A Rio Tinto-sized opportunity beckons for American Pacific Mining at Madison

Canadian junior American Pacific Mining (CSE: USGD; US-OTC: USGDF) and joint-venture partner Rio Tinto (NYSE: RIO; BHP: RIO; ASX: RIO) are rapidly delineating a new resource estimate for the Madison copper-gold project in Montana, CEO Warwick Smith tells The Northern Miner. This year mark’s Rio Tinto’s third drill campaign at the project.

“Recent results have returned incredibly high-grade gold and copper, which is spreading along a good-sized area,” Smith says in a recent interview. “They’re really focused on that skarn at the surface, which excites us. Their drilling has made it larger, both laterally and at depth. And that’s the intention this year — to follow up on some of those targets, to increase it in size.”

Since 1986 it has been suggested that there may be a deep porphyry system at the Madison project. Recent exploration work by former owner Broadway Gold Mining has led to interpreting a Cadia-like skarn over porphyry mineralization relationship. Currently, known copper skarn mineralization and massive sulphide gold mineralization are proposed to be linked to a deeper porphyry system.

“Through all that compilation work, the 3D modelling work that’s been done, you start piecing together how this can become a large deposit,” Smith says. “The skarn zone at surface alone could become a large deposit, and then you think of getting down into the porphyry below. With American Pacific owning 30% of the Rio Tinto-sized target, it can be an incredible win for shareholders.”

Smith says Rio Tinto has developed an “innovative” and “unique” structural interpretation at Madison, and several planned holes will test these theories.

“What we see near the surface is incredibly high-grade pockets of gold and copper,” Smith says. “What we’re looking to see is to get to somewhere in and around that 1,800 meters in strike length; that’s where you could hold a significant deposit that is coming together as we speak.”

American Pacific went public in March 2018. That was followed by a transformative transaction last year, picking up the Madison mine in Montana and signing a partnership agreement with Kennecott Exploration Company, a division of Rio Tinto. Under the agreement, Rio Tinto may spend up to US$30 million to earn 70% of the project.

The exploration partners have recently released results from 26 rock chip samples collected near the past-producing American pit, which identified significant high-grade gold and copper mineralization.

These samples were collected east of the American pit, known for high-grade skarn mineralization, where altered Rader Creek granodiorite outcrops dive under tertiary gravel cover. Six samples were described as skarn with disseminations of pyrite, pyrrhotite and chalcopyrite; these samples returned values with up to 29 grams gold per tonne, 1.52% copper and 44.80 grams silver per tonne.

Another rock sample about 400 meters east of the American pit included native gold in a quartz vein, returning 12.65 grams gold per tonne, 0.98% copper and 11.20 grams per tonne silver.

More recently, Rio Tinto has started work on an un-manned aerial vehicle magnetic survey over Madison focused on defining a detailed magnetic signature of the Madison Limestone-Rader Creek intrusive contact. The detailed magnetic signature of the contact area will provide precise skarn-hosted drill targets for follow-up investigation.

“The recent trench results two kilometres from the Madison mine also support our belief that the regional potential at Madison is excellent, and this new mag data will help define additional areas of interest,” says Smith.

“When you look at the regional map of Madison, it’s evident that there are significant gaps in the mineralized trend connecting past-producing mines and the Madison project. The scale of the opportunity really becomes evident.”

The porphyry target, says Smith, is “an entirely different beast.” The porphyry was pierced by drilling in 2017, returning evidence of chaotic folding typically associated with a porphyry-style system. “That’s where this can become one of those behemoth-sized deposits. For example, the old Butte copper mine is 48 kilometres away from us. It’s on that same geological trend that produced 3.1 billion pounds of copper, three million ounces of gold and 715 million ounces of silver. When I say big, that’s the example,” he says.

“So, it’s something that you can put in production in let’s call it relatively short order, being as there’s already still a small mining permit on-site, you’ve got Rio Tinto, one of the world’s largest companies as the operator alongside you, and you’ve got something that’s very high grade. I think for the market and for creating interest that works incredibly well at the moment.”

Madison was last in production between 2008 and 2012. It produced 2.7 million pounds of copper at between 20% to 35% copper and 7,600 ounces at 16.1 grams gold per tonne.

With Madison mineralization occurring in three styles, Smith says early indications are each stream would have to be treated separately.

“The processing stream for these different styles of mineralization is going to be different. What you do with the massive sulphide would be to ship it in a float concentrate, which would have to go to a smelter. The other oxide mineralization can be processed at any oxide mill. And there’s actually a mill just about 20 miles from us, the Sunshine mine, which historically produced about two million ounces gold for Barrick,” says Smith.

American Pacific has also recently brought in Michael Gentile as a 19.9% strategic investor.

“That’s been fantastic,” Smith says. “He’s been an incredible help for the company and really helped to put a spotlight on the company, while also providing a bunch of instructions for us that have been incredibly helpful.”

Smith expects a busy remainder of the year in terms of news flow from the project. “What we want to see out of it is growing this skarn again, both laterally and in depth,” he says. “We feel like we’re getting there.”

The partners expect to release a first compliant resource in 2022, but plans may change depending on what the exploration initiatives find in the meantime.

Aside from the gathering excitement at Madison, American Pacific is also making headway elsewhere.

Also in the company’s project portfolio are three highly prospective high-grade precious metals projects, the Gooseberry gold-silver project, the Tuscarora gold project, and most recently, a lease on the Red Hill property contiguous to NuLegacy Gold‘s (TSXV: NUG; US-OTC: NULGF) rift anticline target in Nevada.

“We’re in a good, strong corporate position with rising metals prices, amid new excitement in the story. We have a new strategic investor. It even feels like copper wants to keep going as the world keeps building. It’s a great time to be involved in American Pacific,” says Smith.

The company’s equity in Toronto last traded at 76¢ per share, capitalizing the company at $50 million. Despite coming off its recent highs at $1.02, the stock is still trading up 162% over the past 12 months.