Western Nunavut gold miner hopes shareholders approve Chinese buyout
“We have acted in the interests of all stakeholders to put Hope Bay on a new trajectory for long-term success”
Only a little more than a week remains before TMAC Resources Inc. shareholders cast their votes on June 26 on whether to support a buyout of the Hope Bay mine in western Nunavut by Shandong Gold Mining Co. Ltd.
If the deal with the Chinese state-owned company, better known as SD Gold, is a go, TMAC president and CEO Jason Neal says the Hope Bay mine will be able to ramp up to full operating levels.
“More importantly, we have acted in the interests of all stakeholders to put Hope Bay on a new trajectory for long-term success,” Neal said in a news release about the deal. He said he hopes TMAC shareholders will approve the buyout at a special meeting in Toronto, on Friday, June 26.
At the meeting they will consider and, “if deemed advisable,” pass a resolution approving the acquisition by SD Gold of all common shares of TMAC.
Given the COVID-19 pandemic, TMAC has asked shareholders to vote by proxy in advance of the special meeting and not to attend the meeting in person, “unless and until all social distancing recommendations or restrictions have been lifted.”
On May 8, TMAC announced the completion of the strategic review process and its agreement with SD Gold to purchase all of the outstanding shares of TMAC at a price of $1.75 per share in cash.
If the deal is approved, SD Gold will pay $207.4 million for the gold mine complex.
SD Gold also 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.
If the buyout deal goes through on June 26, SD Gold said it commits to keeping to much the same path as TMAC.
The sale will require the approval of at least 66 and two-thirds per cent of the votes cast by TMAC shareholders at the special meeting.
These shareholders include the Kitikmeot Inuit Association, which represents Inuit in western Nunavut’s five communities.
In addition to shareholder and court approvals, the transaction will also be subject to regulatory approval in Canada and China.
Non-Canadians who acquire control of an existing Canadian business are subject to the Investment Canada Act, whose purpose is “to provide for the review of significant investments in Canada by non-Canadians in a manner that encourages investment, economic growth and employment opportunities in Canada and to provide for the review of investments in Canada by non-Canadians that could be injurious to national security.”
But Ottawa is unlikely to reject the deal over security issues because the mine doesn’t lie directly on the Northwest Passage, and its gold, unlike the rare earth minerals sought after by high tech companies, isn’t a commodity with political implications, said Michael Byers, a legal scholar who holds the Canada Research Chair in Global Politics and International Law at the University of British Columbia and is the author of “Who owns the Arctic?”
The SD Gold acquisition is the kind of business deal to be expected in a global downturn because China has “deep pockets,” he said. The proposed takeover is a sign that China is looking to make money in the Canadian Arctic, Byers told Nunatsiaq News shortly after news of the possible buyout was publicized.
BHP Billiton, Miramar, Newmont and TMAC have explored Hope Bay for more than 30 years.
During that time, more than $1.5 billion have been spent on exploration and evaluation, surface infrastructure, and mine and process plant development.
TMAC began producing gold in early 2017 from Doris, its first mine at Hope Bay, although, recently, TMAC has had disappointing production results, resulting from multiple challenges due to the COVID-19 pandemic and mechanical issues.
There have been production delays in the Doris Central mine as a result of the water issues disclosed before drilling and development activities were suspended in March in response to the COVID-19 pandemic.
There were also problems caused by a failed bearing crusher, which meant the mine’s processing plant shut for 17 days.
TMAC is now operating on a limited basis, with the processing plant dealing with material from stockpiles, as part of the company’s response to the COVID-19 pandemic.
In the first quarter of 2020, TMAC generated gross revenues of $59.4 million from the sales of 27,710 ounces of gold.