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Toronto-based Agnico Eagle to acquire TMAC Resources, shaking up gold industry after feds reject Chinese bid

Earlier this year, China garnered significant attention from Canadian industry leaders especially in the natural resources and finance sectors. This was due to Chinese state-owned gold mining company, Shandong Gold Mining Co. Ltd.’s reported plans to acquire struggling Canadian gold producer, TMAC Resources, and its key strategic operations in Hope Bay, Nunavut. The deal was reported to be valued at $207.4 million.

Because the Chinese government has for several years now disturbingly self-identified as what it calls a “Near-Arctic State”, the push for state-owned corporations to gain literal ground in the region was troubling for many Canadians including national security and military experts. Additionally, key American players also had substantial concerns with China occupying major strategic land in the Arctic, especially this close to tidewater via the Northwest Passage.

Key Canadian opponents to the proposed Chinese takeover of TMAC include former director of the Canadian Security Intelligence Service, Richard Fadden and retired major-general, David Fraser. Both cite national security concerns for their position on the deal, stressing the fact that Canada needs to assert its sovereignty over its Arctic assets, especially those adjacent to the geopolitically vital Northwest Passage, which provides an avenue between the Pacific and Atlantic Oceans.

After a federal review of the proposed acquisition, the government rejected the deal in late 2020 under the Investment Canada Act. It is also reported that high-profile national security concerns as well as American interests played a role in the decision. Only a few weeks later in early 2021, Toronto-based gold producer Agnico Eagle agreed to acquire TMAC for $289 million.

TMAC’s shortcomings at the Doris gold mine site in Hope Bay have been, in large part, the result of a poorly performing mill. The construction of a new mill is said to require a cash injection of about $700 million, and TMAC simply does not have those resources. While Agnico Eagle likely does have the resources for an upgrade, CEO Sean Boyd clarified, “We don’t see us investing massive amounts of capital here for a couple of years. We need to drill it, understand it a bit more, optimize and improve what they’re currently doing.” By adjusting the approach of managing the Hope Bay operation, Agnico is positioning itself strongly to explore all options of successfully re-tooling the mine.

By adopting a methodological approach to rebuilding TMAC and other smaller-scale mining acquisitions, Agnico Eagle is able to maximize efficiency and productivity without extensive financial commitments. Because natural resource sectors, especially those involving mining and oil and gas are often very time-sensitive operations, investment in them needs to be backed by financially prudent and logistically sound leaders. It is this critical financial competence paired with substantive industrial expertise that has positioned Agnico Eagle as a prime candidate to lead the way in Canada’s still expanding gold industry.

Aside from the economic and industrial potential that Canada’s North holds, investment in this region is also central to its geopolitical approach. The Northwest Passage, a direct route between the Atlantic and Pacific oceans is a still untapped asset that holds far-reaching applications in global trade, military strategy, and domestic northern development. Considering this in the context of the ever-present climate trends opening up more space in Canada’s north, it is important for the federal government to ensure that the region, including its resources and strategic geographical position, is controlled by domestic and allied players.

It is encouraging to see the federal government prioritize Canadian sovereignty in the nation’s North, blocking the Chinese firm’s bid to establish a foothold in such a vital geopolitical region. Although international cooperation is a fundamental factor in strengthening Canada’s economic standing, it is important to reinforce the protection of Canadian assets from foreign acquisition.

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