Harte Gold completes feasibility study on Sugar mine

Harte Gold (TSX: HRT; US-OTC: HRTFF) has completed a feasibility study on its Sugar mine, which started commercial production in White River, Ont., in January.

The feasibility study incorporates improvements to the indicated mineral resources and reserves since the preliminary economic assessment released last year.

The study used an 800-tonne-per-day operation as the base case, which resulted in annual production of 61,000 oz. gold over a 14-year mine life.

At US$1,300 per oz. gold, the base case generates about $30 million a year in net free cash flow at cash operating costs of US$643 per oz. and all-in sustaining costs of US$845 per oz.

Based on current mineral reserves, production could increase to 1,200 tonnes per day, which would boost production to 95,000 oz. gold a year and could trim cash costs based on benefits of scale.

The study demonstrated a post-tax net present value at a 5% discount rate of $266.9 million.

Indicated resources from the Sugar, Middle and Wolf zones formed the basis of the study, and measure 4.24 million indicated tonnes grading 8.1 grams gold per tonne for 1.11 million contained oz. gold.

Inferred resources, which were not included in the feasibility study, stand at 2.95 million tonnes averaging 5.9 grams gold for 558,000 contained oz. gold.

The updated resource estimate incorporated a database of 683 drill holes (258,605 metres).

The mine plan in the feasibility study was based on a probable reserve of 3.88 million tonnes grading 7.1 grams gold for 890,000 contained oz. gold.

The underground mine uses ramps from surface to access mine workings and production levels. The process plant produces a gold dore bar and a gold concentrate through gravity concentration and flotation circuits. It was commissioned at a throughput rate of 575 tonnes per day with nameplate capacity of 800 tonnes per day.

Earlier this month, Harte Gold reported that it is in advanced discussions with existing lenders and potential new financing partners in order to refinance its current debt facilities, and is working with Appian, its major shareholder, to deliver near-term liquidity as operations continue to ramp up.

Mining was slowed in January and February due to contractor equipment failures and manpower issues, and the freezing of water in the tailings management facility, which constrained process water supply and mill throughput.

“Harte exited 2018 with C$7.3 million in cash, and C$70.7 million in short-term debt – $20.0 million of which is repayable on May 9, 2019,” mining analysts Mike Kozak and Michael Wichterle of Cantor Fitzgerald writes in a research note. “The company is in advanced discussions on refinancing its current liabilities and solving its near-term liquidity challenges.”

“Though plagued by ramp-up issues over the last few months, Harte is reporting that underground mining and processing rates have significantly improved since March.”

The analysts also noted that Harte is currently permitted for a throughput rate of 600 tonnes per day, but only requires “a simple licence amendment” to get to the 800 tonnes per day outlined in the feasibility study.

Kozak and Wichterle have a target price on the stock of 75¢ a share.

Michael Gray of Macquarie Research has cut his target price on the stock from $0.80 per share to $0.40 per share.

Harte Gold’s shares are trading at 29¢ with a 52-week range of 28¢ to 55¢. The company has a $174-million market capitalization.