Canada orders security review of Shandong bid for Arctic gold mine

TORONTO (Reuters) - Canada has ordered a national security review of Shandong Gold Mining Co Ltd's 600547.SS1787.HK bid to acquire a gold mine in the Canadian Arctic, the mine's owner said on Thursday, in the latest sign of pushback faced by China's state miners.

The review comes amid a diplomatic rift between Canada and China over the 2018 arrest by Canadian police of Huawei Technologies Co Ltd's HWT.UL chief financial officer, Meng Wanzhou.

Deals by Chinese miners have faced heightened scrutiny from Canada to Australia amid economic dislocation caused by the coronavirus pandemic.

Shandong Gold, one of China's biggest gold producers, in May offered C$230 million ($165 million) for struggling TMAC Resources TMR.TO.

TMAC shareholders approved the deal in June but it still requires Canadian government approval.

TMAC’s Toronto-listed shares edged down 2.5% to C$1.18 at mid-afternoon.

In a statement, the miner said the transaction provides a “strong overall net benefit to Canada and does not pose a security risk.”

A TMAC spokesman declined further comment. The Canadian government department that oversees foreign investment did not immediately respond to a request for comment.

TMAC operates the Hope Bay mine in Canada’s northern territory of Nunavut, a region of growing strategic importance as climate change makes shipping lanes and resources more accessible.

The sensitive Arctic location could prompt Canada to block the acquisition, lawyers and security analysts have said.

Canada-China relations froze in late 2018 after Meng’s arrest on a U.S. warrant. China subsequently arrested Canadian citizens Michael Kovrig, a former diplomat, and businessman Michael Spavor and charged them with espionage.

On Thursday China denied it had taken the two men hostage.

Shandong’s Canadian unit is keen to revitalize Hope Bay, which has underperformed expectations.

Canada now has up to 90 days to conduct the review under tightened restrictions announced earlier this year. That could delay closing, TMAC said.

In 2018, Canada blocked a proposed takeover of construction company Aecon ARE.TO by a Chinese state builder on national security grounds.

Reporting by Jeff Lewis; Editing by David Gregorio and Richard Chang