Ottawa Rejects Chinese Company’s Takeover of Nunavut Gold Mine Over Security Concerns

Aerial view of Hope Bay, Nunavut, where TMAC Resources' gold mine is located. (Timkal/CC BY 3.0)

The federal government has rejected a Chinese state-controlled mining company’s planned takeover of Canada’s TMAC Resources, after conducting a review of the potential security risks.

Toronto-based TMAC Resources Inc. says Ottawa has turned down its deal to be bought by China’s Shandong Gold Mining Co. Ltd. following a review under the Investment Canada Act.

TMAC says the deal will now not go ahead and it is in talks with Shandong regarding termination of the transaction. Shares in TMAC fell Tuesday morning after the company announced Ottawa had blocked the sale, down 15 cents at $1.15 in late-morning trading after falling as low as $1.05 earlier in the day.

Shandong, one of the world’s largest gold producers, announced the deal in May to buy TMAC, owner of the Hope Bay gold mining project in Nunavut, for $230 million.

The deal had received Chinese regulatory approvals and TMAC shareholders voted in favour of it in June, but it was pending approval by Ottawa after the federal cabinet ordered a national security review of the proposed sale in October. Under the Investment Canada Act, foreign companies are subjected to more scrutiny during the COVID-19 pandemic in order to prevent “opportunistic investment behaviour.”

The deal also raised security concerns about Chinese state-owned firms acquiring key assets in Canada’s Far North amid China’s Arctic ambitions, as the Chinese Communist Party is known for buying companies that can aid in its long-term strategic goals.

Security experts have said the project aligns with China’s geo-political ambitions, as TMAC’s Doris gold mine is situated near a highly strategic shipping route connecting the Atlantic Ocean to the Pacific.

David Harris, a former contractor for the Canadian Security and Intelligence Service, told The Epoch Times in May that the TMAC deal had a “predatory flavour” and would pose serious risks for Canada on economic and national security fronts.

Gold has become a refuge for investors during precarious economic times, and for the past 20 years China has been expanding its reserves. Though Hope Bay’s gold production has been limited, Harris said the precious metal’s military utility and the mine’s location on the shores of the Northwest Passage present dual concerns.

“Gold plays a significant role when it comes to certain nuclear-related operations, and that’s not a minor issue given China’s muscular military orientation these days, and there’s the proximity question as a function of security,” he said, adding China has a “tremendous appetite” for securing strategic control in the Arctic.

In June, Charles Burton, senior fellow at the Macdonald-Laurier Institute and one of Canada’s top China experts, called for a moratorium on investment in Canada by Chinese state-owned enterprises, citing major economic and security concerns. He said the Chinese regime is unlikely to invest in any sector that doesn’t serve a specific political goal or advantage, and that state-owned enterprises work closely with the Chinese military to gather information which they can later use strategically.

With files from The Canadian Press