The B2Gold booth at the Prospectors and Developers Association Of Canada convention, on March 2, 2020.Fred Lum/the Globe and Mail
B2Gold Corp.’s plan to acquire a project in Nunavut for $1.1-billion is blocking expansion plans at one of China’s largest gold producers, the latest in a series of Canadian setbacks for Chinese resources companies.
Vancouver-based B2Gold BTO-T launched a friendly takeover bid for Sabina Gold & Silver Corp. SBB-T on Monday aimed at winning control of properties 520 kilometres northeast of Yellowknife that contain some of the world’s highest-grade undeveloped gold projects. Sabina, also based in Vancouver, forecasts its first mine will open in 2025, at a cost of $750-million, and produce gold for 15 years.
If B2Gold’s offer is successful, and analysts predict it will be, the company will buy out Zhaojin Mining Industry Co. Ltd., one of Sabina’s largest shareholders with a 7.4-per-cent holding, and thwart the Chinese company’s global ambitions.
In 2017, Zhaojin bought an initial stake in Sabina for $66-million, buying stock at $2.65 per share. At the time, Zhaojin’s 25 mines and its smelting operations were located in China and company executives said their goal was to double production within a decade by making international acquisitions.
When the investment was announced, Sabina president Bruce McLeod said Zhaojin was a “cornerstone investor” that expected to take the Nunavut projects into production. Last June, Zhaojin invested an additional $12-million in Sabina, buying 7.8 million shares for $1.55 each.
On Monday, B2Gold announced a friendly, all-stock acquisition of Sabina for $1.1-billion, or $1.87 per share. The terms of the transaction prevent Sabina from soliciting rival offers, and give B2Gold the right to match any new bid. Sabina’s board recommended shareholders accept B2Gold’s offer.
“We see competing bids as unlikely, but not impossible, given the scale of the project, its location in Nunavut and the capital/expertise required for construction/operation,” analyst Michael Siperco at RBC Capital Markets said in a report.
Zhaojin has yet to comment on B2Gold’s offer. If the company does decide to bid for Sabina, it would be making a hostile offer in a country that’s recently been hostile to Chinese miners.
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In 2020, the federal government blocked Chinese state-controlled Shandong Gold Mining Co. Ltd.’s planned $207-million takeover of junior gold miner TMAC Resources Inc., which also has a property in Nunavut. The government stopped the acquisition over national security concerns in the Arctic.
In November, the government ordered Chinese state-owned companies to divest their interests in three Canadian junior mining companies: Power Metals Corp., Lithium Chile Inc. and Ultra Lithium Inc. The move was part of a new policy that would only allow transactions involving investments by state-owned companies into Canadian critical minerals companies to be approved on what the government called an “exceptional basis.”
Last year, the government did allow Chinese-state-owned Zijin Mining Group Co. Ltd. ZIJMF to buy Canadian company Neo Lithium Corp. for $960-million. Neo’s operations are in Argentina. In 2019, Zijin also acquired Vancouver-based Nevsun Resources Ltd. for $1.86-billion in a friendly takeover. Nevsun’s properties are in Serbia and Eritrea.
Canadian politicians, including Industry Minister François-Philippe Champagne and Finance Minister Chrystia Freeland, have spoken in recent months on the need for Western countries to decouple from, or reduce trade with, China and other authoritarian regimes. Canada’s relationship with China has also been strained by the imprisonment of Michael Kovrig and Michael Spavor, and the recent downing of a Chinese balloon off the U.S. east coast.
B2Gold expects the Sabina acquisition to close by the end of June. If successful, the deal will give B2Gold its first significant Canadian holdings, as the company currently operates in Mali, the Philippines, Namibia and Colombia.
B2Gold hired National Bank Financial as its financial adviser on the Sabina acquisition, along with Canadian law firm Lawson Lundell LLP and U.S. legal counsel Dorsey & Whitney LLP. Sabina’s financial advisers are BMO Capital Markets and Cormark Securities Inc., along with Toronto-based law firm Blake, Cassels & Graydon LLP and New York-based Skadden, Arps, Slate, Meagher & Flom LLP.
Andrew Willis