Harte Gold Corp.
HARTE GOLD ANNOUNCES FINANCING PACKAGE TO PERMIT MINE RESTART
Toronto, ON: HARTE GOLD CORP. (“Harte Gold” or the “Company”) (TSX: HRT / OTC: HRTFF / Frankfurt: H4O) is pleased to announce that it has entered into a binding term sheet with Appian Capital Advisory LLP (“Appian”) for up to US$30 million (~C$40,884,000) in financing (the “Proposed Transaction”), subject to receipt of approval from the Toronto Stock Exchange (the “Exchange”). Proceeds of the financing will be used to facilitate a restart of the Sugar Zone mining operation in July 2020.
The Proposed Transaction is comprised of:
(a) a private placement of 9,500,000 Series B special shares (the “Special Shares”) of the Company at a price of US$1.00 per Special Share (the “Offering Price”) for aggregate gross proceeds of US$9,500,000 (the “Private Placement”);
(b) a US$18.5 million non-revolving credit facility (the “Credit Facility”); and
(c) a grant of a 0.5% net smelter return royalty in consideration of US$2 million (the “0.5% NSR”).
The Proposed Transaction has been negotiated on an arm’s-length basis and represents the culmination of a review of
financing and capital structure alternatives by a special committee (the “Special Committee”) of independent members
of the board of directors (the “Board”) of the Company and, in the view of the Company, will provide the Company 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. The Company has applied to the Exchange to list the Common Shares to be issued pursuant to the Proposed Transaction for trading on the Exchange and closing of the Proposed Transaction is conditional upon receipt of such approval.
RESTART OF SUGAR ZONE MINE AND OTHER INITIATIVES
The Proposed Transaction will, subject to receipt of approval from the Exchange and other closing and drawdown
conditions, provide the Company with the funds required to restart the Sugar Zone Mine operation in mid-July and allow
Harte Gold to carry out several initiatives that are already well underway.
- Restart and Return to 800 tpd
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 C$35 million (~US$25.7 million) is required to return the mine to 800 tpd, the details of which are as follows:
o C$18 million significantly reduces accounts payable and provides enough liquidity for mine restart;
o C$10 million for mine development;
o C$5 million for capital projects and surface infrastructure; and
o C$2 million for additional exploration.
- 18-Month Guidance
With detailed 18-month planning now complete, the Company is targeting the following production levels upon mine restart:
o 2020 production: 20,000 to 24,000 ounces Au
o 2021 production: 60,000 to 65,000 ounces Au
The Company’s previous guidance for 2020 of 42,000 to 48,000 ounces Au was placed under review following initiatives in response to COVID-19 (see press release dated March 30, 2020) 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. The Company 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 per ounce and AISC of US$1,100 to US$1,300 per ounce.
- Transition to Owner-Operator Mining
A transition from contract mining to owner-operator has been arranged and depends upon the Company proceeding with the Proposed Transaction. The benefits to the Company include:
o Lower mining cost per tonne;
o Increased efficiencies in management of mining fleet;
o Day-to-day flexibility in mine scheduling and execution;
o Integration of underground workforce establishing one team focused on results; and
o Long-term sustainability of mine operations.
The transition to owner-operator would be executed over a three-month period that the Company anticipates, assuming the Proposed Transaction proceeds, would be completed by Q4 2020.
- 1,200 tpd Feasibility Study
Combined production from the Sugar and Middle Zones is expected to provide sufficient throughput to achieve 1,200 tpd. The Company intends to undertake the preparation of a feasibility study to focus on mine planning and scheduling to achieve 1,200 tpd, processing facility upgrades, paste backfill implementation, surface infrastructure and tailings management review.
- Exploration
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.
INFORMATION IN SUPPORT OF FINANCIAL HARDSHIP EXEMPTION
The Company’s decision to rely on the Financial Hardship Exemption was made upon the recommendation of the Special
Committee. The Special Committee, which was formed effective June 2, 2020 to consider possible financing, capital structure and/or transaction alternatives, is comprised of Joseph Conway (Chair) and James Gallagher, who are
independent members of the Board, free from interest in the Proposed Transaction and unrelated to the parties involved
in the Proposed Transaction. Both Messrs. Conway and Gallagher are senior mining executives, who have had experience in dealing with other similar situations.
After considering and reviewing all of the circumstances currently surrounding the Company and the Proposed Transaction, including: (a) the Company’s current financial difficulties and immediate capital requirements; (b) the lack of
alternate financing arrangements and the fact that the Proposed Transaction is the most attractive financing option
available to the Company at the present time; and (c) all other relevant factors available to the Special Committee, the
Special Committee determined that: (i) the Company is in serious financial difficulty; (ii) the Proposed Transaction is
designed to improve the financial condition of the Company; and (iii) the terms of the Proposed Transaction are reasonable in the circumstances of the Company (collectively, the “Special Committee Determinations”).
As such, the Special Committee recommended that the Board proceed with the Proposed Transaction and, given the
immediate need for capital, with an agreed solution capable of attainment without delay, apply for the financial hardship
exemption from the Exchange (the “Special Committee Recommendations”).
The Board, relying in part on the recommendation of the Special Committee, unanimously (other than Michael W. Scherb
and Geoffrey Cohen, who abstained from the matter) agreed with the Special Committee Determinations and adopted
the Special Committee Recommendations.
The Company expects that, as a consequence of its financial hardship application, the Exchange will place the Company
under remedial delisting review, which is normal practice when a listed issuer seeks to rely on this exemption. Although
the Company believes that, upon completion of the Proposed Transaction, it will be in compliance with the Exchange’s
continued listing requirements, no assurance can be provided as to the outcome of such review and therefore, continued
qualification for listing on the Exchange.
TECHNICAL INFORMATION
Scientific and technical information contained in this news release was reviewed and approved by Dr. Martin Raffield,
Executive Vice President and Chief Operating Officer of Harte Gold, who is a “qualified person” as defined by National
Instrument 43-101 - Standards of Disclosure for Mineral Projects.
About Harte Gold Corp.
Harte Gold holds a 100% interest in the Sugar Zone Mine located in White River, Canada. The Sugar Zone Mine entered
commercial production in 2019. The Company has further potential through exploration at the Sugar Zone Property,
which encompasses 79,335 hectares covering a significant greenstone belt. Harte Gold trades on the Toronto Stock
Exchange underthe symbol “HRT”, on the OTC underthe symbol “HRTFF” and on the Frankfurt Exchange underthe symbol “H4O”.
For further information, please visit www.hartegold.com or contact:
Shawn Howarth
Vice President, Corporate Development and Investor Relations
Tel: 416-368-0999
E-mail: sh@hartegold.com
Source: https://www.hartegold.com/news/harte-gold-announces-financing-package-to-permit-mine-restart
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