Western Nunavut gold producer TMAC may put itself up for sale

TMAC Resources Inc., which controls the big Hope Bay goldfield in western Nunavut, has launched a process that could see the company put itself up for sale, TMAC said in a news release issued on Jan. 20.

Through what it calls a “strategic review process,” TMAC says it will explore a broad range of options, including a sale, a merger, a joint venture or alternative forms of long-term financing.

The purpose of that work is to “generate the financial strength which will allow Hope Bay to achieve its potential,” the company said, saying it’s seeking more ways to generate the capital it needs to expand.

To do that, it has engaged two Canadian investment bankers, CIBC Capital Markets and BMO Capital Markets, as financial advisors.

TMAC’s Hope Bay goldfield, which is roughly 80 kilometres long and 20 kilometres wide, is located on the mainland about 65 kilometres east of Bathurst Inlet, 150 kilometres southwest of Cambridge Bay and 700 kilometres northeast of Yellowknife.

The Hope Bay goldfield, roughly 80 kilometres long and 20 kilometres wide, is located on the mainland about 65 km east of Bathurst Inlet, 150 km southwest of Cambridge Bay, and 700 km northeast of Yellowknife.

Its commercial operations, which began in 2017 with a small starter mine at Doris North, have become a lucrative source of cash for Nunavut Tunngavik Inc. and the Kitikmeot Inuit Association, through royalties, fees, bonuses and other payments.

Mandatory extractive industry disclosures made to the federal government reveal that in 2018, TMAC put $7.16 million into NTI’s coffers, and paid $2.69 million to the KitIA,and paid $820,000 in property taxes to the Government of Nunavut.

And a potential future expansion could create hundreds of jobs, though potential Inuit employment levels are unclear.

But the stock market has turned a cold shoulder to the troubled firm. Since late 2016, TMAC’s share prices have plummeted.

In early November 2016, TMAC’s shares were selling for $19.15—but as of Jan. 21 this week, they traded at only $2.76.

So the company now hopes the strategic review will lead to new measures that will create more value for shareholders.

“Alignment with our largest shareholders is a key consideration in the timing of this process,” said Jason Neal, TMAC’s president and chief executive officer.

TMAC’s biggest shareholders, which control 58.5 per cent of the company right now, are the U.S. gold mining giant Newmont Corp. and Resource Capital Funds, a global investment bank that invests in mines.

But at the same time, it appears as if TMAC needs new sources of investment to pay for future expansion to the south of Doris North.

In 2018, the company received permits to do that expansion, at three new mines called Madrid North, Madrid South and Boston.

But to do that, it appears as if TMAC may need either new investors or a new ownership structure that could be put in place early this year.

“Additionally, a transaction in early 2020 would provide an advantage in planning and procurement for the 2020 sealift, which may include additional purchases to support investment that TMAC may not otherwise make itself at this time,” the company’s release said.

“Maximizing value for our stakeholders, including but not limited to our shareholders, employees and the people of the Kitikmeot region, is not possible without maximizing the value of Hope Bay,” Neal went on to say.

In past statements, the company has said they hope to expand into Madrid South in 2020 and at the Boston location by 2022, using a 55-kilometre road to connect its various mining sites.

The company’s fourth quarter production results appear to be disappointing.

“In the fourth quarter we produced 24,650 ounces of gold, which was the low end of our expectations,” Neal said.

Also, one of the founders of the company, mining executive Terry MacGibbon, resigned from TMAC’s board this past Dec. 30. The company name “TMAC” is formed from MacGibbon’s name.

About $1.3 billion has been invested in exploration and development work at the Hope Bay property over the past 30 years.

Newmont Mining acquired the property from Miramar Mining in 1999, but in 2011, put the property into mothballs.

TMAC emerged in 2012 to acquire Hope Bay, with Newmont participating as a major shareholder.

The company cautions that it has yet to decide on any future course of action and will make no more comments until after its board of directors approves a course of action.