Harte Gold sends first ore to Barrick’s Hemlo mill

Harte Gold (TSX: HRT; US-OTC: HRTFF) has shipped the first ore from a 70,000-tonne, bulk-sample mining program to Barrick Gold’s (TSX: ABX; NYSE: ABX) Hemlo mill on Lake Superior’s North Shore.

The bulk-sample program at Harte’s Sugar deposit in Ontario could produce 24,000 oz. gold this year.

Technica, a Sudbury-based contract miner, has been hired to mine the bulk sample.

The fully permitted bulk-sample phase and the relatively quick path to production has won over analyst Christopher Ecclestone of Hallgarten & Co.

“Production remains king, and long lead times are death to a gold-mining story,” the London-based analyst writes in a research note, marking the start of his coverage of the Toronto-based junior.

A truck loaded with development ore from Harte Gold’s Sugar gold deposit in northern Ontario.  Credit: Harte Gold.

“The trend towards small-scale mining — or as we tend to call it, ‘right-sized’ mining — seems to be gaining traction,” the London-based analyst says.

“Bankers don’t like it because it means smaller financings and less fees, and consultants absolutely hate it, because it means less mindless drilling, wheel-spinning and production of useless tomes of bankable and definitive feasibility study drivel. The group that does like it includes retail investors and us, while institutional investors find that, quite literally, they cannot get enough of these companies.”

The 70,000-tonne, bulk-sample program will cost $20 million and mine the Sugar zone — one of four zones the company has identified at the project — 60 km east of the Hemlo area gold mines and 25 km northeast of White River.

Material passes through processing equipment as part of Harte Gold’s bulk sampling of the Sugar gold deposit in northern Ontario. Credit: Harte Gold.

The Sugar zone is a high-grade, 500,000 oz. gold deposit that is open at depth and on strike, where mineralization extends to a 1,000-metre vertical depth. Drilling last year extended the strike length at Sugar by 300 metres to 1,100 metres, and found a parallel mineralized zone that Harte is calling the “Footwall” zone.

Stephen Roman, Harte’s chairman, president and CEO, says that after the bulk-sample mining program, the company will have all the information it needs to make a commercial production decision. “This is in fact our feasibility study,” he says, which will provide information on mining methods, average grades, average thicknesses, costs and so forth.

Roman notes that the $20-million cost of the bulk-sample program is dramatically lower than the $118 million in initial capex estimated in a 2012 preliminary economic assessment (PEA). This is because the PEA didn’t envision contract mining the deposit or toll milling, and all the savings on equipment and other material.

Even if the company builds its own mill, Roman says, Harte has received three estimates that range from $10 million to $15 million for a mill, bringing total capex up to $45 million to get the project into the second phase, or commercial production. If the company brings its own power to site, this would add several million dollars.

Roman notes that the company has already started permitting for commercial production, which he expects will take 12 to 18 months. “The best-case scenario would be having all of our commercial permits in hand a year from now,” he says.

It has taken the company quite some time to reach this stage, Roman notes. When management took over the company in January 2009, it spent the next three years permitting the bulk sample, and another two years getting other permits and building a road to the mine.

“Although it looks like an overnight success story, it’s taken quite a few years to get to this point during a difficult period in the mining cycle,” he says. “We’ve had to raise financing in a terrible market, but we’ve gotten the work done, and moved to the point we’re at now.”

Underground ramp development at Harte Gold’s Sugar gold project in Ontario.  Credit: Harte Gold.

“Although this is not a huge deposit … it is high grade, and it should be profitable,” he continues. “We like making money for shareholders and not spending a lot of money to do it. You have to be … a little inventive, so that you can make deals like we did with Barrick to toll mill and keep capex down … eventually you can accumulate enough capital to build your own milling facility without having to continually go back to the market.”

Roman adds that cash flow from the bulk-sample mining program should flow in May, and that the operation could provide a profit that can be reinvested in the project.

Roman says that while the bulk-sample program will provide information needed to make a commercial production decision, he expects that cash costs in commercial production would come in at $600 per oz., which is about the same amount envisioned in the 2012 PEA.

The Sugar zone contains an indicated resource of 980,900 tonnes grading 10.13 grams gold per tonne (uncapped) — or 8.72 grams gold per tonne (capped) — for 319,300 oz. gold (uncapped), or 275,000 oz. gold (capped). Inferred resources add 580,500 tonnes averaging 8.36 grams gold (uncapped) — or 7.03 grams gold (capped) — for 156,000 oz. gold (uncapped), or a capped 131,300 oz.

Management sees more exploration upside beyond the Sugar zone, with the project identifying other target areas.

In 2014, an induced-polarization (IP) magnetic survey found a mafic volcanic and sedimentary contact. Drilling the next year confirmed a Hemlo setting, with pathfinder elements and gold values that the company named the Contact zone.

In 2010, Harte discovered the Wolf zone — 2 km from the Sugar zone — with a 7.5-metre intercept grading 9.5 grams gold per tonne, including a higher-grade core of 3 metres averaging 22.9 grams gold. Drilling last year extended the Wolf zone down-plunge and on strike.

The deposit represents just a fraction of the overall 300 sq. km property, and the company says exploration will uncover more ounces, and that it has the right team to find them.

The company’s vice-president of exploration George Flach helped find several gold deposits, including the 20 million oz. Tarkwa mine in Ghana.

Harte has retained Crone Geophysics & Exploration to conduct a 3-D IP and resistivity survey over 2 km between the Sugar zone and the southern end of the Wolf zone to test for continuous gold mineralization. The survey will be followed by an initial 5,000-metre drill program to test geophysical targets. The survey will be conducted over 1.5 by 2.3 km on 25-metre centres, and overlap the northern end of the Sugar zone deposit and the southern end of the Wolf zone for gold mineralization and structural baseline data.

As for funds, Hallgarten’s Ecclestone says recent financings have left Harte in a hearty position.

“The company is well-padded for current requirements, and its strategy of funding works through the bulk sample is a canny one,” he notes. “To accelerate the project will need financing, but as production is tallied, the potential to do a streaming deal is accentuated.”

Ecclestone has a one-year, 38¢ target price on the stock.

At press time the company traded at 19¢ per share within a 52-week range of 4.5¢ to 34.5¢.

Harte has 305.4 million shares outstanding, with another 39.7 million warrants and 24.5 million options for 370.5 million shares fully diluted.

As of March 1, insiders owned 8%; institutional investors, 10%; and known retail investors, 40%. The public float makes up the rest.

In addition to its Sugar project, Harte owns the 25 sq. km Stoughton-Abitibi project, 110 km east of Timmins, Ont. It is adjacent to and on-strike of the Holloway gold mine and the Thunder and Smoke Deep discoveries, now owned by Kirkland Lake Gold.