Chinese Company Positioned to Acquire Distressed Canadian Mining Asset in the Arctic amid Market and Coronavirus-Related Stress
On May 8, 2020, reports emerged that Chinese company, Shandong Gold (SD Gold), was positioning itself to acquire Canadian mining company, TMAC Resources, and, with it, the Hope Bay gold mine complex in western Nunavat – 160 km north of the Arctic circle. It has been reported that SD Gold will pay an estimated $149 million for the acquisition from TMAC’s parent company, Newmont Mining Corporation.
The Hope Bay acquisition would place SD Gold within proximity to a potentially strategic section of the Canadian Arctic. This area of the Arctic Circle reportedly holds 22% of the undiscovered, but still discoverable, resources in the world. The area has become increasingly navigable as more ice has melted due to global warming, which has led to further increased Chinese activity in the region. The Hope Bay Complex is situated near the Robers Bay port and is equipped with an airstrip, among other operational facilities.
TMAC began production at the Hope Bay mine in early 2017, however the company’s share price has been declining since 2016 and the company has been in search of investors that could assist with its plans for expansion. The coronavirus pandemic has exacerbated the company’s financial concerns, which may also be playing a role in the acquisition. Prior to the announcement, SD Gold had already made a $15 million equity investment in the company to assist with TMAC’s sealift.
Hope Bay consists of three main mining environments, Doris, Madrid and Boston. As of June 2017 the complex was estimated to hold proven and probable reserves of 3.6 million ounces of gold. Since its start, the mine’s development has been viewed positively for the local community’s employment and general economic growth. In a press release, Shandong Gold has assured “continuity of existing significant contract business to local, Inuit-owned firms.”