana, and Nevada. You recently announced the commencement of a new drilling project. What's next?
Smith: We have two large drilling programs underway: one in Alaska, where our partner is spending C$17 million (US$12.4 million), and another in Montana, where we're spending a couple of million of our own money. Our market cap is C$40 million, but we have C$20 million being spent on exploration this summer, largely partner-funded. This generates significant news flow, moving our assets forward. Other companies with similar market caps might spend only C$1-3 million on exploration, so our situation is unique. Additionally, we get paid as the operator in Alaska, earning a 7% management fee from our partner, which typically covers our annual burn rate
BZ: You are looking for partnerships outside of your core projects. What attributes do you seek in potential partners?
Smith: It depends on the project. For Alaska, a partner with deep-water port access and large smelting capacity, like our Japanese partner, is ideal. In Nevada, we look for mid-tier to major companies for an earn-in arrangement or other juniors for equity and cash transactions. These transactions can yield equity, which can be a great kicker for a company our size and push the project forward. It's project-dependent. For example, Alaska needed a big partner with deep pockets, and we found that in Dowa.
BZ: You found the best results at the Palmer project in Alaska, immediately after taking over. What's the secret behind that success?
Saderholm: Sometimes, new perspectives can significantly alter the approach. Alongside geologist Peter Mercer, our combined expertise allowed us to target effectively, leading to successful drilling results. This is crucial when working with new partners and building trust.
BZ: Your deal regarding the Madison asset in Montana earned a Deal of the Year nomination by S&P Global Platts. Why was this deal so important?
Smith: Eric and I visited the asset in 2016 and liked it, but another company bought it. They did great work, bringing in Rio Tinto. Later, they shifted focus to psychedelics, and we bought the mining asset and that joint venture partnership for C$2.4 million in stock. This led to a significant increase in our market cap, earning the Deal of the Year nomination. The partnership with Rio Tinto, which was spending up to C$30 million, allowed us to see significant gains reflected in our market performance and recognition from S&P Global. We worked with Rio Tinto between 2020 and 2023 and now own 100% of the Madison asset.
BZ: With mining capex declining for years and critical metals becoming a matter of national security, do you believe the market's cyclical nature, paired with surging retail participation, is creating a rush?
Smith: I hope so. We've seen metal prices rise, driven by the green revolution and demand for copper. Major banks forecast significant copper price increases, which benefits us. If the market turns risk-on again, we're ready with big partnerships, visibility, and access to capital. Our asset in Alaska is particularly well-positioned. We're fully cashed up and have major institutional shareholders, ensuring we can raise capital in good times and bad.
The demand for critical metals like copper and lithium, essential for green technologies, is set to rise significantly, driving prices up and creating opportunities for companies like ours. We're prepared to capitalize on these market shifts and deliver substantial returns for our investors.
BZ: Junior mining space offers opportunities, but it is chaotic — there are just so many of them. What should investors look for when investing in small companies?
Smith: Chaos is a great way to describe it, to be totally honest. It’s tough. I’ve thought this many times at larger conferences. A retail investor, hedge fund, or family office that isn't entrenched in mining walks on the floor and sees four or five hundred companies. They all kind of look the same. It's really hard to see who will be successful and why.
We were able to tell our story more like a tech company than a mining company and we saw the results in that. It has been challenging since then (2022), simply because it is a tougher market and a risk-off market. As that changes, these stocks will get an opportunity to get those parabolic moves. Regarding selection, you want ones that have big partnerships -so you already got your stamp of approval on the assets, and ones that have good visibility on the market so that people know the name.
One of our key shareholders, Michael Gentile of Bastion Asset Management, focuses predominantly on junior mining stocks. He always says you want to own a basket of these companies in the junior mining space and look for 10 to 50 baggers. Failure is the norm, but a couple of those that go parabolic can make up for any losses
BZ: Regarding the government and its influence in this sector, the Biden Administration and the Department of Energy are actively involved. Do you believe they are doing enough?
Smith: Yes and no. The critical metals initiatives and Department of Defense grants are great and necessary. But permitting remains a serious issue. Mines could be built much quicker if you cut some red tape. Eric and I have worked under different administrations and seen that you can work in the US regardless of who's in the office. If you have a title, your title is good. This is important, and that is what raises our value because you can find lucrative opportunities abroad and run into administrative problems.
BZ: There are rumors about the industry pushing to revive the US Bureau of Mines as the principal regulatory body for the domestic industry. Would it solve issues like permitting and environmental concerns?
Saderholm: The Bureau of Mines has been gone for about 30 years. It could serve a purpose if it expedites permitting. But if it becomes just another bureaucratic layer, then it doesn't help. It really depends on who you put in that bureau. If it is geologists, if it is people like me who understand the challenges, then you would probably be ok. If it is just somewhere to put your brother-in-law, who doesn't even know mining, he will just get in the way. So that would be my concern – adding another level of bureaucracy.
Smith: One challenge in the U.S. is inconsistency. In Nevada, the Bureau of Land Management (BLM) knows its job inside and out because it’s used to mining activities. But elsewhere, the same agency can take much longer due to a lack of experience or resources. An overarching agency could dilute local expertise, causing more issues. Local knowledge and efficient processes are crucial.
Another thing that I find interesting is that we could be driving across the highway in Nevada, and Eric would say, "Okay, this is where the BLM stops, and this is where the Forest Service begins," which means permitting is more difficult. But that invisible line on the road—the rocks are the exact same on either side. There are no trees to be seen, so it’s not like you're suddenly in a huge forest.
BZ: Last year, BCA Research's Chief Strategist Marko Papic argued we're entering a capex-driven commodity super cycle. Where do you see opportunities for the fastest domestic commodity production development?
Smith: Copper, definitely. Copper mines can take a while to get up and running, but copper will be in high demand. Lithium might be another one. An interesting outside commodity could be boron, which is essential for EV vehicles. With only two major producers globally, boron could be a dark horse of the industry.
Eric: Copper will rise above most other commodities. We have plenty of gold and silver, which works in different cycles, but copper is heading towards a production deficit in 15-20 years, and that's what we have to avoid. We can't wait for the deficit to hit before permitting new mines. It has to be an educational realization from the public.
There is a sequence of issues because copper is a complicated thing. Without it, everything stops—not just electrification. We need it desperately. As smaller, poorer countries start to modernize, there is another draw on production. It is essential that people know all the ways we put copper into the system, recycling included.
BZ: Is there anything you'd like to add about the industry or your company for our readers?
Smith: We're in a strong position, fully cashed up, with world-class partners. We're doing more drilling than companies with much larger market caps. Our drill budget is similar to that of Hecla and Coeur, but we have a C$40 million market cap. We're aggressively exploring and looking forward to a more risk-on market.
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