North American Tungsten — Stephen M. Leahy Opportunity Show podcast transcript

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Ellis Martin Interviews North American Tungsten's CEO, Stephen M. Leahy _uacct = "UA-2662954-2"; urchinTracker();  | Investment Opportunities | Investing Articles | Financial News | Resources | Radio Show Podcasts | Ellis Martin Interviews North American Tungsten's CEO, Stephen M. Leahy - Podcast March 02, 2009 - Hosted By Ellis Martin

Ellis Martin: I’m Ellis Martin, Executive Producer of The Opportunity Show and today we’re featuring a conversation with Stephen Leahy. He’s the President and CEO of North American Tungsten trading on the TSX Venture Exchange under the symbol NTC. Steve welcome to The Opportunity Show.

Stephen Leahy: Thank you Ellis it’s a pleasure to be here.

Ellis Martin: Let’s talk about North American Tungsten and if you don’t mind educate those of us who have no clear understanding about tungsten and its uses worldwide.

Stephen Leahy: Tungsten is a very small worldwide product. It is called a minor metal or noble metals in some cases, but it has three main attributes. Number one, it is the hardest material on earth beside diamond and number two it is the, has the highest melting point of any metal by far at three (3), four hundred (400) degrees Celsius and three, its density, it is non-toxic but its density is equal to that of gold. So given that you may also need to understand the geopolitical sense of tungsten and that means that China currently has captured an eighty-six percent (86%) market share and production of tungsten worldwide and there has been no exploration virtually for tungsten for several decades.

Ellis Martin: Now it’s my understanding that your company is an actual tungsten producer and is the largest producer in the western world as well as being an answer to that strategic threat from China more or less.

Stephen Leahy: Absolutely. We are the only tungsten producer in North America. We produce four percent (4%) of the world’s tungsten currently and our big deposit the Mactung and our next mine is the largest high grade tungsten deposit skarning deposit in the world. It comprises from eight (8) to ten (10) percent of the world’s known resource.

Ellis Martin: That property is wholly yours in the Northwestern Territories? Am I right?

Stephen Leahy: Saskatchewa Yukon Territory.

Stephen Leahy: Our current mine is in the Northwest Territories.

Ellis Martin: As you stated Steve, North American Tungsten currently produces about 4% of the world’s supply of tungsten, you see that percentage increasing? How do you see your company’s growth globally as time progresses? Let’s discuss the strategic importance of tungsten as well as something you’re involved in developing called, Tungsten Plastic.

Stephen Leahy: Well certainly let’s deal with our company. As we said we produce about four percent (4%) of the world’s tungsten today at our Cantung mine. At our Mactung Mine which we have just received bankable feasibility studies on and we hope to start, we’re developing and hope to have that in production in several years. It will produce well over two times that in terms of tonnage and we will become the largest single producer of a mine of tungsten in the world.

Ellis Martin: That’s impressive.

Stephen Leahy: As far as tungsten goes, you know, tungsten is a strategic metal and it is important to virtually every industrialized country in the world. Cutting tools and hard metal uses are typically the largest component and market share or consumption of tungsten and let me give you an example. If you’re drilling say an oil well for example, a ten thousand (10,000) foot oil well and you have to pull your drill string up several more times by not using tungsten drill bits, that costs you a lot of money. So the elasticity of the pricing of tungsten is very good we think, that the tungsten market with as I said before with virtually no exploration certainly in the western world for the last several decades. Tungsten is definitely required for all sorts of infrastructure projects as I said coatings for drill bits, coatings for dozer blades, strengthening steel and more importantly recently the biggest new category that I see for use of tungsten is relating to its non- toxicity. Technology basically developed by a group in Minnesota who we are now in partnership with has come up with a tungsten composite, which means that we coat the tungsten particles with plastic making it maniable as opposed to using its density and non-toxicity as a replacement for lead in certain consumer items ranging from, essentially from, fishing weights to wheel weights anything balancing needing density, anything, ballistics as an example. So there’s all of a sudden there’s a huge amount of markets have now open to the use of tungsten and it is the best product to be used in these individual composites. So I think the demand for tungsten is going to be increasing. In addition the three percent (3%) of the world’s supply of tungsten is currently being roughly auctioned off by your U.S. government stock, strategic stock pile and by our calculations there’s only five (5) or six (6) years left of that. So with no domestic production and virtually only us in production in North America I think we are very much a strategic, of strategic importance to not only Canada but to United States as well.

