Harte Gold arranging Sugar Zone Mine restart funding

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Harte Gold Corp. [HRT-TSX; HRTFF-OTC; H40-FSE] has entered into a binding term sheet with Appian Capital Advisory LLP for up to us $30-million (~CDN $40,884,000) in financing, subject to TSX approval. Proceeds of the financing will be used to facilitate a restart of the Sugar Zone mining operation, northern Ontario, in July 2020.

The Proposed Transaction is comprised of a private placement of 9,500,000 Series B special shares at US$1.00 per Special Share for aggregate gross proceeds of US$9,500,000; a US$18.5 million non-revolving credit facility; and a grant of a 0.5% net smelter return royalty in consideration of US$2 million.

The Proposed Transaction will provide Harte Gold with a funded solution for mine restart, a return to 800 tpd capacity and a pathway to 1,200 tpd capacity as well as enhanced exploration efforts.

“This proposed transaction represents the completion of our review process. Given the company’s current financial condition, the proposed transaction provides the best financing alternative available to the company, limiting up-front dilution, providing sufficient funding to cover cash flow and capital requirements on start-up and allowing for immediate capital to accelerate the restart of operations,” said Joseph Conway, Chair of the Board of Harte Gold and Chair of the Special Committee.

A phased restart approach has been established and will start with backfill and select mining operations. Mill operations would resume in late July once a sufficient stockpile is developed.

The company believes approximately CDN$35 million (~US$25.7 million) is required to return the mine to 800 tpd.

With detailed 18-month planning now complete, Harte Gold is targeting the following production levels upon mine restart: 2020 production: 20,000 to 24,000 oz; 2021 production: 60,000 to 65,000 oz.

The company’s previous guidance for 2020 of 42,000 to 48,000 ounces gold was placed under review following initiatives in response to COVID-19 and at this time the company is withdrawing previous guidance provided to the market.

For 2021, the company would expect to see significant production growth over 2019 and 2020 production levels, resulting from entering into higher grade zones, higher mine production and improving mine development rates.

Harte Gold would expect to use paste backfill in 2021 to improve mining efficiency and increase overall flexibility. In 2021, 800 tpd throughput would be achieved from the Sugar Zone North and South zones only, indicating potential growth through the addition of the Middle Zone.

The company is not providing cash cost and AISC guidance for 2020 as start-up costs and accelerated development incurred over this period are not indicative of continued operating performance.

For 2021, Cash Cost and AISC would be expected to decline as operations stabilize and higher-grade material is brought into the mining plan. The Company would target a Cash Cost of US$800 to US$900/oz and AISC of US$1,100 to US$1,300/oz.

A transition from contract mining to owner-operator has been arranged and depends upon proceeding with the proposed transaction.

Summer prospecting at TT8 Zone would commence on restart of operations. Based on drilling and geophysics work completed to-date, the company has identified target areas for prospecting which depend upon the Proposed Transaction proceeding. The drilling of near-mine exploration targets would commence in Q4.


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