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Hope Bay mine in Nunavut, currently owned and operated by TMAC Resources Inc.

Handout

Michael Byers is the Canada Research Chair in Global Politics and International Law at the University of British Columbia, and the author of International Law and the Arctic.

A Chinese state-owned company wants to purchase a gold mine in Nunavut. Does the Arctic location make the purchase a national security risk?

The Hope Bay gold mine is operated by TMAC Resources, a junior Canadian mining company. Shandong Gold wants to buy TMAC for $208-million, and 97 per cent of TMAC shareholders have approved the sale. Meanwhile, however, the Canadian government has ordered a national security review; some experts, including retired Major-General David Fraser, have pointed to Arctic sovereignty and security as reasons for blocking the sale.

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But Canadian sovereignty is not being threatened. Shandong Gold is not buying the land, which is recognized as “Inuit-owned” under the Nunavut Land Claims Agreement. Instead, the Chinese company will operate under licenses from the local and territorial land claims organizations – and pay royalties to them.

Canada’s position in the Northwest Passage would also not be threatened by this purchase. Hope Bay is located along the southernmost of several routes through Canada’s Arctic islands. This route is so shallow and poorly charted that three small cruise ships have run aground there.

The northern route of the Northwest Passage is deeper and might one day be important for international shipping, but it is more than 600 kilometres away.

Moreover, China has avoided taking a position on the legal status of the Northwest Passage. It knows that the waterway is remote and dangerous and that Canada, as the coastal state on both sides, is uniquely positioned to provide marine charts, aids to navigation, weather and ice forecasting, ports of refuge, and search and rescue. Without Canada’s support, voyages through the Northwest Passage would be hazardous, leading to accidents and higher insurance rates.

Canada’s Arctic security would be likewise intact, since the Hope Bay mine is 100 km from the nearest community and separated from it by salt water. There is no road access, and a proposed road from Yellowknife to Grays Bay in Nunavut would terminate 175 km away. If Chinese agents wanted to spy on the NORAD Northern Warning System radar station at Nunavut’s Cambridge Bay, as Mr. Fraser suggests they might, they would have to fly to that community and check into a hotel.

For all these reasons, the proposed purchase of the Hope Bay mine should be assessed not on the basis of its Arctic location, but more on the type of mineral involved.

If a Chinese state-owned company sought to purchase a Canadian mine that produced rare earth elements or lithium, with their high-tech applications in defence, energy and telecommunications, that would be a national security concern.

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Gold, on the other hand, is not a strategic resource. Forty per cent of world supply is used in jewellery. A smaller percentage is used in electronics, but gold is an investment commodity.

If Shandong Gold was proposing to fly in workers from China, this would raise concerns about the economic benefits to Canada. But the purchase of the Hope Bay mine will deliver economic benefits in the form of jobs and royalties in Nunavut – again, because the land on which the mine is situated is Inuit-owned. The local Kitikmeot Inuit Association holds more than one million shares in TMAC and has an impact-and-benefits agreement with the company that would also be binding for any new owners.

Investments by Chinese state-owned companies are not unprecedented in Canada. Quite a few such companies already do business here, and a few of them operate mines. The Nunavik nickel mine in northern Quebec is partially owned by the Chinese state, and in 2014, the first shipment of concentrate from that mine was carried westward through the Northwest Passage to China.

Of course, the Chinese regime has been behaving atrociously of late. China is building artificial islands in the South China Sea in support of a politically provocative and legally unfounded “historic waters” claim. It continues to threaten Taiwan, which it considers a rebel province. It is quashing democracy in Hong Kong and engaging in mass ethnic-based persecution of Uyghurs in Xinjiang.

China has imposed trade restrictions on Canada over the arrest and possible extradition of Huawei executive Meng Wanzhou to face allegations of bank fraud in the United States. It has arrested two Canadians – Michael Kovrig and Michael Spavor – and charged them with spying.

The proposed purchase of an Arctic gold mine does not threaten Canadian sovereignty or security. There are other, much better reasons for preventing the Chinese regime from buying companies here.

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