North·In Depth

Why, after 6 years, the N.W.T. gov't still hasn't sold its tungsten mining project

The N.W.T. government continues to push ahead with the sale of the tungsten-rich Mactung property, straddling the N.W.T.-Yukon border, but it's been complicated.

In the meantime, the Mactung transaction and ongoing clean up at Cantung have cost taxpayers over $40 million

The N.W.T. government continues to push ahead with the sale of the tungsten-rich Mactung property, straddling the N.W.T.-Yukon border. The territorial government purchased the property in 2015 for $4.5 million after its then-owner, North American Tungsten, filed for bankruptcy protection. (North American Tungsten)

Six years after taking the extraordinary step of purchasing the Mactung property — a tungsten mineral exploration project straddling the N.W.T.-Yukon border — the N.W.T. government continues to plod ahead with the complex process of trying to sell it.

Each step of the sale involves a detailed back and forth between a dozen separate governments, a court-ordered monitor in charge of a miner in bankruptcy protection and an undisclosed number of interested mining companies. 

To make matters even more convoluted, the Mactung project is being sold in tandem with another mining property — the former Cantung mine. Both of these properties were held by North American Tungsten before it went into bankruptcy protection in 2015.

"It's the most complicated process I've seen in terms of a sales transaction," said John Ketchum, director of the N.W.T. Geological Survey. 

But it continues, if slowly. 

The territorial government, federal government, and more than 10 N.W.T. and Yukon First Nations governments have approved a list of qualified bidders for the two tungsten projects.

Ketchum said a request for proposal is now out to that short-list of prospective buyers.

"It's a confidential process," Ketchum said, when asked for details on the identities and number of bidders. Releasing company names at this stage, he said, could affect how they are valued and traded on the stock market. "There's a lot of sensitivity around the process."

Why does the N.W.T. even own a mining project?

Back in the fall of 2015, a few months after failing Vancouver-based North American Tungsten was granted creditor protection, the territorial government stepped up to buy Mactung for $4.5 million. When the N.W.T. cabinet approved the purchase, the rationale given at the time was all other offers to purchase the tungsten-rich property were too low.

With mineral leases in both the N.W.T. and Yukon, Mactung is one of the largest-known tungsten deposits outside of China — the main player in the market.

In 2019, the N.W.T. government and the federal department in charge of the Cantung mine clean-up, tasked Vancouver-based firm Alvarez & Marsal with leading the joint sale of the Mactung and Cantung properties. (North American Tungsten Corp. )

But perhaps more importantly to the territorial government, by buying Mactung, it was able to get responsibility for Cantung off its books. The N.W.T. government transferred all liabilities for Cantung's cleanup to the federal government, based on the devolution agreement signed between the two governments in 2013.

Cantung, roughly 160 kilometres southeast of Mactung, produced tungsten off and on between 1962 and 2015. It has been in care and maintenance ever since.

The Department of Crown-Indigenous Relations and Northern Affairs spent more than $37 million at Cantung between 2015 and March 2021. 

According to a recent court filing, cleanup costs at the former mine for the period between March 2021 and April 2022 will cost Canadian taxpayers more than $7 million. Right now, 12 full-time workers on four-week rotations do environmental monitoring and site remediation work at Cantung.

Meanwhile, the territorial government has spent more than $208,000 since 2015 to clean up Mactung and keep it in compliance with its water license. "There's no real ongoing costs with the property at the moment," said Ketchum.

What happens next?

Although the Canadian government has assumed responsibility for Cantung, the property is still technically owned by North American Tungsten, which is currently being run by Alvarez & Marsal, a court-appointed monitor.

In May 2019, the territorial government and the federal department tasked the Vancouver-based monitor to lead the sale of the two mineral properties. Any prospective buyer would assume ownership of the two properties, including all environmental liabilities and securities owed at Cantung.

But Ketchum said buyers do have the option to restart the Cantung mine.

"It's not simply just a remediation project in our minds. We think there is some value still remaining," he said, adding there is also the potential to reprocess Cantung's tailings to recover tungsten.

The request for proposals was supposed to go out in summer 2020, but was delayed due to COVID-19. The pandemic also held things up since some interested bidders couldn't get in for site visits.

The deadline for the request for proposals is not expected to close until early 2022, a spokesperson with Canada's Crown-Indigenous Relations and Northern Affairs, Matthew Gutsch, told CBC News by email.

Once the bids are received, a committee comprising representatives from the federal and territorial governments and the monitor will pick a preferred bidder, he explained.

When (or if) a sale goes through, the Canadian and territorial governments have an agreement about how the proceeds will be split.

But details of that agreement — like so much of this process — are confidential, said Ketchum.

"The sale process is designed to maximize the cash value of the Mactung property and to offset to the greatest extent possible the environmental liabilities that exist at the Cantung mine site," Gutsch confirmed.

From 2015 to March 2021, remediation costs at Cantung have totaled more than $37 million. From March 2021 to April 2022, this ongoing clean-up work is expected to cost Canadian taxpayers more than $7 million. (North American Tungsten)

Any new owner will also be expected to negotiate a new Impact and Benefits Agreement (IBA) with the Nahɂą Dehé Dene Band in Nahanni Butte. "Cantung operated for more than 50 years without any consideration of [the Nahɂą Dehé]'s rights and interests," Soham Srimani, acting band manager, wrote in response to questions from CBC.

It wasn't until early 2015 that North American Tungsten signed an IBA with the First Nation, but this agreement was never fulfilled due to the company's bankruptcy protection filing soon after.

"[The Nahɂą Dehé Dene Band] is actively working to ensure that any further operations or reclamation activity at Cantung Mine maximizes benefits to [its members] and minimizes further impacts on our traditional territory," explained Srimani, adding a new IBA is needed to document these obligations.

Tungsten in the spotlight

The request for proposals comes at a time when critical minerals, like tungsten, are in the global spotlight. 

Tungsten is a durable metal, with the highest melting point and tensile strength of any element. It is used to make cutting and wear-resistant equipment and tools that are important in heavy-duty industries like mining and construction.

In January 2020, the U.S. and Canada signed an agreement to secure access and improve supply chains for so-called critical minerals, many of which are controlled primarily by Chinese producers. Tungsten is one of the 35 critical minerals considered vital to clean energy, communications and military defence technologies.

Prices for the metal are on the rise. In November 2021, tungsten fluctuated between $305 US to $315 US per metric ton unit. 

The price of tungsten has risen steadily in the last year. In late November 2021, the latest price was US$313 per metric tonne unit, or per 10 kg, according to Capitalight Research. ((Capitalight Research))

According to a 2007 filing, Mactung is believed to host more than 290,000 tonnes of recoverable tungsten trioxide.

In 2009, North American Tungsten estimated it would cost $402 million to build Mactung and bring it into production.

Ketchum said the growing interest in critical minerals — and the two tungsten projects by extension — could be a "silver lining" of the complicated sales process.

"Because they are world-class resources," he said. "There's no question about that."