Chinese group to buy slice of N. A. Tungsten

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 composed of a common share plus a warrant exercisable at $3 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 Mactung to production.

In a statement, North American Tungsten CEO Stephen Leahy said the investment would help advance Mactung, where a feasibility study is due out later this year.

Located near MacMillan Pass on the Yukon-Northwest Territories border, Mactung 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 the project. In early 2007, the company boosted resources at Mactung to 33 million indicated tonnes grading 0.88% WO3, plus 11.9 million inferred tonnes at 0.78% WO3 contained within four mineralized zones. A 0.5% WO3 cutoff grade was used by the engineering firm that carried out the study, deeming that appropriate for Mactung’s location and cost profile.

The study also identified higher-grade sections within the resource –outlining roughly 22.2 million indicated tonnes and 4.6 million inferred tonnes averaging more than 1% WO3.

A total of 29 million metric tonne units (MTUs) of contained tungsten (WO3) is estimated in the deposit’s indicated resource with another 9.2 million contained MTUs within inferred resources. One MTU is equal to 10 kg 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 1970s- ’80s. Deteriorating tungsten prices in the early 1980s halted development plans.

The deposit is situated about 160 km northwest of the company’s Cantung mine, which 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, including major amounts oftungsten, zinc, antimony and lead. It controls the largest tungsten and bismuth reserves in the world, along with significant antimony.

On the news, North American Tungsten shares rallied 20%, or 22, to close at $1.32 apiece. The stock posts a 52-week trading range of 78- $1.64.