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There are only three
significant tungsten mines in the western world and North American
Tungsten has one of them
Mining
Metals/Tungsten
(NTC-TSXV)
North American Tungsten Corporation Ltd.
#1400 – 1188 West Georgia Street
Vancouver, BC V6E 4A2
Phone: 604-684-5300
Stephen M. Leahy
Chairman and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
December 29, 2005
BIO:
Mr. Leahy has more than 26 years experience in venture capital, primarily in the Canadian
resource sector, and he has been instrumental in the formation, financing and development
of a number of public and private corporations. Mr. Leahy has previously acted as a senior
officer or director of StarTech Energy Inc. (TSX), First Silver Reserve Inc. (TSX) and
Wellco Energy Services Inc. (TSX). As founder of North American Tungsten Corporation Ltd.,
he was instrumental in facilitating the Company's acquisition of it wholly-owned Cantung
mine and Mactung deposit
Company Profile:
North American Tungsten Corporation Ltd. (the “Corporation”) is a Canadian
mining company engaged in the development and exploitation of tungsten reserves located
adjacent to the Yukon – N.W.T. border in Northern Canada. The Corporation’s
wholly-owned Cantung mine and neighboring Mactung deposit are estimated to represent
approximately 15 percent of the world’s known high grade tungsten resources.
With an annual production capacity of 8.8 million pounds of tungsten concentrate,
the Cantung mine is the Western world’s preeminent source of this strategically
important industrial metal.
The Corporation has established a rigorous and
comprehensive program of ongoing environmental assessment and reclamation that evidences
its total commitment to conducting its operations in an environmentally responsible
manner.
CEOCFO: Mr. Leahy, will
you tell us about your background with the company?
Mr. Leahy: “I formed the company back in 1992 and have
been head of the company as chairman and president and more recently as chairman and CEO
of the corporation.”
CEOCFO: What was your
vision then and where are you today?
Mr. Leahy: “I saw an opportunity in the tungsten market
because of China’s dominance in a strategic metal. Over the years, there was
virtually no exploration for tungsten outside of the China area. I saw a looming
opportunity because of the potential squeeze in the commodity that in some cases does not
have any substitutes.”
CEOCFO: What are the
uses for tungsten?
Mr. Leahy: “Tungsten is the hardest material on earth
besides diamonds and it has the highest melting point of any metal. It is essentially used
for high-end carbide production in terms of hard facing, hard metals, cutting tools. It is
the filament in your light bulb, it has more recently been used in ammunition and things
that will be replacements for lead because it is non-toxic.”
CEOCFO: Will you tell us
more about the opportunity you saw?
Mr. Leahy: “In 1996, some assets became available from
the old Canada tungsten and the assets were two-fold. One is the CanTung Mine located in
the northwest territories of Canada, which was a tungsten mine that had been placed on
care and maintenance. The second was the MacTung deposit, which borders the Yukon
Territory and the Northwest Territories slightly north of the CanTung Mine. Together they
represent approximately 15% of the world’s tungsten reserve resource. Because
of depressed prices, people were not very interested in tungsten and because China was
supplying all of the material that was required. I saw an opportunity that would see us
acquire the assets and a vision to hold until China started to run out of their own
internal tungsten supply, or decided it was 80% of the world’s tungsten commodity
market, that they would be charging higher prices, which would make these assets viable,
and that has happened.”
CEOCFO: What are you
doing to get tungsten out of the territories?
Mr. Leahy: “Since tungsten prices have risen from the
beginning of 2004, when pricing was approximately $68.00; it is currently about $240.00 U.S.
per metric tonne unit, which is the standard unit in the industry. It has made our assets
extremely viable so we have recommissioned the CanTung Mine and it is now in operation as
of September 1st (2005). CanTung is an underground mine with both mining and
milling operations on-site. We have customers and we are delivering concentrate to those
customers as we speak.”
CEOCFO: Are there new
technologies that you are able to take advantage in the mining process?
Mr. Leahy: “There are and we are instituting some of
them. Because of our two-month start-up, which was extremely fast, we will be instituting
some more efficiencies as we move forward.”
CEOCFO: What is
happening with your other deposit?
Mr. Leahy: “With that deposit, we went back at the
beginning of the summer and initiated a $1.2 million drill program to reconfirm the
existing ore body and to test to do some step out holes, which we have done. We did 6000
meters of drilling and essentially 24 out holes. The first results have been coming out
and we released those early in the week. They were impressive results and I could supply
you with the information on that.”
