➤ No major gold discoveries are expected in the near future.

➤ Western US is a prime mining jurisdiction with relatively simple permitting.

➤ Consolidation of gold majors is reducing competition for juniors' projects.

Eric Saderholm, president of American Pacific Mining. Source: American Pacific Mining Corp.

American Pacific Mining Corp. is an explorer and developer of base metals and precious metals that focuses on the Western US. The company has partnered with various large companies to develop many of its assets. One of American Pacific's top assets is the Palmer volcanic massive sulfide project in Alaska, which is a joint venture with Dowa Holdings Co. Ltd. subsidiary Dowa Metals & Mining Co. Ltd., and the company has partnered with a Rio Tinto Group subsidiary on the Madison copper-gold project in Montana. American Pacific is also exploring for gold and silver at the early-stage Gooseberry and Tuscarora projects in Nevada.

S&P Global Commodity Insights spoke with American Pacific President Eric Saderholm and CEO Warwick Smith about gold mining in the western US, the state of industry exploration and recent consolidation among major mining companies. This interview has been edited for clarity and length.

S&P Global Commodity Insights: We have not seen a lot of new gold discoveries lately. What's your outlook on that front in 2023?

Eric Saderholm: I don't see any major discoveries coming on. There were none in 2021 and very few smaller discoveries from 2020 to 2023. So it seems to be shaping up as a year where gold mining companies will exploit what they have if permitted and ready to go.

A lot of your [gold reserves] making a lot of money, regardless of the gold price, over the last 40 years have been mined out. Supply is not going to go up this year and production has gone down roughly 2% to 3% over the last decade. So regardless of the fact that the gold price went up so substantially, production levels have not met that increased price.

There are a whole lot of reasons why you just don't see a big discovery happening unless it's in some place where you're going to have a problem geopolitically. I mean, there are lots of good ore bodies out there, but you just can't get to them for one reason or another.

Warwick Smith, CEO of American Pacific Mining. Source: American Pacific Mining Corp.

Warwick Smith: If you look back at the last couple of bull markets, they were spurred on by major discoveries, right? People get that [fear of missing out] in investing. With a major discovery, they've done incredibly well, that money filters back into the market, and it brings more money with it. It's something that we could really use.

Is there a gold price where miners are willing to try to overcome some of those challenges that might push them into more difficult jurisdictions?

Smith: You need specific expertise, which is the most important part of going into those jurisdictions. Some groups do an excellent job at it, but those are specialized skill sets and contacts that you need to have. Eric and I have focused on the Western US for virtually our whole careers because we know it well. You can still make great discoveries in the Western US. We've focused on finding assets that are a smaller resource but can grow significantly.

Can you tell me more about the advantages and challenges of operating in the Western US?

Smith: We've got a strategic advantage there. Newmont Corp. was looking for assets that are 3 million ounces today, and then they bring those into the fold, right? There are not a lot of those out there. But there are a lot of good assets out there that are half a million to a million ounces that have the opportunity to grow and get significantly larger.

One of the reasons that we like to be in the Western US is we understand the permitting. We understand the geopolitical environment. Well, we know that the challenges can change every four years from going to being Democratic to Republican. But we've worked under Obama, we've worked under Trump, we've worked under Biden, and we've been able to handle those challenges quite well. The second thing that I think we've done well, and that's worked for us in the Western US, is we can consistently bring in majors as partners.

Saderholm: While permitting throughout the world, and certainly in the Western US, has gotten slightly more stringent, it's not nearly as stringent as a lot of venues and jurisdictions. So if we get a delay of 10%, well, that's two weeks to three weeks. It is still a place where, if you know the agencies and want to play by the rules, you can get permits relatively quickly. That's well understood in the industry. They know that if they can permit an exploration program, that program leads to a development program that leads to a mine. It's probably the quickest place on the planet to get that into production.

Is there anything in terms of regulation or policy that you think would help make it easier to mine more in the United States?

Saderholm: I believe there's always going to be a current against mining. That's just the way it is. Same with petroleum extraction and other things. But the current impediments are relatively minor, and I think mining in the United States is still considered a beneficial industry. There's always a trade-off.

We've seen some consolidation among major gold mining companies lately. How is that impacting juniors and other gold miners?

Smith: My personal preference is that there are more majors out there. It makes it more competitive. As we find assets that we like, we'd like to have a few conversations and then make a final decision. As there are fewer people to talk to, that becomes more challenging just from a negotiation standpoint, for sure.

I think the majors, as they get bigger, they get in a lot of ways more bureaucratic and more difficult for us to transact with, to be completely honest.

Typically when you get in [discussions], particularly when you get to large companies that merge, there's so much redundancy and what have you in there that it takes time for it to smooth out. So you know, as a junior, you go from, "Okay, well, I'm dealing with Bob at XYZ company" ... [to] now there's Bob, and there's Jim in the same seat, and who's going to move.

Even if you end up with Bob, [you're] still in the middle of a merger. There's a period there where trying to get anything done — budget approvals, moving assets forward, all those types of things — becomes really, really, really challenging. I'm of the mind that having more options is a good thing.

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