New Gold Inc. [NGD-TSX, NYSE American] is making a strategic investment in Harte Gold Corp. [HRT-TSX; HRTFF-OTC; H40-FSE] by way of a private placement subscription of 154.9 million common shares priced at 16 cents each.
The private placement will result in Harte Gold raising $24.8 million and leave New Gold holding 14.9% of the company’s outstanding shares. Closing of the transaction is expected to occur by March 24, 2021.
Harte also said it has received a non-binding indicative proposal from BNP Paribas to re-schedule approximately $50 million of the scheduled amortization payments under the company’s senior debt facility with BNP, a move that would provide Harte with more financial flexibility over the next two years.
Harte Gold shares advanced on the news, rising 10.7% or $0.015 to 15.5 cents on volume of 3.09 million.Shares are currently trading in a 52-week range of 21.5 cents and $0.075.
Harte operates the Sugar Zone Mine 80 km east of the Hemlo Gold Camp in northern Ontario.
The Sugar Zone Mine entered commercial production in 2019 and has an anticipated mine life of approximately 13 years at current production levels. The mine produced 25,649 oz gold last year. The company has set a production target of between 60,000 and 65,000 oz in 2021 at an all-in-sustaining cost of US$1,400-US$1,550/oz.
New Gold is an intermediate gold mining company. Its key operating assets are the Rainy River mine northwest of Fort Frances, Ontario and the New Afton mine near Kamloops, British Columbia.
In 2020, production was 437,617 gold equivalent ounces (293,139 oz gold, 636,952 oz silver, and 72.1 million lbs copper).
In connection with the private placement, New Gold and Harte will enter an investor rights agreement; as long as New Gold holds no less than 10% of the issued shares of Harte, it can participate in certain equity financings in order to maintain its 14.9% interest.
New Gold will have the right to have one nominee on the Harte board.
A feasibility study indicated by increasing throughput to 1,200 tpd from 800 tpd, Harte can increase the annual Sugar Zone gold production rate to 102,000 ounces by 2023 and deliver sustainable annual gold production to 98,700 ounces from 2023 to 2027. The study indicated that the all-in-sustaining-cost will decline to an average of US$1,025/oz from 2023 to 2027. It said the expansion would cost $21 million.