Canada rejects bid by China’s Shandong for Arctic gold mine on security grounds

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Canada rejected Shandong Gold Mining’s bid for indebted TMAC Resources, the companies said, amid concerns about a Chinese state-owned entity operating in the country’s sensitive Arctic region.

Canada and Australia have increased scrutiny on deals by state-run Chinese miners this year amid economic dislocation caused by the coronavirus pandemic.

Ottawa’s decision could further strain Canadian-Chinese relations, already damaged by Canada‘s December 2018 arrest of Huawei Technologies Co Ltd Chief Financial Officer Meng Wanzhou at the request of the United States.

“There were concerns about a Chinese state-owned enterprise taking over a mine in the far north and it was ultimately rejected,” an Ottawa source familiar with the matter said on Tuesday. The source declined to say what those concerns were.

Shandong Gold , controlled by the province of Shandong and one of China’s top gold miners, said Tuesday it had received notice of a decision made by Canadian authorities on Dec. 18 that it should not proceed with the deal. It added the sale was blocked on national security grounds.

Chinese foreign ministry spokesman Zhao Lijian said Canada should provide a fair, open and non-discriminatory business environment for companies from all countries including China.

“Any action that politicises normal commercial cooperation and engages in political interference in the name of national security is wrong,” Zhao told a daily news briefing.

Shares in gold producer TMAC, which said it had been informed of the order to block the deal under the Investment Canada Act, fell as much as 16.2% Tuesday as investors worried about its ability to repay debt.

The miner said on Nov. 5 it had about C$99 million in cash on hand, short of the C$169.7 million of debt due in June.

“Given Canada’s sensitivities with the high North and more recent tensions between Canada and China, we had anticipated the Canadian government would not approve the proposed purchase,” Laurentian Bank analyst Barry Allan said.

TMAC now faces a potentially “messy refinancing which could ultimately hurt shareholders,” he said.

Shandong Gold said in May it would pay C$230 million ($179 million) to acquire TMAC, which operates the Doris mine in the Hope Bay region of the northern and strategically important territory of Nunavut.

Canada in October launched a national security review of the proposed acquisition that was extended last month.

Mineral-rich but thinly populated, Nunavut is seen by Canada as vital as retreating sea ice opens up potential new shipping routes.

Canada in May 2018 blocked a proposed C$1.51 billion takeover of construction company Aecon by China Communications Construction Co Ltd, also on national security grounds.

Prime Minister Justin Trudeau has faced pressure to toughen the country’s stance on China.

Canada‘s department of Innovation, Science and Economic Development, which oversees foreign investment, said in a statement that Canada remains open to investment but declined further comment, citing confidentiality provisions.

TMAC has not decided whether to relaunch a sale process, a spokeswoman said, declining further comment.

Reuters

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.