North American Tungsten Corp. Ltd.'s decision to shut down the Cantung Mine, Canada's only producing tungsten mine, Oct. 15 comes at a time when tungsten prices are depressed and stockpiles of ore are climbing.

But company Chairman and CEO Stephen M. Leahy, told reporters in Brazil recently that he doesn't expect the temporary shutdown to last more than six months.

"Logistically it's much simpler to come back in the spring after April," Leahy said. "We will have to make our decision based on how we gauge the market in the first quarter of 2010 and make our plans from there."

Cantung is located in western Northwest Territories just east of the Yukon Territory border. It is accessible by a 300-kilometer, or 186-mile, all-weather road from Watson Lake, Yukon.

The mine will then be put on a "care and maintenance program," with the hopes that it can be brought back into production when market conditions improve, Leahy said in announcing the shutdown June 29.

The company said it opted for temporary suspension of production because of its customers' high stocks and declining tungsten prices.

Tungsten concentrates prices, meanwhile, rebounded slightly in early July, but industry insiders said they doubted the prices will continue to rise with the lack of demand from Chinese tungsten smelters.

The supply of tungsten concentrate is not tight and the output of tungsten concentrate from January to April was 25,211 metric tons, 18.71 percent higher than that seen at the same period last year. Moreover, market demand for the strategic metal is much lower than last year

In June, N. A. Tungsten said it was considering cutting production levels to offset rising inventories, but the miner instead chose to halt output entirely and continue sales under existing contracts through the winter.

"The difficulty is doing a partial versus a full stoppage in a remote location. It's very difficult to simply slow down something," Leahy told reporters.

He said shutting down in October also will be less costly than doing so later because it will avoid the mine having to make the transition amid winter temperatures that dip as low as minus 30 degrees Centigrade.

Painful decision

Despite hopes for a third-quarter revival of tungsten activity, signs of a recovery had not materialized by the end of the second quarter, and Leahy said N.A. Tungsten needed to give at least 14 weeks' notice to employees and regulators for a lengthy shutdown.

"This has been a difficult decision as we have seen our tungsten team evolve to be among the best in the world," Leahy said in a June 29 statement.

"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," he continued.

N.A. Tungsten will retain about 20 members of its supervisory staff and lay off its remaining work force at the mine.

The shutdown also will deal an economic blow to Watson Lake, the nearest community.

Virtually every business in the town of about 1,600 people will be affected by the mine's shutdown, according to Norm Griffiths, president of the Watson Lake Chamber of Commerce.

Though the company's decision "shocked" the industry, Leahy said action has to be taken in the current economic climate.

"The market is still soft and if we pressed to do deals just for the sake of doing deals, what are we really achieving here?" he asked.

History of shutdowns

Prospectors discovered the Cantung tungsten deposit in 1954 while looking for copper. Commercial production began in 1962 from an open pit at a rate of 300 standard tons per day but was suspended in 1963 due to low tungsten prices and in 1966 due to the destruction of the mill by fire. A new 350-stpd mill was completed in 1967 and, in 1969, the capacity was increased to 450 standard tons per day.

Production continued throughout the '70s and '80s, with gradual increases in mill capacity to 1,000 standard tons per day. In 1986, the mine ceased operations due to low tungsten prices.

In 1997, N.A. Tungsten purchased the mine, along with related assets held by the former owner.

Leahy recognized the potential for Cantung tungsten production because 85 percent of the world's known tungsten reserves are located in China.

After an improvement in tungsten prices that began in 2000, the company reopened the Cantung mine in December 2001. Underground production and milling resumed.

Two years later, the company's creditors recalled its loans, forcing the miner to seek protection under Canada's bankruptcy statute, and for Cantung to close again.

In November 2004, N.A. Tungsten successfully completed a plan of arrangement to deal with its creditors, and this allowed the company to reopen the mine the following September.

"I just had to believe that at some point in time, something was going to happen - and of course, several years ago China passed a law against exporting raw material tungsten," Leahy explained in 2007.

"(The Chinese) are moving up the value chain. They want to do the refining in the first state. Pretty soon, they will want to sell you the finished goods, the saw blades, the drill bits. If you in the West have no raw material, how are you going to make those things?" he asked.

N.A. Tungsten's latest financial results reflect the considerable progress the company had made in recent quarters to move the operation toward profitability.

For the second quarter of fiscal 2009, the miner reported a loss of C$300,000. That compared with a loss of $5.5 million during the same three months in FY 2008. Sales revenue climbed 12 percent to C$14 million on 58,507 metric ton units of concentrates and 3,000 MTUs of tungsten blue oxide, compared with C$12.5 million in the second quarter of FY 2008 on 58,840 MTUs of concentrates and 6,035 MTUs of ammonium paratungstate.

Exploration to continue

During the first quarter of FY 2009, North American Tungsten released an NI 43-101-compliant report that updated reserves and resources for the Cantung mine. As of Sept. 30, 2008, the mine had estimated probable reserves of 655,706 standard tons with an average grade of 1.1 percent tungsten oxide. Indicated mineral resources at Cantung were estimated at 1.43 million tons grading 1.25 percent WO3.

N.A. Tungsten said it intends to focus this summer on completing a C$1 million surface drilling program at Cantung and will spend another C$2 million on an in-field drilling exercise on the open-pit portion of its separate Mactung tungsten deposit further to the north.

Mactung is one of the world's largest known high-grade undeveloped tungsten-skarn deposits. Indicated mineral resources at Mactung are estimated at 33 million metric tons grading 0.88 percent WO3. Underground indicated mineral reserves have been calculated at 8.2 million metric tons grading 1.09 percent WO3.

The Cantung and Mactung deposits, together, hold an estimated 15 percent of the world's known tungsten.