By Vipal Monga

TORONTO--The Canadian government on Monday rejected Shandong Gold-Mining Co.'s proposed acquisition of TMAC Resources Inc., which owns a mine 120 miles north of the Arctic Circle, TMAC said.

"As a result, the transaction between TMAC and Shandong will not proceed," TMAC said in a statement. "TMAC and Shandong are in discussions regarding termination of the transaction."

Shandong proposed to buy TMAC for almost US$150 million in May, but almost immediately drew fire from opponents who said it would give a Chinese state-owned company too much access to Canada's Arctic.

Opponents included former security and military officials who viewed China's intentions in the sensitive region with suspicion.

The Canadian government had said it would review the deal because Shandong is a state-owned enterprise.

The denial of the transaction comes as Canada and China remain at odds over Canada's arrest in 2018 of Meng Wanzhou, chief financial officer of Chinese tech giant Huawei Technologies Co. China has retaliated by imprisoning Canadian nationals Michael Kovrig and Michael Spavor.

Write to Vipal Monga at vipal.monga@wsj.com

(END) Dow Jones Newswires

12-21-20 2220ET