North American Tungsten cancels US$19.4M private placement with Chinese enterprise

North American Tungsten (NTC-V, NATUF-o) has cancelled a private placement of about 13.4 million units in the company at a price of $1.45 per unit that was part of a strategic alliance agreement with Hunan Nonferrous Metals.

The agreement with China’s largest nonferrous metals producer would have raised US$19.4 million for the development of North American Tungsten’s Mactung tungsten project in the Yukon. At the time the deal was signed, the price represented a 36.7% premium to North American Tungsten’s 10-day volume-weighted average trading price.

News of the cancellation sent the company’s shares falling to a 52-week intra-day low of 13 apiece before closing at 15 on Oct. 15. At presstime, the stock had edged back up to about 22 per share. (Its 52-week high was $1.54 per share last October.)

North American Tungsten signed an agreement with Hunan Nonferrous Metals in March but the Chinese company failed to come up with the relevant Chinese government approvals to move forward with the deal.

North American Tungsten granted the Chinese company a number of extensions — totalling 192 days — but has grown tired of waiting and has sought financing elsewhere.

On June 2, North American Tungsten cancelled the exclusivity clause in the agreement so that it could try to negotiate with additional potential partners. Since then, it has successfully closed two deals; the first, a US$5.4-million brokered flow-through financing in August and the second, a US$3- million convertible debenture financing in September.

“While we certainly hope to work with Hunan Nonferrous in the future, the duration of the approval process has been too prolonged and NTC must continue forward its negotiations with other parties,” Stephen Leahy, North American Tungsten’s chairman and chief executive, declared in a statement.

The company is now reviewing various potential sources of funding for Mactung, one of the world’s largest known and undeveloped high-grade tungsten-skarn deposits.

The Mactung property is 8 km northwest of the MacMillan Pass in the Selwyn Mountain range and covers the area around Mt. Allan on the border between the Yukon and the Northwest Territories.

The Cantung mine is in the western Northwest Territories, about 300 km northeast of Watson Lake in the Yukon. The mine is a primary producer of tungsten concentrate from open-pit and underground mines. It was opened in 1962.

The 100%-owned Cantung mine and Mactung development project make North American Tungsten one of the few companies in the world to be a tungsten producer with both a producing mine and strategic development asset.

Hunan Nonferrous is a world leader in tungsten mining and processing and has a market capitalization of about US$1.8 billion. Its major products include tungsten, zinc, antimony and lead, as well as compounds, alloys and other products derived from these metals. According to North American Tungsten, Hunan Nonferrous controls the largest tungsten and bismuth reserves in the world and also has significant reserves of antimony.

Tungsten is a strategic industrial metal used in a variety of products ranging from jet turbine engines and high-speed cutting tools to electronic circuitry and surgical instruments.