CEOCFO: Do you sell to
the end-customer and are there different qualities and varieties in tungsten?
Mr. Leahy: “There are many different varieties and
qualities of tungsten; we have the highest grade tungsten ore of any mine in the world. We
are an underground mine with grades of over 1.6% tungsten. We ship a 65% concentrate of
WO3, which is tungsten trioxide.”
CEOCFO: Can you increase
that production?
Mr. Leahy: “We plan to produce 400,000 metric tonne
units of tungsten trioxide concentrate for the next twelve months on an annual basis. If
for example we net $200 U.S. dollars, our revenue is $80 million.”
CEOCFO: What is the
financial picture at the company?
Mr. Leahy: “We are a small company. We managed to raise
$14.5 million dollars for restart and drilling purposes in April of this year (2005). That
allowed us money to restart the CanTung Mine and also do some drilling at MacTung. Our
cash flow will enable us to build up some significant cash reserves if prices hold like
this, within the next twelve months for sure.”
CEOCFO: Prices tend to
be cyclical with many commodities; how do you adjust for the volatility?
Mr. Leahy: “It is a mixed bag of how we prepare. In some
cases, we have a pricing formula with a customer that would allow us to have a floor
price, which would guarantee us a profit, and anything over that floor price, we
essentially would give the customer an exchange for giving us a floor price at a discount,
from a quoted market price. If a quoted market price was $240 for example, we may give
that customer for giving us a floor price of X that would ensure our cash flow, we would
give them a fifteen or twenty percent discount from the market. Other customers are
purchasing on the spot; they would want to purchase let’s say 10,000 metric ton units
at one go and we would negotiate a price for that.”
CEOCFO: Are you picking
up more property as you go along?
Mr. Leahy: “We did one property, which was close to the
CanTung Mine that we staked in September of 2004. We have been doing some exploration work
there but we have not engaged any other projects other than the ones we have because we
have to focus on our own mine to make sure we get it to the point of the highest
efficiency we can get. We have the largest single tungsten deposit in the world being
MacTung and we do not need to look much further.”
CEOCFO: Is the
government in that area friendly toward mining in terms of the local population as well?
Mr. Leahy: “Yes, they are because the both the mine and
deposit of MacTung sit on the boarder of Yukon Northwest Territories. There is only one
road in there and it flows through the Yukon. The Yukon Territory has been supportive of
our position. They need the work. We have 172 employees, the majority of which are
northern Canadians and that helps their local economy quite a bit.”
CEOCFO: Why should
potential investors be interested?
Mr. Leahy: “There are only three significant tungsten
mines in the western world and we are one of them. Tungsten is a strategic commodity that
hasn’t been on people’s radar screens for the last thirty years. There appears
to be a shortage, it is going to take some time for other resources or deposits to be
found and developed, and we have a significant leg-up on them. We believe we will be
extremely profitable.”
CEOCFO: Are you planning
to develop MacTung on your own or with a partner?
Mr. Leahy: “That is the question. People would like to
see how stable the tungsten pricing markets are on a go-forward basis. Given stability at
these levels, I would think we would be very attractive to some other mining companies on
a joint venture basis. If prices remain the same, we would have significant cash reserves
enabling us to develop it.”
CEOCFO: Why should
potential investors be interested?
Mr. Leahy: “There are only three significant tungsten
mines in the western world and we are one of them. Tungsten is a strategic commodity that
has been on people’s radar screens from the last thirty years. There is a shortage,
it is going to take some time for other resources or deposits to be found and developed,
and we have a significant leg-up on them. We believe we will be extremely profitable.”
CEOCFO: What should
potential investors know that they might miss when they first look at the company?
Mr. Leahy: I think they should know that the company has been
in tough times before. It had to go through a reorganization because of prices. People
should understand that tungsten, as a commodity does not trade like copper on the
mercantile exchange. It is almost exclusively private sales; there are no future contracts
such as in copper or gold that people can hedge against, including companies. The market
is dominated by China, which can be seen in two ways; one, they can determine pricing on
the upside or the downside but our argument is if you have 80% of the market why would you
decrease the price.”
CEOCFO: What would you
like to say in closing?
Mr. Leahy: “People say that the market for tungsten is
mundane, that it is an industrial metal and there is not much future there. However, just
in China alone, their internal consumption is rising in a very rapid rate to the point
where it could be that they are using most of the material internally and will not have a
lot left for the western world.”
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