Canada rejects Shandong’s bid to buy TMAC

The Canadian government has rejected Shandong Gold Mining’s bid to acquire TMAC Resources (TSX: TMR), the companies said.

In a filing to the Shanghai Stock Exchange, Shandong Gold said it had received notice of a decision made by Canadian authorities on Dec. 18, based on the Investment Canada Act.

Shandong agreed to buy the company for about US$150 million in May, but in October TMAC said it had received notice that the Canadian government had ordered a national security review.

Some investors are worried about TMAC’s ability to repay debt. The miner said on Nov. 5 it had about C$99 million in cash on hand, short of the C$169.7 million of debt due in June.

 

“TMAC is likely to be forced into a messy refinancing which could ultimately hurt shareholders,” Laurentian Bank analyst Barry Allan told Reuters news agency.

“While we are disappointed with the outcome, we are very pleased that TMAC achieved significant operation improvements at Hope Bay,” Jason Neal, TMAC’s president and CEO stated in a news release on Dec. 21. “We will continue to build on these improvements while considering options to manage our balance sheet.” 

“Given our September 30, 2020 unrestricted cash balance of C$71.5 million and current positive cash flow being generated, we expect to have sufficient cash on hand to fund the 2021 sealift, but not to fully repay maturing debt recently extended to June 30, 2021,” Neal continued.

TMAC owns the Doris gold mine, the only operating asset in Hope Bay, Nunavut. The mine began commercial production in 2017 and had proven and probable mineral reserves totalling around 3.54 million ounces of gold at the end of 2019.

The miner is in the early stages of developing a second underground mine at Hope Bay — Madrid North. It has also concluded a prefeasibility study on a production expansion at the Hope Bay property.

TMAC’s biggest shareholders include Newmont (TSX: NGT; NYSE: NEM), and Resource Capital Funds.

Canada last blocked a proposed C$1.51 billion takeover of construction company Aecon by China Communications Construction Co Ltd, also on national security grounds, in May 2018.

Canada-China relations have been frayed since December 2018, when Huawei Technologies Co.’s chief financial officer, Meng Wanzhou, was detained in Vancouver at the request of the United States, where she’s charged with fraud. She has been confined to the city since then.

Following her arrest, China jailed two Canadians — Michael Spavor and Michael Kovrig — on espionage charges and halted billions of dollars in Canadian imports.

Prime Minister Justin Trudeau has faced pressure to toughen the country’s stance on China.

At presstime in Toronto TMAC was trading at $1.16 per share within a 52-week range of $0.44 and $3.93 per share. The company has about 130 million common shares outstanding for a market cap of about $151 million.

This article first appeared in MINING.com, part of the Glacier Resource Innovation Group.