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Dowa wanted to focus on production; we saw the potential for a much larger VMS [volcanogenic massive sulfide] system.
Warwick Smith, CEO American Pacific Mining Corp (CSE: USGD)
Key Takeaways
- 1. American Pacific Mining secured $10 million and full ownership of the Palmer Project, highlighting its focus on exploration upside over immediate production.
- 2. The company plans to prioritize the Madison Project in 2025, with CAD $2 million allocated to aggressive drilling to unlock its gold-copper potential.
- 3. Palmer’s resource expansion could double to 30 million tons with $20-$30 million, offering significant transaction or partnership opportunities.
- 4. Non-core Nevada assets may be spun out or joint-ventured, unlocking additional value for shareholders.
- 5. American Pacific’s strategy remains rooted in exploration and smart M&A, aiming to create shareholder value through transactions rather than mine-building.
Summary
American Pacific Mining just secured $10 million and full ownership of the Palmer Project while maintaining flexibility for future partnerships or sales. The company is prioritizing its Madison Project in Montana for 2025, allocating CAD $2 million to drilling with the goal of a resource estimate and feasibility decision within 18 months. Palmer’s resource expansion potential, estimated at 30 million tons with $20-$30 million in investment, underscores its appeal as a significant zinc-copper-silver asset.
Meanwhile, non-core Nevada properties may be spun out or joint-ventured to unlock shareholder value. With $16 million in cash and a clear focus on exploration and M&A, American Pacific aims to deliver substantial returns through smart transactions rather than mine development.
Why Did Dowa Agree to This Deal?
Dowa Metals and Mining’s strategic interest lies in securing zinc concentrate for its smelter operations, which is a core part of its business generating over $2 billion annually. American Pacific, on the other hand, viewed the Palmer Project differently. While Dowa prioritized near-term production, American Pacific saw significant exploration upside. As Warwick Smith described, “Dowa wanted to focus on production; we saw the potential for a much larger VMS [volcanogenic massive sulfide] system.”
The deal allowed both parties to achieve their goals: Dowa secured the option to purchase 50% of Palmer’s future zinc concentrate, while American Pacific obtained $10 million and full ownership of the asset. Smith highlighted the win-win nature of the agreement, noting, “We’ve essentially been paid back for the project in cash and now own 100% of it instead of 35%.”
Why $10 Million?
The $10 million price tag was the result of months of negotiations. “It took some time,” Smith admitted. “We used multiple valuation groups, and so did they. It didn’t start exactly at $10 million, but it’s a number we were both comfortable with.” The round figure reflects a balance of value for the concentrate option and the long-term potential of the project.
Does the Zinc Offtake Agreement Limit Flexibility?
While Dowa’s offtake rights for 50% of Palmer’s zinc production could be seen as limiting, Smith emphasized the broader potential of the project. “The other 50% is still available, plus copper, silver, and gold. Palmer has 96 million pounds of copper, 19 million ounces of silver, and 96,000 ounces of gold—all of which we think can grow significantly.”
Smith pointed out that having a built-in buyer like Dowa for half the zinc concentrate could be an advantage when attracting additional buyers or partners. “It speaks to the quality of the concentrate and provides a strong foundation for future negotiations,” he added.
Will American Pacific Look for a JV Partner on Palmer?
Now that American Pacific owns 100% of Palmer, the question of partnerships or partial asset sales is on the table. Smith remained cautious about committing to a specific path before the deal’s final closure in Q4 2024. “We’re transactional by nature,” he said. “Let’s get this deal closed first, and then we’ll weigh our options.”
He hinted that the asset’s scale and potential make it suitable for a wide range of strategic opportunities, including joint ventures or even a full sale.
“Palmer is big enough to stand on its own, and there are not many high-quality zinc-copper-silver assets like this out there.”
How Does This Deal Impact Financial Obligations?
Taking full ownership of Palmer does increase American Pacific’s financial obligations, including maintaining a $2 million camp and paying annual claim fees. However, the $16 million cash balance, bolstered by the Dowa transaction, positions the company well to manage these costs.
Smith explained, “Our monthly burn rate will increase to CAD $450,000 in 2025. While significant, it’s manageable with our current resources and gives us the flexibility to focus on high-priority projects.”
What’s the Plan for Madison?
The Madison Project in Montana will receive the lion’s share of American Pacific’s 2025 budget. Two drill programs, budgeted at CAD $2 million, are planned for the year. “Madison is an asset we believe can be big,” Smith asserted. “We’re targeting a resource estimate and feasibility decision within 18 months.”
Smith emphasized the importance of methodical drilling to maximize results: “You want to drill smart—know what you’ve got before committing further.” The goal is to unlock the potential of Madison as a significant gold-copper project.
Will Palmer Require Significant Additional Funding?
While advancing Palmer toward production would require $100 million, American Pacific’s focus is on expanding the resource. “For $20 to $30 million, we could double the resource to 30 million tons,” Smith explained. “That’s the smarter pathway and what excites us about Palmer.”
The company sees this approach as a way to create substantial value while keeping options open for future transactions or partnerships.
Why Not Spin Out Palmer?
Given Palmer’s scale, spinning it out into a separate vehicle has been considered. However, Smith emphasized the need for careful timing. “It’s a world-class asset with multiple options to transact on. We want to get this right and create significant value.”
Is American Pacific Looking to Divest Nevada Assets?
Smith acknowledged that American Pacific holds several non-core Nevada assets that are not being actively developed. “There’s too much on the table today,” he admitted. The company is considering joint ventures or spinning out these properties into a new vehicle with dedicated management.
Smith added, “In a bull market, these assets could create significant value. It’s about finding the right structure to unlock that potential.”
What Drives American Pacific’s M&A Strategy?
American Pacific reviews an average of 60 potential deals annually, focusing on advanced projects with growth potential. Smith shared a notable example: “When we looked at Madison in 2016, it reminded our team of Fortitude, a significant gold-copper deposit. Years later, we acquired it after its previous owner pivoted to psychedelics. That deal took 18 months to finalize.”
Smith highlighted the importance of structuring deals with favorable commercial terms and strong geological potential. “You want assets that can excite the market and create long-term value,” he said.
Long-Term Vision: Builder or Seller?
Smith was clear about American Pacific’s identity: “We’re explorationists, not builders. Our goal is to find something, grow it, and transact on it. Ultimately, we want to reward shareholders with significant value by selling the company.”
Madison is the company’s current flagship project, and Smith believes its success could attract significant interest. “If Madison proves to be what we think it is, someone will want the company,” he predicted.
What Does the Future Hold?
American Pacific’s priorities for 2025 include advancing Madison, exploring options for Palmer, and pursuing additional M&A opportunities. “It’s going to be an incredibly busy year,” Smith said. “With $16 million in cash and high-grade assets, we’re in a strong position to create excitement and value.”
We’re not here to build mines—we’re here to make discoveries and reward shareholders through smart deals.
American Pacific CEO Interview With Warwick Smith (CSE: USGD)
This is a very brief summary of what was a lengthy interview. Don’t rely on this summary. Watch the full interview which is linked above.
Please note that this guest has paid for the creation of this content. The Resource Talks interview rules are simple. The companies, albeit paying or non-paying, get no questions upfront, no questions off the table, and no editing rights.
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