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

By Tom Daly and Jeff Lewis
(Reuters) - Canada turned down Shandong Gold Mining's offer for indebted TMAC resources, the companies said amid concerns about a Chinese state-owned company operating in the country's sensitive Arctic region.
Canada and Australia took a deeper look at the businesses of Chinese government miners this year amid the economic turmoil caused by the coronavirus pandemic.
The Ottawa decision could put further strain on Canada-China relations, which were already damaged by the arrest of Huawei Technologies Co Ltd's CFO Meng Wanzhou in December 2018 at the request of the United States.
"There were concerns that a Chinese state-owned company might take over a mine in the far north and it was ultimately rejected," an Ottawa source familiar with the matter said Tuesday. The source declined to say what these concerns were.
Partly owned by Shandong Province and one of China's largest gold mining companies, Shandong Gold said Tuesday it received a decision from Canadian authorities on December 18 not to continue doing business. It added that sales have been blocked for national security reasons.
The gold producer TMAC announced late Monday that it had been informed of such an order under the Investment Canada Act.
TMAC shares fell as much as 16.2% on Tuesday before rebounding somewhat as investors worried about its ability to repay debt.
The miner said Nov. 5 that he had approximately C $ 99 million cash on hand, just before the C $ 169.7 million debt due in June.
"Given Canada's sensitivity to the far north and recent tensions between Canada and China, we expected that the Canadian government would not approve the proposed purchase," said Barry Allan, an analyst at Laurentian Bank.
TMAC is now facing a potentially "chaotic refinancing that could ultimately hurt shareholders," he said.
Shandong Gold said in May it would pay C $ 230 million (US $ 179 million) to acquire TMAC, which operates the Doris Mine in the Hope Bay region in the northern and strategic area of ​​Nunavut.
Canada launched a national security clearance of the proposed acquisition in October, which was extended last month.
Rich in minerals but sparsely populated, Nunavut is considered just as important by Canada as the retreat of sea ice opens up potential new shipping routes.
Canada blocked a planned acquisition of construction company Aecon by China Communications Construction Co Ltd for $ 1.51 billion in May 2018, also for national security reasons.
Prime Minister Justin Trudeau has been pressured to tighten 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 comments, citing confidentiality provisions.
TMAC has not made a decision on whether to restart a sales process, said a spokeswoman, declining further comments.
($ 1 = 1.2865 Canadian dollars)
(Reporting by Tom Daly; additional reporting by Jeff Lewis in Toronto; additional reporting by David Ljunggren in Ottawa; editing by Kirsten Donovan and Steve Orlofsky)
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