China bristles over rejection of Nunavut gold mine takeover
Federal veto is `political interference,' Chinese embassy claims in interview
Representatives of the Chinese government say Canada was “wrong” to reject the proposed takeover of an Arctic gold mine by a state-owned company, the latest jab in an already-fraught relationship between the two countries.
Canada on Tuesday rejected the proposed takeover of Toronto-based TMAC Resources Inc. by China's Shandong Gold Mining Co. Ltd., citing national security concerns. Under the deal, Shandong would have paid $230 million not including debt to acquire the Canadian firm, which is developing a gold mine in Hope Bay, Nunavut.
In response to questions by the National Post on Wednesday, the Embassy of the People's Republic of China in Ottawa said the decision amounted to the “politicization of normal economic co-operation” between China and Canada.
Embassy officials said blocking the transaction interferes with “mutually beneficial” relations between the two countries, saying that “political interference with the excuse of national security is wrong.”
“The Canadian side should provide a fair, open and non-discriminatory market environment for enterprises from all countries, including China,” the statement said.
Tensions between China and Canada have been running high ever since the Canadian authorities arrested Meng Wanzhou, the chief financial officer of Chinese telecom giant Huawei Technologies Ltd., in December 2018. Federal officers arrested Meng at the request of U.S. prosecutors, who have accused her of violating Iran sanctions, as well as theft of trade secrets.
China in turn arrested Canadian citizens Michael Spavor and Michael Kovrig, who have remained in prison for two years and have been denied access to legal counsel.
The arrests set off a war of words between the two countries, and a deepening trade rift that has ensnared a range of Canadian exports from canola to pork.
Conservative Leader Erin O'Toole has been vocal in his condemnation of the Chinese regime and has suggested imposing Magnitsky sanctions against Chinese officials as a retaliatory measure.
O'Toole and others have placed pressure on Prime Minister Justin Trudeau to walk a tougher line on China after he faced criticism for favouring a softer approach that was ultimately spurned.
The federal industry department launched a review of the proposed takeover on Oct. 15. It was among the first proposed Chinese takeovers reviewed by Ottawa after it said earlier this year that it would bring “enhanced scrutiny” to foreign takeovers during the COVID-19 pandemic.
Some observers, including former director of the Canadian Security Intelligence Service Richard Fadden, had urged Ottawa to review the TMAC transaction given
Beijing's growing interest in strategic minerals.
Security experts have long warned against the risks of foreign takeovers by Chinese state-owned companies, who on occasion have been asked to advance the interests of the Communist Party of China. Those concerns have been elevated under the leadership of Chinese President Xi Jinping, who has aggressively sought to widen the country's geopolitical interests through the acquisition of foreign strategic assets.
As for the Nunavut mine, the rejected takeover now leaves the company with major questions over who else might step up to buy the asset.
In an interview with the Financial Post this week, TMAC chief executive of TMAC Jason Neal said the rejection at least underscores the high status of the project.
“The one thing I would say is that in taking action, the government has definitely shown that what we have built in Nunavut, they see as important to Canada,” he said. “You know, that's a silver lining.”
But Neal also said that he believes the government should be more supportive of companies that build infrastructure in Nunavut and other parts of the Arctic.
His company had announced a strategic review of the mine in January. Located in Nunavut, the company faced high operating costs because all its supplies need to be shipped by air or sea.
Those costs were exacerbated by a mill that never performed at the expected level, which led to lower gold recovery and difficulties with debt repayment.