New Gold will acquire 155 million shares priced at 16c each to take a 14.9% stake in the junior, a 15% premium. The proceeds will be used to accelerate mine development, a planned expansion and a US$3.3 million dept repayment in March to lender BNP Paribas.
Harte is to undertake a C$21.1 million expansion of its Sugar Zone mining operation from 800 tonnes per day to 1,200tpd, which will increase annual gold production to 102,000oz by 2023 and deliver sustainable gold production of 98,700oz/y from 2023 to 2027. The company's guidance for 2021 is 60,000-to-65,000oz.
"New Gold's investment represents more than just a significant financing - it is an endorsement of the potential of the Sugar Zone mine and property, and a vote of confidence that Harte Gold's operational team will continue to deliver on our impending growth strategy," said Harte Gold president and CEO Frazer Bourchier.
The financing came about as Harte engaged with one of its lenders BNP Paribus to re-sculpt its loan. After considering a number of avenues, the company thought it might be a good moment to run a process aimed at potential strategic investors as it sought additional funding to provide stabilisation and growth. "We did this with five or six companies and we found New Gold were the most appropriate and best fit on number of factors," Bourchier said.
New Gold operates the Rainy River mine in Ontario and president and CEO Renaud Adams, while at Richmont Mines, also grew production at the Island mine which is much closer to Sugar. "There is a natural synergy between mines in the same jurisdiction and people often help out when appropriate. New Gold's history and competence, the mining history, knowledge of Ontario geology and understanding of how this business works is a good sounding board to have," said Bourchier.
The investment also marks the continuing improvement and confidence at New Gold as a result of a successful turn-around of its Rainy River operation in Ontario, a process which saw the company shed assets to remain financially viable, such as the Blackwater development project in British Columbia which was sold to Artemis Gold in 2020.
Harte is currently developing to the Middle Zone where it expects initial access by mid-2021, which will provide the flexibility to mine concurrently from three independent zones (Sugar Zone North, Sugar Zone South and Middle Zone) to provide enough stoping areas to support 1,200tpd mine production.
Sugar Zone has a probable reserve estimate of 3.5 million tonnes grading 7.2 grams per tonne containing 797,000oz. It hosts an indicated resource of 2.8Mt grading 11.9g/t Au containing 1.1Moz and an inferred resource of 1.9Mt grading 9.5g/t containing 567,000oz.
Completing a financing was a condition of BNP to adjust its loan terms. Harte has also received a non-binding proposal from BNP to re-schedule about $50 million of amortization payments under its senior debt facility by extending the loan maturity loan from June 2024 to June 2025 and the maturity of the revolving loan would be extended from June 2022 to June 2023. This requires shareholder approval.
Harte has debt of C$85-89 with BNP and C$38 million with Appian Capital Advisory, and as it ramps up production it will look to further improve the capital structure of the company.
"The main focus is the operation and associated exploration and then we will continue to improve the capital structure and reducing our debt. AS we start to make money, lenders are becoming more interested and we may be able to make further improvements to reduce the debt cost," said Bourchier.
Shares in Harte Gold are trading at 14c, valuing the company at $121 million.
Shares in New Gold are trading at $1.76, valuing the company at $1.2 billion.
