North American Tungsten Corporation Ltd. has permanently laid off 50 employees and will borrow $3 million to keep its Cantung mine operating until the end of October.
The company was supposed to appear before the courts on July 8, but has requested a stay of proceedings until July 17 as it figures out how to proceed.
The company received creditor protection in early June, after revealing it owed $79.5 million to 237 companies.
But the company’s financial situation took another hit on June 22, when one of its two customers for tungsten concentrate, Global Tungsten and Powders Corp. (GTP), failed to make a payment of $500,000.
The company immediately began negotiating with lenders to cover the shortfall.
“If NATC is unable to access immediate financing by June 30, it will be unable to meet its negotiated payment terms for post-filing obligations and it may not be able to meet its payroll obligations later in the week, which could create significant complications with its suppliers and employees and likely lead to an early closure of the Cantung Mine,” wrote Dennis Lindahl, the company’s chief financial officer, in a June 29 affidavit.
He also warned that if the mine closed, the Government of the Northwest Territories would be left to deal with the cleanup.
The company received $500,000 from its primary lender, Callidus Capital Corporation, at the end of June. On July 6, Callidus agreed to lend an additional $2.5 million to the company over the next several months. The company already owed Callidus $13.3 million as of June 26.
According to a monitor’s report, the company temporarily laid off 80 underground mine employees on June 1. On July 3, 50 of those employees were laid off permanently.
Currently, North American Tungsten Corporation plans to keep the mine running until the end of October.
However, the company also aims to “conduct an orderly wind-down of underground mining activities” and to sell off much of its equipment to reduce its debt to Callidus, according to court documents filed with the B.C. Supreme Court on July 3. The company hopes to earn $3 million from the sale of equipment.
As of July 7, the company was expecting to make $20.3 million from the sale of tungsten concentrate between now and the end of October. If problems persist with payments from GTP, the company hopes to sell all of its product to its other customer, Wolfram Bergbau und Hutten AG.
In that time, it’s expecting to spend $7.3 million to cover payroll and other employee costs, $2.5 million on raw materials, $2.9 million on fuel, and $500,000 to cover head office and corporate costs, among other expenses.
In his affidavit, Lindahl also wrote that the company plans to spend $400,000 on a study that could help reduce the value of the Cantung mine reclamation security.
The mine’s original security was $11.7 million. But after it applied for an amended water license for a new dry-stack tailing system in March 2014, the Mackenzie Valley Land and Water Board recommended an increase to nearly $31 million.
The company believes $15 million should be sufficient to cover reclamation costs, and hopes to demonstrate that to the government.
Lindahl wrote that a reduced security payment “will enhance the viability of the Cantung mine.”
The company also plans to develop a sale and investment solicitation process to look for potential buyers for the mine. It aims to present that plan to the court on July 17.
Contact Maura Forrest at email@example.com