The Canadian government has rejected a deal by Chinese state-owned Shandong Gold Mining to buy Canadian gold miner TMAC. The case involved controversy over possible Chinese Arctic interests, raising national security concerns. Experts believe that Ottawa made the right decision when it finally vetoed the deal.
In April, Chinese state-owned Shandong Gold Mining Company and TMAC signed a deal to buy the company for $207.4 million, about 4 percent more than its market value at the time. The deal was approved by an overwhelming majority of Temec shareholders in June and was approved by the Chinese regulatory board, but the Canadian government ultimately vetoed the deal after repeated deliberations, citing national security concerns.
Shandong Gold’s acquisition of Trimac raises concerns about Chinese intrusion into Arctic sovereignty and resources, as Trimac’s Doris gold property is located in Hope Bay, in the Nunavut region of the Canadian Arctic, near the Northwest Passage, a highly strategic transportation route linking the Atlantic and Pacific Oceans.
The company itself is poorly run, but China is willing to overpay, not for the 1,600 square kilometers of mining land, but for the infrastructure and location that the land already comes with, says political observer Anthony Furey. “If a Chinese state-owned company buys the land, it could become an important stop for military fuel supplies and control of the Arctic in the future.
According to investment analyst Chee Cheok-ru, Chinese companies should pay extra attention to the acquisition of investments because the Chinese government will manipulate companies and even steal secrets through them, and what may seem like an immediate benefit for an acquisition may have unimaginable long-term damage. “Capitalism in mainland China is authoritarian and state-controlled. This of course should be cautious, especially in the defense business, you see how Nortel died? It was huawei that stole all the technology back then before it closed down.”
During the review of the deal by Canadian authorities under the Investment Canada Act, opposition parties and experts alike urged Ottawa not to approve the case. Retired Canadian Major General David Fraser said, “If you look at what China is doing in the South China Sea to expand its sovereignty and influence, how can you control them if you let them have ports and airports in the north of Canada and access to the Arctic?”
Former Canadian intelligence chief Richard Fadden also urged Ottawa to add gold to its list of strategic resources to avoid foreign acquisition, as gold is not only seen as a safe-haven investment in turbulent economic times, but is also widely used in control systems for nuclear power plants and nuclear weapons facilities.
Conservative MP Ed Fast also publicly mentioned in Parliament, “This acquisition would undermine national sovereignty and national security, and with China acquiring many financially troubled companies around the world during the New Crown epidemic, Canadian authorities cannot be less than cautious.”
Temec issued a statement saying it was disappointed with Ottawa’s decision. Temec does not currently have enough cash on its balance sheet to pay off its debt due next June. Industry Canada had not responded to the rejection of the deal by press time.
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