American Pacific Mining Execs Weigh In On Trending Commodities, COVID-19, Virtual Deals

The largely in-person mining industry is no exception to the disruption of work caused by the coronavirus pandemic.

One mining company, the American Pacific Mining Corporation USGDF, believes that it has set itself up to succeed in a distanced environment.

Hot Commodities: With the stock market being volatile, some investors are turning to commodities, which grant feelings of tangibility and possession that owning shares cannot reproduce.

The price of gold closed above $1,800 for the first time since September 2011, confirming how much people value commodities in uncertain times. Copper is enjoying a similar upward trend.

Benzinga spoke with American Pacific Mining executives Warwick Smith and Eric Saderholm to discuss how the company is adapting to the paradigm shift in the mining sector and the state of commodities.

Benzinga: Can you give an update on your timeline regarding the Madison Copper Gold project — and how you've dealt with the pandemic?

Smith: We visited the Madison mine down in Montana in 2016 and really liked it, but unfortunately, another company named Broadway Gold beat us out and bought the project.

In April 2019, they ended up doing a transaction with Rio Tinto RIORTNTF, the second-largest mining company in the world, which could spend up to $30 million to earn 70% of the project.

Then in June, Broadway Gold halted the trading of their stock to convert from mining to medicine, so I had a conversation with their CEO and ended up closing the transaction that month.

For mining companies, many deals are getting done in a time where all the C-suites are locked down, creating a mindset: "a lot of the mines are shut down. We have been thinking about acquiring projects or companies for a long time. Now is a great time for us to focus on exactly that."

BZ: What factors went into picking this project to add to your portfolio?

Smith: The project itself is incredibly high-grade. Most copper mines are probably in production at less than 1% copper, but there have been some spectacular hits here, between 40%-60% copper.

That is what is creating excitement for the market. For Rio Tinto, the excitement comes from the potential for porphyries like those discovered in the Butte mine, 40 kilometers away. That mine produces 21 billion pounds of copper, 3 million ounces of gold and 100 million ounces of silver, so that was part of the appeal for shareholders and management in terms of this mine.

BZ: How different do the mining sector and the market for commodities look today?

Smith: When COVID-19 started to become a real issue, it hit the underground mines more than the open pits due to spacing. And as of the end of June, global gold production is down 5.7% from where it was last year, whereas in April, it was down 15%, so gold production has made quite a comeback.

Silver production is still down 13.4% as of June, but in April, it was down 30%. And copper production has been very steady, staying at about 20% offline.

Gold miners have had this inverse relationship where they never like Goldman Sachs GS because Goldman Sachs has always kept their gold price forecast low, so if Goldman Sachs is bullish on gold, that creates a lot of excitement.

If you want a car or a house, those come from mining. The Tesla TSLA vehicles need commodities like silver and vanadium.

BZ: Do you see a paradigm shift of communication between majors and juniors in the mining industry?

Smith: Deals are getting done virtually. The executives are saying, “the mines are closed, so the focus can be to look at X, Y, Z companies and see if there are any deals to be done.” I think the mining sector has felt that and has navigated that particularly well, and this transition will open up new opportunities.

Photo courtesy of American Pacific Mining.