China's Shandong Gold to buy Canadian miner TMAC Resources for almost $165 million

BEIJING (Reuters) - Shandong Gold Mining <600547.SS> <1787.HK>, one of China's biggest gold producers, said on Friday it had entered into an agreement to acquire Toronto-listed TMAC Resources <TMR.TO> for around C$230 million ($164.89 million).

TMAC operates the Hope Bay gold project in Canada's far-north territory of Nunavut, which started commercial production in 2017 and had proven and probable mineral reserves totalling around 3.54 million ounces of gold at the end of 2019, according to the company's website.

Shandong Gold will pay roughly US$149 million in cash to acquire all of TMAC's shares at a price of C$1.75 per share, TMAC said in a separate statement, and will also purchase another 12 million shares at the same price in a private placement for around $15 million.

The key shareholders in TMAC, Resource Capital Funds and gold miner Newmont Corp <NEM.N>, which together hold a combined 58.6% in the company, "have entered into voting support agreements to support the transaction," the TMAC statement said.

The deal marks the latest acquisition of a Canadian resources company by a Chinese gold firm after Shandong Gold rival Zijin Mining <601899.SS> <2899.HK> in March completed its purchase of Continental Gold for C$1.3 billion.

It also comes after the coronavirus outbreak caused panicked investors drive prices for safe-haven gold <XAU=> to a more than seven-year high last month.

"The transaction is the culmination of the strategic review process we announced earlier this year," TMAC president and CEO Jason Neal said in the statement. Shandong Gold "has the financial strength, technical capability and long-term vision to maximize the value of the Hope Bay camp," he added.

Shandong Gold, based in eastern China's Shandong province, produced 40.12 tonnes, or 1.29 million ounces of mined gold in 2019.

"Hope Bay is a highly prospective high-grade gold camp which requires substantial investment to optimize production and extend mine life and maximize the value of the camp to the benefit of all stakeholders," Chen Yuming, chairman of Shandong Gold Group, said in the statement.

The offer price represents a premium of 52% to TMAC's 20-day volume-weighted average price as of May 6. TMAC's share price is down by more than 50% year-to-date, giving it a market capitalisation of C$191.35 million, Refinitiv Eikon data showed.

The transaction needs the approval of at least two-thirds of votes cast at a special meeting of shareholders expected to be held next month, TMAC said, adding that regulatory approvals would also be needed in Canada and China.

(Reporting by Tom Daly; editing by David Evans)