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News Release

CanTung Closes: NWT Mine Reclamation Policy Shown to be Farce

On December 5, 2003, North American Tungsten, the owners of the CanTung Mine in the Northwest Territories, announced they were closing the mine immediately, leaving 200 workers out of a job.

Mine reclamation policy in the Northwest Territories is once again shown to be a farce.

It will cost $48 million to rehabilitate the mine site and protect Nahanni National Park from toxic effluents. There is only a $900,000 security in place.

Closed from 1986 to 2002, the mine was allowed to re-open in early 2002 without an environmental assessment or even an inspection. The mine was estimated to have four years of ore reserves and had contracted to supply its tungsten to Swedish and US companies.

The CanTung Mine was open from 1962 to 1986, and was sold to Aur Resources, then resold to North American Tungsten (NATCL) in 1997. As part of the deal with Aur, NATCL agreed to place $2,650,000 into an escrow account for reclamation to indemnify Aur. This amount was to be reduced by $1 million if it was used for opening the mine. This was done June 26, 2001, and the escrow account was reduced to $1,650,000.

It appears that the water licence is secured with a $900,000 letter of credit, although it is not clear that all this money has actually been collected.

The capital to purchase the mine came from loans from two companies that were willing to purchase the product of the mine, from the escrow account and from the sale of shares to the public ($2.6 million). The loan - $4.5 million CAD over 36 months - was from Sandvik (of Sweden) and Osram (of the US), the companies which were to purchase the tungsten. Subsequently there were other loan agreements with Sandvik and Osram which gave them title to all the equipment and buildings at the mine. NATCL thought that the contract guaranteed them a market for 100% of their production for at least three years1. Now the companies have called in the loans, and the mine has been closed.

The mine should never have been re-opened, and the 170-200 workers there should never have had their hopes raised.

Estimates of the costs of reclamation of the site vary from company-commissioned estimates of $2.3 million to $4.6 million to estimates commissioned by DIAND (the Department of Indian Affairs and Northern Development) of $34 million to (most recently) $49.3 million.

The mine is in a very sensitive area, within the traditional territory of Nahanni Butte of the Deh Cho First Nations. It is on the Flat River, a tributary of the Nahanni, only 85 km upstream from the treasured Nahanni National Reserve World Heritage site. There is an enormous tailings area at the old mine, and a waste rock dump. Some of the rock is acid-generating, and the tailings are full of heavy metals including tungsten and are very toxic. A breach of the tailings dam could poison large sections of the Nahanni River. Dust from the mine and mill are also toxic. Contamination from the mine has been found 15 km from the mine site.

Tungsten is known to cause lung problems and childhood leukemia, although there are few studies.

DIAND allowed the mine to re-open in January, 2002. A few weeks later, on January 19, there was a fuel spill of over 23,000 litres of diesel. No charges were laid, and it took DIAND three weeks to inspect the accident.

This confirmed the worst fears of citizens who care about the environment. They had been insisting that the mine's water licence - necessary for re-opening the mine - should not be issued without a full environmental assessment (EA). The Mackenzie Valley Land and Water Board agreed and requested an EA. The company went to court, arguing that an EA would cost $1.5 million and take two years, and would make the mine un-economic. On November 26, 2002, the court determined that an EA was required. Two days later the Water Board extended the water licence for one year with no changes to the terms of conditions, while the company appealed the court decision. On March 31, 2003, the NWT Court of Appeal overturned the lower court decision on a technicality. No EA was to be conducted. The water licence was renewed in November 2003 for five years, with a larger security requirement that will likely never be collected.

DIAND's Reclamation Policy for the NWT was finalized in August 2002. It states that 100% reclamation bonding must be in place and that the polluters will pay. Renewing the water licence without full security was in direct contravention of this policy; a policy approved by the same minister who approved the licence.

Now Nahanni National Park and the lands of the Deh Cho are in grave danger from this toxic mine site. Most of the owners of the company - CEO Udo Van Doehren and three other directors - have resigned.

The directors of the company paid themselves handsome salaries in 2002: Van Doehern was paid $210, 000; Stephen Leahy $102,000.

DIAND will have difficulty acting to protect the watershed because the ownership of the site is now in question. To what extent does it belong to Sandvik and Osrom? What is the role of the Aur Resources escrow account? The security available to the government is $900,000 or less.

The mine would only have provided work for four years anyway - the extent of the ore body, and the return in royalties and taxes to the NWT would never have been enough to compensate for this destruction.

Its not clear who owns the site or how it will be cleaned up. This fiasco makes clear that the NWT needs legally binding mine site reclamation standards and an industry-funded orphan site clean-up fund. CanTung is the newest in a string of orphaned and abandoned sites in the north - BYG Faro, Colomac, Giant - that have all happened in the last decade. It is time we moved forward.

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1 North American Tungsten, Annual Information Return, February 14, 2003, page 10. "Effective March 15, 2001, the Company entered into a Letter of Intent with Sandvik AB ("Sandvik"), of Stockholm, Sweden, and Osram Sylvannia Products, Inc. ("Osram"), of Pennsylvania, U.S.A., pursuant to which Sandvik and Osram agreed to purchase all of the Company's tungsten ore concentrates produced from the Company's Cantung mine and includes: the existing reserves containing approximately 900,000 metric tonne units of tungsten ore at the Cantung mine; the potential additional resources of tungsten ore concentrates which may be produced from underground resources at the Cantung mine; and the potential additional resources of tungsten ore concentrates which may be produced from open pit production at the Cantung mine. Sandvik and Osram are leading producers of tungsten products, cemented carbides and leading consumers of tungsten ore world-wide. Effective May 18, 2001, the Company entered into formal agreements with Sandvik and Osram pursuant to which Sandvik and Osram jointly agreed to advance $3,000,000(US) (Cdn.$4,500,000) by way of loan to the Company which was applied towards startup and re-fit costs for the Cantung mine. Sandvik AB controls Sandvik Coromant and Sandvik Canada. The loan is to be repaid over a period of 36 months. In addition to the loan amount, the agreement provides for the guaranteed purchase of the tungsten concentrate produced from the Cantung mine at a minimum floor price, together with a scaled discount from world quoted tungsten commodity prices for the benefit of Sandvik and Osram. Additionally, the agreement grants to Sandvik and Osram the exclusive option to participate in the future development of the Company's additional tungsten assets, specifically the Mactung deposit located some 160 kilometres north-west of the CanTung mine."