After feds stop sale to Chinese company, Nunavut’s TMAC looking for cash

$170 million debt comes up for repayment in June

TMAC Resources Ltd. says the Hope Bay gold mine in western Nunavut is not headed into care and maintenance despite the federal stop to the proposed sale of TMAC to Shandong Gold Mining Co. Ltd. (Photo courtesy of TMAC)

By Jane George

This week’s decision by the federal government to reject the sale of TMAC Resources Inc. to the Chinese Shandong Mining Co. Ltd. doesn’t mean the Hope Bay mine in western Nunavut will be mothballed, says Jason Neal, TMAC’s president and CEO.

“There is not going to be a care and maintenance situation,” he told Nunatsiaq News on Dec. 22, the day after the federal review decision became public.

But TMAC still faces a big financial challenge within the next six months: how to manage the repayment of roughly $170 million to Sprott Resource Lending by the end of June 2021.

Neal called the debt “considerable.”

TMAC had $71.5 million in cash reserves as of Sept. 30, as well as a positive cash flow, which means it has enough money to fund its 2021 sealift.

But that’s not enough to pay off the debt.

The repayment had been put off pending the sale to Shandong.

“That’s the next thing in front of us. We need to refinance that,” Neal said.

But Neal said that he thinks TMAC has done well enough with its debt to date that the company will be able to negotiate a solution and avoid bankruptcy.

Had the sale to Shandong, which is owned by the Chinese government, gone through, Neal said he believed Hope Bay would have been on solid financial ground.

“We thought Shandong was stable,” Neal said. “They have deep pockets and they could bring investments that would guarantee longevity to the mine.”

Neal did not want to speculate on exactly why the federal review was negative, but he acknowledged the decision reflected the reality that “relations between Canada and China are not all that good now.”

He almost acknowledged concerns about China’s designs on the nearby Northwest Passage.

However, Neal said the Chinese-owned mine was just “really a mining company that is trying to build an international mining business,” and did not constitute a security risk.

“They were trying to do all the right things,” Neal said. “They have been disappointed by politics like everyone else has.”

The rising price of gold since the start of the pandemic may be able to help attract a new buyer.

During the federal review process, the Kitikmeot Inuit Association, which owns the land the Hope Bay mine sits on, remained quiet.

But on Dec. 22, association president Stanley Anablak said in a statement “KIA respects Canada’s law and right to decide whether to approve or deny this transaction.”

At the same time he said that association strongly supports the continuation of the Hope Bay mine.

“[The KIA] expects Canada will take the necessary steps to ensure that valuable Canadian resources can be successfully developed in the Kitikmeot region in a manner that does not compromise the interests of Inuit and the interests of Canada,” he stated.

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(2) Comments:

  1. Posted by Jeff on

    – Classic case of putting the cart ahead of the horse. TMAC not servicing their debt because they expected the sale of their mine to the chinese govt-owned co. wd be approved.
    – TMAC is in a positive $$ position so getting new terms on debt repayment shdn’t be a problem.
    – TMAC (& KIA) need to find a ‘friendly’ BUYER that wants to buy a gold mine not a BUYER who wants to buy a geo-political location… NWPassage.
    – KUDOS! to the feds for seeing the BIG picture because TMAC was only thinking about their wallets.

  2. Posted by Jen on

    Does that mean the Chinese road and port will be stopped too?

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