The Mactung Purchase: GNWT as Junior Miner?
The new owner of the Mactung tungsten property won’t have a scapegoat to blame if it can’t put its mine into production. The oft-repeated complaints about the lack of infrastructure, a long regulatory process or even local opposition to development are hard to make when the new owner is actually in charge of building new roads, funding regulatory boards and has the final authority on most land-use decisions in the territory.
The Government of the Northwest Territories’ announcement today that it bought Mactung had us at Up Here scratching our heads. Not only because it’s the territorial government’s first step into the exploration industry, but also due to the timing of the news. The territorial election is in its final week and, while they’re campaigning, ministers relinquish their cabinet positions (in every respect other than in title) so they can’t have any undue influence on the electorate’s poll booth decisions. Any new spending is only approved by special warrant—that means, in exceptional circumstances. And this apparently constitutes such a case.
North American Tungsten, owner of the Cantung mine and the Mactung property, was granted creditor protection in June as it fell deep into debt, partly due to mill upgrades made at Cantung during a crash in tungsten prices. The company had also been ordered to increase its security deposit from $11 million to more than $30 million. And to do that within 90 days. The Cantung mine—located on the NWT side of the Yukon-NWT border, accessible only through the Yukon—closed its doors in October, its employees were laid off and the B.C. Supreme Court appointed a monitor to sell the company’s assets to pay off its creditors. Bids were submitted and creditors—those owed money—were able to approve or nix any deal. The GNWT was one of those creditors and it felt the bids were too low, so it stepped in and offered a maximum of $4.5 million for Mactung. According to cabinet spokesperson Andrew Livingstone, this decision was made by cabinet and was taken during the election period because the B.C. Supreme Court would not wait until after the election.
The GNWT then transferred responsibility for Cantung—along with the money it had collected from North American Tungsten for its security deposit—to the federal government, meaning the Government of Canada is now on the hook for Cantung’s clean-up. The territorial government was able to do this due to a clause in the devolution agreement, allowing a five-year window to transfer closed mines back to the feds. (UPDATE: In order to transfer Cantung to the feds, the GNWT was required to purchase Mactung as a condition, says Livingstone.)
But the GNWT will hold onto Mactung—located primarily on the Yukon side of the NWT-Yukon border—and look to flip it once (if?) tungsten prices recover. (Tungsten is currently at a ten-year low.)
It is still unclear how long the GNWT intends to hang onto this property, what it will cost to complete the baseline work on the property required to maintain a mineral rights lease, and then what sort of process it would use to sell Mactung. (And, you guessed it—we can’t ask ministers about any of this because they can’t talk about government business during an election.)
Government investment in mining properties isn’t unheard of in Canada. The Quebec government, for one, put up $220 million through an investment arm into Stornoway Diamond’s Renard mine. But this is a first for the GNWT and it will be interesting to see whether this sets a precedent for investment elsewhere.
We reached out to the feds, to the GNWT lands department and to the court-appointed monitor Thursday afternoon, because there are so many questions to ask, but we haven’t heard back yet.
What are the feds planning to do with Cantung and the tens of millions of dollars of infrastructure in place at a mine that was churning out tungsten just months ago? What would the consequences have been if the GNWT hadn’t swept in and picked up North American Tungsten’s properties? We’ll let you know when we find out.
(Story updated Nov. 20 11:30 a.m.)