Retired general urges rejection of Chinese takeover of Arctic gold mine

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A former commander of Canadian troops in Afghanistan is urging the federal government to reject a takeover of an Arctic gold mine by a Chinese state-owned enterprise.

Retired major-general David Fraser said this rejection should form part of a strategic rethink aimed at keeping China out of Canada’s Far North.

Prime Minister Justin Trudeau’s cabinet recently ordered a formal national security review of the proposed acquisition of Toronto-based TMAC Resources Inc. by Shandong Gold Mining Co. Ltd., a Chinese state-owned conglomerate and one of the world’s largest gold producers.

A senior government official told The Globe and Mail that the Canadian military is opposed to the transaction because of Beijing’s growing economic and military threat in the High Arctic. The Globe is not identifying the official who was not authorized to publicly discuss the security review under way.

Mr. Fraser said Ottawa should turn down the $207.4-million takeover, citing the mine’s location in Hope Bay, an inlet on the Northwest Passage, as well as its proximity to Canadian early warning radar facilities.

“This thing has a port attached to it. [China has] written a paper saying they want to be a near-Arctic power. Well, this gives them actual Arctic access,” Mr. Fraser said in an interview.

“If you look at what they have done on the South China Sea to extend their area of influence – what’s to stop them, once they get squatter’s rights and get into this port, of doing the same thing up there?”

Climate change is making the Northwest Passage an increasingly attractive shipping route between the Atlantic and Pacific Oceans. The Arctic thoroughfare can cut shipping time for foreign vessels travelling between Asia and Europe. Shrinking summer sea ice, a consequence of global warming, is expected to make transits through this route easier in the decades ahead.

The mine site is a little more than 100 kilometres from a NORAD North Warning System radar station in Cambridge Bay, Nunavut, part of a chain of installations across the north that gather information and transmit it to military operations centres.

Mr. Fraser said Ottawa must also examine the transaction in light of how China’s authoritarian Communist Party has extended its control over state-owned and private enterprises.

The presence of Communist Party units in China-based companies has long been a fact of doing business in the Asian country, where the law requires companies, including foreign firms, to set up a party organization. Earlier this year, however, the party issued a directive demanding greater loyalty from companies, saying they must “maintain high consistency” with the party regarding the political aspects of position, direction and principles. Chinese companies are also required by law to spy for China if requested by the central government.

“[The Shandong] company reports back to the party in some shape or form and then all of a sudden they have certain people on their staff … that would be looking at things other than mines,” Mr. Fraser said. “Who is to say they couldn’t start snooping on us given [the various] strategic installations that we have across the North?”

Richard Fadden, the Canadian Security Intelligence Service director from 2009 to 2013, told the The Globe in May that Ottawa should examine the proposed TMAC takeover within the larger picture of Canada’s national interests and Beijing’s strategy of gaining control over critical metals and minerals.

China is active in the Canadian north in zinc, a key ingredient in making galvanized steel, computers, cellphones and batteries.

MMG Ltd., whose major shareholder is the Chinese government, owns zinc and copper assets in the Izok and High Lake deposits in Nunavut. Those deposits could be worth billions of dollars to China if Ottawa goes ahead with plans to build a road and a deep-water port to ship the zinc and copper out through the Northwest Passage.

“We don’t need an economic foe and a political foe sitting here in my country, near some of these sites,” Mr. Fraser said.

John Higginbotham, who from 1989 to 1994 was commissioner for Canada in Hong Kong, a role equivalent to an ambassador, is now an Arctic expert and senior fellow with the Norman Paterson School of International Affairs at Carleton University in Ottawa.

He said he’s very concerned about what he calls the lack of Canadian leadership on economic infrastructure and security in the Arctic. The lack of new icebreakers, the scarcity of deep-water ports and the relatively little Arctic industrial development stands in marked contrast to the military preparedness and investment of Canada’s neighbours and competitors.

Russian President Vladimir Putin and Chinese President Xi Jinping have made big investments in Arctic liquefied natural gas energy exports, with ports, marine corridors, icebreaker tankers and enormous nuclear icebreakers that will eventually enable year-round shipping, Mr. Higginbotham noted.

“There are developments taking place all around the Arctic rim and we are the least-developed country there,” he said. Canada’s north is “over-governed and underdeveloped” with a focus these days that is limited to environmental, social and housing measures, he said.

China’s designs on northern Canadian minerals in part prompted a recent joint U.S.-Canada government strategy to reshape global metallic supply chains to reduce reliance on China, which has moved aggressively to control rare-earth minerals that are critical to high-tech and military products.

Canada still does not have new icebreakers unlike Russia, which is building a fleet of 13 new polar icebreakers. Beijing has two medium-strength icebreakers and is building a larger, more powerful icebreaker as it looks to use the Arctic as a shipping lane and to exploit minerals.

Mr. Fraser said Ottawa also needs to have a bigger military presence in the Arctic, including continued air surveillance operations using autonomous underwater vehicles and regular navy and coast guard patrols. Canada is starting to accept delivery of new Arctic and offshore patrol vessels but they can’t operate in the Far North during the winter and have limited ice-breaking capability.

He said the government has been “asleep at the switch” when it comes to asserting Canadian sovereignty in the Arctic.

Just before the 2019 election, the Liberal government announced a new Arctic strategy that lists climate change, health, infrastructure and economic development as key goals, but it was short of details and had no timelines.

“The Arctic is an economic window and we must put our stake in the ground and take ownership of it to assert our sovereignty in order that we can push back on the Russians and Chinese and everyone else that starts using the area,” Mr. Fraser said.

With files from Reuters

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