Feds reject sale of TMAC Resources to China’s Shandong Gold

Deal would have given Shandong Gold control of Hope Bay gold mine in western Nunavut

TMAC Resources president and CEO Jason Neal says the company is evaluating its options, following the federal government’s rejection of a proposed takeover of the company by China’s Shandong Gold Mining Co. (File image)

By Jane George

The proposed sale of TMAC Resources Inc. to China’s Shandong Gold Mining Co. Ltd. will not move ahead.

TMAC Resources owns the Hope Bay gold mine in western Nunavut.

The company put out a news release last night at 9 p.m. announcing the federal government has rejected the plan.

“TMAC and Shandong are in discussions regarding termination of the transaction,” states the release.

The two companies had hoped to seal the proposed sale, first announced in May, by Feb. 8, 2021.

Nunatsiaq News reached Jason Neal, TMAC’s president and CEO, after the announcement.

“We have a lot of work to do now on next steps for TMAC and Hope Bay,” he said.

“But Hope Bay has been performing well in the second half of 2020 so we are operating from a better platform.”

TMAC is now looking at ways to reduce its capital expenditures and meet financing requirements.

According to the release, the company had $71.5 million as of Sept. 30, as well as a positive cash flow, which means it has enough money to fund its 2021 sealift. TMAC is now going to focus on how to pay back an unspecified amount of debt, which is set to mature at the end of June 2021.

Shandong Gold had been willing to pay US$150 million for Hope Bay.

Before the deal was finalized, Shandong made an equity investment of about US$15 million to support the cost of TMAC’s sealift this year, by buying 12 million common shares.

Last January, TMAC started looking for a buyer in order to finance expansion and fix Hope Bay’s processing plant.

Shandong would likely have invested $1 billion to revitalize the mine.

However, under the Investment Canada Act, the federal government had been looking at whether the deal would be likely to increase employment in Canada, as well as economic and other impacts.

The act also allowed Ottawa to review the transaction for national security reasons.

The sale had been approved by 97 per cent of TMAC’s shareholders at a special meeting held in June.

As things stand now, Neal said the gold mine could continue to operate at current levels until the third-quarter 2021 sealift arrives and restart development of its Doris Central and Madrid properties early in 2021.

“I would like to thank the TMAC employees and contractors for their hard work and dedication this year as we have dealt with the unprecedented COVID-19 pandemic and the uncertainties of the transaction,” stated Neal in the release.

He also thanked Inuit communities and Nunavut’s leadership for their patience during the regulatory review process.

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(8) Comments:

  1. Posted by The Old Trapper on

    Thank you to the Government of Canada for protecting Canadian resources, the Canadian environment, and ultimately Canadian jobs.
    With the price of gold well over $1,800 USD per ounce TMAC should be able to raise sufficient funding for continued operations. If the gold reserves are in the ground then there will be investors willing to risk their money for mine expansion.
    I am sure that this is a disappointment to the Kitikmeot Inuit Association however they need to remember that the gold is not going anywhere. Use this opportunity to partner with people who will respect the land and the resource.

  2. Posted by Northern Guy on

    Letting the Chinese in would have been disastrous. If past history is anything to go on there would have been an incremental and steady decrease in the number of Canadians employed at the mine and an increase in the number of less expensive Chinese miners.

    • Posted by Employment on

      You can expect zero Canadians to be employed at the mine if the lenders don’t come to the table to re-negotiate the debt TMAC has. It was clearly stated they won’t be able to service the debt that is coming due and it would drive the mine into bankruptcy.
      Ultimately they will need to either find a new buyer, a new financier, or re-negotiate the debt. I doubt they can issue more shares, it would only further dilute current shareholders and they are almost a penny stock with very low volume traded per day. Not exactly attractive.
      All those common shares that were given to KIA are virtually worthless at this point, the stock will only continue to decline until there’s certainty that business can continue operations. You can tell the market is already betting they will fail given todays tank of 13%.

    • Posted by Employment on

      Just because a company is purchased by a Chinese company does not mean that the company does not have to follow the regulatory bodies in the country in which business is conducted in.
      There is 100s of foreign owned operations on Canadian soil. They still have to follow all Provincial and Federal regulations of which one in minimum wage.
      You still have watch dogs and regulated reporting that is required.
      People seem to instantly default to oh Chinaman will do everything so cheaply, and take our jobs and completely forget we have laws and regulations in place. Or immediately go with the China is evil narrative and accepts we have regulatory authorities but China will circumvent them because China is evil.

  3. Posted by Nunavut Resident on

    Too bad KIA is trying to access billion of dollars for the road and port, they should ask or half a billion to buy TMAC instead.

  4. Posted by Jeff on

    – As I stated when a previous story came out on this possible transaction; allowing a Chinese govt-owned company to purchase a mine in Canada, Nunavut & right on the NWPassage would be like letting the fox! in the henhouse.
    – Their intentions were obvious from the outset.
    – Of course many at TMAC (Neal, Buchan, etc) were touting it as ‘simply a business transaction’ BUT sadly they were placing their own vested interests ahead of the best interests of Nunavut & Canada.
    – So KUDOS! to the feds for seeing past the fluff & for seeing what this TMAC mine sale was really all about… the NWPassage?

    • Posted by Thomas Kelly on

      Fully agree with your comments.

  5. Posted by Douglas Brunet on

    I have to agree with those who support the federal government’s decision. It’s unfortunate for the people of China as a whole that they are represented by a regime whose reputation is continually declining, and rightfully so. They were very good at keeping dirty secrets. But, as more cats get out of the bags, the more that secrecy and subterfuge become difficult to maintain. Inevitably, change has to come there just as it must here.
    Rest assured. If the mine is viable, it will operate. However, the previous comment of ‘the fox in the henhouse’ was deadly accurate. We CANNOT permit it.

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