New Gold purchases 15% stake in Harte for C $ 24.8 million
New Gold will acquire 155 million shares at a price of 16c each to take a 14.9% stake in the junior, a premium of 15%. The proceeds will be used to accelerate development of the mine, a planned expansion and a repayment of US $ 3.3 million 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 1,200 tpd, which will increase annual gold production to 102,000 ounces by 2023 and provide a sustainable gold production of 98,700 ounces / year from 2023 to 2027. The company’s forecast for 2021 is 60,000 to 65,000 ounces.
“New Gold’s investment is more than just significant financing – it is an endorsement of the potential of the mine and the Sugar Zone property, and a vote of confidence that the Harte Gold operations team will continue to put into practice. is executing our strategy of impending growth, ”said Harte Gold President and CEO Frazer Bourchier.
The financing came as Harte signed up with one of its BNP Paribus lenders to reshape its loan. After considering a number of avenues, the company felt the time might be right to kick off a process aimed at potential strategic investors as it seeks additional funding to ensure stabilization and growth. “We did this with five or six companies and we found New Gold to be the most appropriate and best suited on the number of factors,” Bourchier said.
New Gold operates the Rainy River mine in Ontario, and President and CEO Renaud Adams, at Richmont Mines, has also increased production from the Island mine, which is much closer to Sugar. “There is a natural synergy between mines in the same jurisdiction and people often help where appropriate. The history and competence of New Gold, the history of mining, the knowledge of the geology of the Ontario and understanding how this business works is a great sounding board to have, “Bourchier says.
The investment also marks continuous improvement and confidence at New Gold following a successful turnaround of its operation in Rainy River, Ontario, a process that allowed the company to lose assets to remain financially viable, as the Blackwater development project in Great Britain. Columbia which was sold to Artemis Gold in 2020.
Harte is currently developing in the Intermediate Zone, where it expects initial access by mid-2021, which will provide the flexibility to operate simultaneously from three independent zones (North Sugar Zone, South Sugar Zone and intermediate zone) to provide enough stopping zones to support 1200 tpd mining production.
Sugar Zone has a probable reserve estimate of 3.5 million tonnes grading 7.2 grams per tonne containing 797,000 ounces. It hosts an indicated resource of 2.8 Mt grading 11.9 g / t Au containing 1.1 Moz and an inferred resource of 1.9 Mt grading 9.5 g / t containing 567,000 oz.
Obtaining financing was a condition for BNP to adjust its loan conditions. Harte also received a non-binding proposal from BNP to reschedule approximately $ 50 million in amortization payments under its senior credit facility by extending the loan at loan maturity 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 owes C $ 85-89 to BNP and C $ 38 million to Appian Capital Advisory, and as she ramps up production she will seek to further improve the company’s capital structure.
“The main focus is the operation and associated exploration, and then we will continue to improve the capital structure and reduce our debt. As we start to make money, more and more lenders are interested and we may be able to make other improvements to lower the debt cost, ”Bourchier said.
Harte Gold shares are trading at 14c, valuing the company at $ 121 million.
New Gold shares are trading at $ 1.76, valuing the company at $ 1.2 billion.