Ellis Martin: So you see developing strategic relationships with companies that produce ballistics here in the North America?

Stephen Leahy: Well for example I think it’s very important to understand this non-toxicity. When you know we are not making bullets for example but what we are is making a composite that certainly is interesting to the ballistics industry because of its non-toxicity. When firing ranges shoot off quite a few test bullets every year they have to clean the lead up because it becomes a toxic waste dump and it reaches into the ground water. When bird waterfowl for example each shotgun shot lead pellets is being banned because it’s killing the waterfowl literally not by actually shooting them. So it is a danger there is a lot of toxicity associated with lead and certainly the replacements have never really been of very good quality. Now as I said with this technology, the quality I’m told is there.

Ellis Martin: So it could virtually replace lead across the board as a ballistic component, correct?

Stephen Leahy: Yes. I think the problem though really is that there’s not enough supply of tungsten around. I mean there just isn’t for that to replace, may replace certain sort of sectors of that marketplace but, it I don’t think has the tonnage available to currently to replace the entire ballistics market.

Ellis Martin: How is North American Tungsten as a producer fairing during the current global economic crisis that we are now in the middle of?

Stephen Leahy: Well we will be releasing our first quarter which is December 31st ‘08 very soon but you’ll see that we have been actually beneficiaries of certain things. Exchange rates, when you know, a year ago, the U.S., because tungsten is priced in U.S. dollars, we were at par for our Canadian dollar. So now we’re getting essentially, we have an eighty-one cent ($0.81) dollar roughly we’re paying our expenses in Canadian dollars and we’re receiving revenue in U.S. dollars. Now fuel prices have also declined dramatically and at our remote location we go through about ten (10) million liters of diesel per year. Given that falling diesel price going from a dollar forty ($1.40) say eight (8) months ago to our currently sixty-six cents ($0.66) is a significant savings. Now the biggest thing though is really the tungsten pricing itself. While base metals have literally gone through the floor tungsten has virtually off maybe twelve percent (12%) from two hundred and fifty dollars ($250.00) down to sort of the two hundred and twenty dollar ($220.00) range.

Ellis Martin: Is tungsten now pricing out at about twelve dollars ($12.00) a pound?

Stephen Leahy: That is correct. That is correct. It’s priced in units and the unit is twenty-two (22) pounds.

Ellis Martin: What can you tell us about the Mactung Project?

Stephen Leahy: The Mactung Project as I stated before is as far as we know the largest high grade tungsten skarning deposit in the world. Our bankable feasibility study which we just released points to an eleven (11) year underground mine life at a production rate of seven hundred fifty thousand (750,000) units per year of tungsten trioxide which again compared to our current operation of three thousand (3,000) sorry three hundred thousand (300,000) metric ton units. Now in terms of tonnages there’s thirty-three (33) odd million tons there and with a very high grade it gives us very high recovery. As a comparison when you look at initial grades being mined of one point four percent (1.4%) SW or tungsten compared to some of the Chinese mines for example of point one five percent (0.15%) they have the mines significantly more tonnages than we do in order to recover the same amount of material. And then of course after our underground which we as I said was eleven (11) years of availability we have open pit potential which was essentially not covered by our feasibility study but estimates range in the seventeen (17) year mine life for that. So you’re looking at a several decade potential operating tungsten mine that will be a significant force to the world markets.

Ellis Martin: I was just looking at your chart and your share price is near fourteen cents ($0.14) when at about a year ago it was near a dollar ($1.00). I venture to guess that your stock is extremely oversold possibly? You really haven’t lost any revenue based on what you said earlier since a lot of your costs have gone down. In your opinion why haven’t more people taken a look at North American Tungsten as a retail investment right now?

