North American Tungsten Corporation Ltd., the company that owns the Cantung mine, has been granted protection from its creditors.
The B.C. Supreme Court granted the order this week after the mining company revealed it owed about $79.5 million to 237 companies.
In the six months ending March 31, 2015 the company has lost $6.6 million dollars, court documents say.
The company expects it will be able to continue operating after a financial restructuring, chairman and CEO Kurt Heikkila said in a statement on behalf of the board of directors.
For now operations are expected to continue uninterrupted, he said.
The tungsten mine, located just over the Yukon/N.W.T. border, has been in production off and on since the 1960s.
The only way to reach the site is on a road that travels though the Yukon near Watson Lake.
Heikkila cites “continuation of low prevailing market prices of APT, high debt service payments, insufficient capitalization, and recent operational issues,” as the cause of the problems.
The court gave the company 30 days to figure out the next step. Lawyers will be back in front of a judge July 8.
Without this court filing, the company “expects to have insufficient cash in the coming weeks with which to pay its suppliers, and debt service payments,” according to court documents.
“Key trade creditors may take steps to refuse to provide services that are essential to transport, and therefore sell, existing tungsten inventories.”
Now that the court has stepped in, no one can pursue any claims against the company while it is under protection.
The order also prohibits regular suppliers from discontinuing services that have already been agreed to. Those companies can require payment for anything they do from this point forward.
At the beginning of the month Cantung announced it was laying off 80 employees. The mill is still operating.
So far there are 25 Yukon companies on the six-page creditor list that was submitted to the court.
In all, local companies are owned about half a million dollars. Most of the Yukon debt amounts are relatively small, ranging from a few hundred dollars to less than $10,000.
Kal Tire tops the list of Yukon creditors with more than $300,000 owed.
The mine is a frequent employer of Yukon workers, though it is not clear how many Yukoners work there now or were impacted by the recent layoffs.
This is not the first northern mine to find itself in dire financial straights recently.
Yukon Zinc announced a temporary closure of the Wolverine mine in Faro in January.
It has been under creditor protection since March 13 on $646 million in debt.
Right now the company is working on finding buyers for the mine.
The deadline for making an offer was earlier this week and Yukon Zinc is scheduled to be back in Supreme Court of British Columbia today to let the judge know how that went.
As of January 30, Wolverine owed the Yukon government $3 million in mine security for eventual mine closure and reclamation.
Yukon’s mines minister, Scott Kent, was not available for an interview this week.
Since Cantung is located in the Northwest Territories, the Yukon government doesn’t need any mine security from the company. But securities have become an issue in the N.W.T.
North American Tungsten applied for an amended water licence with the Mackenzie Valley Land and Water Board because of plans for a new dry-stack tailing system.
The water board recommended that the amount of security from the mine be bumped from $11.7 million to nearly $31 million.
That potential increase has hurt the company’s ability to raise money, according to an affidavit by Dennis Lindahl, the company’s chief financial officer.
The company says a $15-million security would be enough.
N.W.T.‘s environment minister, Michael Miltenberger, is supposed to make a decision on that issue by Saturday.
Dropping commodity prices is a problem for mining companies across the country, said Samson Hartland, executive director of the Yukon Chamber of Mines.
But it can be particularly difficult for mines in the North, where operating costs are a lot higher, he said.
A recent study produced by the Mining Association of Canada, the Prospectors and Developers Association of Canada, the Association of Consulting Engineering Companies - Canada, and the chambers of mines in the territories looked at those costs.
It found capital costs in the North - the three territories and northern regions of the provinces - are 2.5 times higher for base metal mines, approximately double for gold mines and 15-20 per cent higher for diamond mines in the territories.
“Producing in Canada’s North is inherently more expensive than it is to do anywhere else in Canada and we need to look toward implementing some ways and means of which we can insure that operating in Canada’s North is as competitive as it is anywhere else,” Hartland said.
The report makes many recommendations, including that the federal government offer companies a 10 per cent investment tax credit as well as another tax credit for infrastructure contributions.
Those recommendations have been forwarded on to Natural Resources Canada, Hartland said. The hope is that they will be added to the agenda to discuss at the upcoming energy and mines ministers conference in July.
Contact Ashley Joannou at
ashleyj@yukon-news.com