CALGARY — Shares in TMAC Resources Inc. fell sharply and then recovered Tuesday after it announced Ottawa has blocked its $230-million sale to China’s Shandong Gold Mining Co. Ltd.
Ottawa made the decision following a review under the Investment Canada Act, the Canadian miner said in a news release, adding it is now in talks with Shandong regarding termination of the transaction.
“While we are disappointed with the outcome, we are very pleased that TMAC achieved significant operation improvements at Hope Bay,” said CEO Jason Neal in a news release, referring to TMAC’s gold mining project in Nunavut.
“We will continue to build on these improvements while considering options to manage our balance sheet. We continue to believe that the Hope Bay gold belt holds substantial value with long life production potential that presents a significant development opportunity.”
TMAC shares were down a penny at $1.29 in mid afternoon trading after falling as low as $1.05 earlier in the day.
Shandong announced the deal in May to buy TMAC for $1.75 per share in cash.
The friendly deal had received Chinese regulatory approvals and TMAC shareholders voted 97 per cent of their shares in favour of it in June.
However, the federal cabinet ordered a national security review of the proposed sale in October.
A spokesperson for Innovation, Science and Economic Development Canada said Tuesday there was no one available for an interview but provided a brief statement that stopped short of verifying the decision.
“Under the Investment Canada Act, all foreign investments are subject to national security review,” said Yara El Helou in an email.
“Reviews are conducted on a case-by-case basis as part of a rigorous and evidence-based process. Due to the confidentiality provisions of the Investment Canada Act, the government cannot comment further.”
In a follow-up email, El Helou confirmed the order had been issued by the government.
In the news release, Neal said the company had cash of $71.5 million as of Sept. 30 and is generating positive cash flow. He said it will have enough funds to pay for its “sealift” bulk supply deliveries next year but not enough to fully repay maturing debt recently extended to June 30, 2021.
“We have the required consumables, materials and supplies to continue operating at current levels until the third-quarter 2021 sealift arrives,” he said.
Lisa Wilkinson, TMAC’s vice-president of investor relations, said the end of the transaction won’t trigger a “break fee” payout by TMAC to Shandong.
“When the transaction is terminated, there would be no break fee in either direction and each party is responsible for their own costs,” she said in an email.
In August, Shandong reported the appointment of Barrick Gold Corp. veteran Mark Wall as CEO of Streamers Gold Mining Corp. Ltd., its wholly owned subsidiary in Canada.
The deal with Shandong followed a strategic process launched in early 2020 by TMAC to improve its financial position through alternatives including a possible sale or merger, taking on a partner or other long-term financing alternatives.
Its remote Hope Bay property is accessible by sea and an airstrip. TMAC began producing gold in early 2017 from Doris, its first mine there.
This report by The Canadian Press was first published Dec. 22, 2020.
