Harte Gold files for protection from creditors

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Harte Gold Corp. [HRT, TSX] has filed for protection under the Companies Creditors Arrangement Act (CCAA) after experiencing technical problems at its Sugar Zone mine in northern Ontario.

The move comes after its cash costs soared to over US$2,000 an ounce in the second quarter of 2021 and third quarter of 2020, exceeding the price of gold. As the company outlined in a May, 2021 press release, there are critical areas of the operation that must be addressed to see a sustainable, consistent increase in production.

The four areas include bolstering the mine workforce, accelerating infill drilling, accelerating mine capital development, and reinforcing underground mobile equipment. In the absence of securing the financial liquidity to address these initiatives, the company said it expected future production to be negatively impacted.

In a press release that was issued after the close of trading on December 7, 2021, Harte said it has obtained protection from its creditors under the CCAA for an initial period that expires on December 16, 2021, the maximum permitted under CCAA.

The Ontario Superior Court of Justice has approved an initial advance of $400,000 to the DIP financing agreement, and has appointed FTI Consulting Canada Inc. as monitor of the company.

While under CCAA protection, management of the company will remain responsible for the day-to-day operation of the company under the general oversight of the monitor and supervision of the court.

In conjunction with the start of the CCAA process, Harte has entered into a subscription agreement with a unit of Silver Lake Resources Ltd. [SLR-ASX], which could become the sold shareholder of the company in a transaction will provides for the continuation of its business and operations as a growing concern.

The Silver Lake unit has agreed to loan Harte up to $10.8 million to fund operations and the CCAA proceedings. If approved by the court, the loan is expected to provide Harte with the liquidity to continue operations at the Sugar Zone mine.

Meanwhile, the Toronto Stock Exchange has suspended trading in Harte Gold’s common shares and has put the company under delisting review under its expedited process. On December 7, 2021, the shares were priced at $0.01 and traded in a 52-week range of 18 cents and $0.01.

A meeting has been scheduled for December 15, 2021 to consider whether or not to delist the securities of the company.

The Sugar Zone mine, which is located 80 kilometres east of the Hemlo gold camp in northern Ontario, was previously expected to produce between 60,000 and 65,000 ounces in 2021.

In addition to the Sugar Zone property, Harte Gold also holds the Stoughton Abitibi property on the Destor-Porcupine Fault Zone, east of Timmins, Ontario. That property is adjacent to the Holloway Gold Mine.


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