Retaining citizenship

I have a fiancee whose mother was born in Germany and then was forced to move to Canada as her father was in the Army at the time and was required to.

Birth in Germany does not confer German citizenship if neither parent is German

Neither of her parents had German citizenship at the time of her birth, she was granted German citizenship upon being born there at the time (1961)

Persons aquiring German Citizenship on the basis of birth in Germany (without a German parent) lose German Citizenship automatically at the age of 23 if they have not successfully applied to retain German Citizenship

After living in Canada for about 45 years she was then sent a letter about how she was required to become a Canadian citizen as she was still a German one and could not use OHIP. She did not apply to retain her German citizenship at any age and still remained German until she changed her citizenship status to Canadian.

If somebody loses German Citizenship as an act of not applying to retain it, what citizenship do they get?