Stephen Leahy: Well I think the reason is because we had two bad quarters in December 31 ‘07 and March ‘08 which basically we posted a significant loss because again we’re in much higher costs and also we were having production problems. So you know we posted an eleven (11) million dollar loss for those two (2) combined quarters. Now we seem to have stabilized ourselves for our third (3rd) and fourth (4th) quarters and as I suggested earlier we are doing better not only because of productivity but also the entire pendulum has swung from sort of the high, high fuel costs and high par value dollars on the exchange rate. But I think in the mean time while we were sort of improving our basis I think with this worldwide economic crisis you know equity markets have been just pummeled I think people are just really sitting on the sidelines and wondering what to do. But I also think that a lot of the stories you know our story is just not out there very much and I think it really needs to be and that’s what we’re trying to do.

Ellis Martin: Why should the retail investors being pointed towards gold and silver right now in this economic climate consider investing in tungsten?

Stephen Leahy: Well I think tungsten because it’s strategic in nature. I think tungsten because it’s mainly due to supply is going to be an issue, reason why it didn’t fall into collapse in pricing. I think you see the same thing associated with gold and things like uranium because it really is necessary and the problem that people have in viewing sort of minor metals is of course your right knowledge but these rare earth and noble metals such as tungsten, are really going to become an integral part of the industrialized western world and they are strategic in nature and they’re so very few including essentially being just one, us in North America.

Ellis Martin: In this era of clean or green tech, how does North American Tungsten fit in to the arena?

Stephen Leahy: Well we fit in very well because as I mentioned the you know the mood of the consumers across the Western World anyways has been one of environmental change and people really need to figure out what they’re going to use as an alternative and in many cases there hasn’t been alternatives such as things to replace toxicity in lead but now there is. Where would you go to buy leaded gasoline these days? Well I don’t think it’s available because non-leaded gasoline is taken its place. Well I think you’ll see not only the consumer but the legislatures as well start in this movement and it’s actually started already in certain states they’ve banned lead shotgun shots in many states. I know they have in Canada as well and the EU is doing the same thing. But I really believe that now that there is an alternative and these are essentially its not going to replace lead in everything it doesn’t need to. What it does is replace lead in certain areas where it affects its toxicity is affected unto the environment. We with our partners in Minnesota we will be essentially we own part of we own forty-three percent (43%) of the operation down there and we will be developing our processing down there and we will be developing our all the composites down in Minnesota. I think you will find that consumers will be very agreeable and they will like the new products because of their consciousness towards the environment.

Ellis Martin: Well that sounds fantastic. With a lot of resource companies sitting on the sidelines and not even in production right now it’s certainly a pleasure to speak with someone like yourself who’s running a company that’s taking care of a worldwide need for a demand that’s quite frankly not being met which is a great position to be in a share price for a company which is potentially highly undervalued and oversold. I’m saying that not you Steve. What is the market cap by the way of this company?

Stephen Leahy: Well we have one hundred twenty-six (126) million shares outstanding and I believe the current share price is somewhere in the fourteen, fifteen cent ($0.14, $0.15) range.

Ellis Martin: And it seems to be trading fairly well considering the market at this time. You do have some eyes on the stock definitely.

Stephen Leahy: Yes I think so and I think as again you know there’s a lot of sellers out there in all categories across the board that really have no they have to sell they really have to sell at any price and so that’s very unfortunate because I think it creates a downward pressure which paints a negative picture of companies such as ours and I think you know when people they look under the covers will see (a) a producing entity, producing four percent (4%) of the world’s commodity that has the next resource to be developed that is a significant percentage of a known resource and that resource is a strategic metal.

Ellis Martin: I’ve been speaking today with Stephan Leahy, President and CEO of North American Tungsten trading on the TSX Venture Exchange under the symbol NTC. You can find more information on them by going to there website northamericantungsten.com or talkingtungsten.com as well as our website, theopportunityshow.com. Steve thanks very much for joining us today.

Stephen Leahy: Thank you very much Ellis.

Ellis Martin: For the Opportunity Show I’m Ellis Martin. |