Vancouver – A major mining company from the far east is taking a bite of the western world’s largest tungsten producer, North American Tungsten (NTC-V, NATUF-O), in a financing and strategic alliance deal worth roughly $19.4 million.
Hunan Nonferrous Metals, China’s largest nonferrous metals producer, will purchase 13.4 million units of North American Tungsten at $1.45 apiece a more than 36%-premium over the stock’s 10-day volume weighted average trading price. Units are comprised of a common share plus a warrant exercisable at $3.00 for 18 months.
The deal gives Hunan Nonferrous Metals a 9.9% stake in the Canadian tungsten producer. The large Chinese miner is entitled to nominate a board member and will also hold rights to maintain its interest level through participation rights in future financings as long as it maintains a minimum threshold interest of 9%.
Additionally, while Hunan keeps its minimum threshold interest it gets a right to match any proposed third-party financing or development deals to move North American Tungsten’s Mactung property to production.
“This investment will help advance the development of Mactung which is due to have a feasibility study completed in calendar Q3-2008,” states Stephen Leahy, North American Tungsten’s CEO in the news release.
Mactung, located near MacMillan Pass on the Yukon-Northwest Territories border, is widely regarded as one of the largest undeveloped high-grade tungsten skarn deposits in the world. Mineralization occurs as disseminated scheelite in a limestone-hosted calc-silicate skarn.
Late last year North American Tungsten launched a feasibility study at Mactung looking to place the project into production. In early-2007 the company boosted its estimates for the deposit with an indicated resource of 33 million tonnes grading 0.88% WO3 plus a further 11.9 million inferred tonnes at 0.78% WO3 contained within four mineralized zones. A 0.5% WO3 cut-off grade was used by the engineering firm, deeming that appropriate for Mactung’s location and cost profile.
The study also identified higher-grade sections within the resource reviewing roughly 22.2 million indicated tonnes and 4.6 million inferred tonnes averaging more than 1% WO3.
A total of 29 million MTUs (metric tonne units) of contained tungsten (WO3) is estimated in the deposit’s indicated resource with a further 9.2 million contained MTUs are projected within inferred resources. One MTU is equal to 10 kg of WO3 per tonne, or 7.93 kg of pure tungsten, and is the standard weight measure used in the industry.
Tungsten remains in a two-year average price level of about US$250 per MTU.
Mactung was discovered by Amax in the early-1960s, and saw roughly $26 million spent on exploration, several hundred metres of underground development and engineering studies through the 1970-80s. Deteriorating tungsten prices in the early 1980s triggered shelving of development plans.
The deposit is situated about 160 km northwest of the company’s Cantung mine that restarted production in late-2005. Cantung’s output for fiscal 2007 was just over 286,000 MTUs of tungsten concentrates.
Hunan is China’s largest producer of nonferrous metals outputting major amounts of tungsten, zinc, antimony and lead. It controls the largest tungsten and bismuth reserves in the world along with significant antimony.
After news of the planned Chinese investment, shares of North American Tungsten rallied to close up 20% in March 6th trading up 22 at $1.32 apiece. The stock posts a 52-week trading range of 78-$1.64.
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