Mine’s shutdown will have ‘a big impact,’ mayor says

North American Tungsten Corp. announced today it will shut down production at its Cantung mine beginning Oct. 15.

There are approximately 210 people employed at the mine, of whom about 75 are Yukoners.

The corporation cited falling commodity prices and growing worldwide inventories brought on by shrinking demand in this global economic downturn as the reasons behind the decision to stop production and put the mine into a mode of care and maintenance.

“This has been a difficult decision as we have seen our tungsten team evolve to be among the best in the world,” company spokesman Stephen Leahy says in a press release issued this morning. “I am very proud of our team.

“I expect that a tungsten supply shortfall will develop as the world economy improves. We fully intend to pursue plans to return the mine to full operations after markets have significantly firmed.”

While the mine is located inside just inside the Northwest Territories, the only road access is through the Yukon.

In addition to direct employment, numerous local companies provide supplies and services to North American Tungsten.

“There are quite a few people who actually work in there from Watson Lake,” Watson Lake Mayor Nancy Moore said this morning after learning of the announcement.

“So if it is shutting down in October, I think that will have a big impact.”

In an interview late this morning, Leahy explained the company will continue sales of existing product, requiring the continued service by some companies.

The chairman and chief executive officer said it cost about $50 million annually to operate Cantung, a fair bit of which ends up in the Yukon.

He estimates North American will require a staff of 20 to maintain the mine site.

Providing the announcement’s lead time of 3 1/2 months is in keeping with N.W.T labour requirements, and is meant to ensure an orderly and manageable shutdown without leaving any unpaid bills, he explained.

The company, said Leahy, has an existing inventory of $9 million to $10 million worth of product.

“You have to be proactive and make sure we do not end up with $20 million in inventory and not enough cash to pay all our people,” he said.

In bankruptcy proceedings six years ago after North American emerged from a courtroom donnybrook with two international buyers, several Yukon companies were forced to take 20 cents on the dollar during the restructuring of millions of dollars of outstanding debt.

Just as the stock market value plummetted for scores of other mining companies in the last year, North American’s value sunk from a $1.14 per share last July to a low last December of 10 cents.

The company has been living in the cellar ever since, as the asking price this morning was 13 cents.

Earlier this year, the company announced cutbacks and wages in an attempt to get leaner and avoid a need for a shutdown.

Back then, Leahy said his Vancouver office today, there was talk of the economic downturn turning around, with an increase in demand for tungsten evident by this summer and into the fall.

“That hasn’t occurred,” he said.

Leahy said a market turnaround and an increase in demand could prevent the shutdown, though it’s not looking that way.

Most customers, he said, are talking about a mounting interest in tungsten in the first three months of next year.

The Cantung mine opened in the early 1960s, but shutdown permanently in 1986.

Leahy and North American brought the mine back into production 2001, but ran into trouble with two multinationals who helped finance the restart.

There are two confirmed years of ore remaining at the mine site, not including recent announcements.

North American also owns the nearby MacTung tungsten deposit located entirely in the Yukon.

Exploration activity, Leahy pointed out, will be continuing this summer at both Cantung and at the MacTung deposit.