Ottawa blocks TMAC sale to Chinese company

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TMAC Resources Inc. [TMR-TSX; TMMFF-OTC] said it has been informed that the Canadian Government has directed Chinese company Shandong Gold Mining Co. Ltd. not to proceed with a previously announced takeover of TMAC.

Published reports say the sale was blocked on national security grounds.

“TMAC and Shandong are in discussions regarding termination of the transaction,” TMAC said in a press release that was issued after the close of trading on December 21, 2020.

TMAC shares reacted to the news by falling 12% or 16 cents to $1.14 on volume of 888,836. The shares are currently trading in a 52-week range of $3.93 and 44 cents.

TMAC is a gold producer with a 100% stake in the Hope Bay gold project in Nunavut.

Back in May, 2020, it was announced that Shandong, through its wholly-owned Shandon Gold Mining (Hong Kong) unit had agreed to acquire all of the outstanding TMAC shares they didn’t already own for $1.75 per share.

The total equity value of the transaction was reported to be approximately US$149 million on a fully-diluted basis.

The Shandong transaction received all the required regulatory approvals from government and the People’s Republic of China.

It was previously reported that Resource Capital Funds, Newmont Corp. [NGT-TSX; NEM-NYSE] and directors and officers of TMAC, collectively holding 58.6% of TMAC’s outstanding shares had pledged to back the Shandong transaction.

Based in Shandong province China, Shandong Gold ranks among the world’s largest gold producers by market capitalization. It reported production of 1.3 million ounces in 2019.

Shandong is an equal partner with Barrick Gold Corp. [ABX-TSX; GOLD-NYSE] in the Veladero gold mine in Argentina.

“While we are disappointed with the outcome, we are very pleased that TMAC achieved significant operation improvements at Hope Bay,” said TMAC President and CEO Jason Neal. “We will continue to build on these improvements while considering options to manage our balance sheet,” he said.

The Hope Bay includes three camps with significant infrastructure, including 2,000 tonne-per-day processing plant, and underground developments at the Doris and Boston mines.

The Doris mine reached commercial production in June 2017. In a press release on October 14, 2020, TMAC said it produced 18,420 ounces of gold in Q3 2020 and 79,680 year to date.

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