HARTE GOLD CORP. (TSX: HRT) (OTC: HRTFF) (Frankfurt: H4O) is pleased to report that the Company is proceeding with an expansion of its 100% owned Sugar Zone mining operation located in Ontario, Canada, from a capacity of 800 tonnes per day to 1,200 tpd, based on the positive results of the Feasibility Study.
All references to non-IFRS measures are denoted and discussed at the end of the news release. All dollar amounts are in Canadian dollars unless otherwise noted. The life of mine is nine years (2021 – 2029).
Highlights of 1,200 tpd Feasibility Study Include:
|1.||AISC is a non-IFRS measure and reported at the project level. Excludes corporate G&A.|
|2.||Defined as operating cash flow net of capital, tax and First Nations NPI, excludes corporate and hedge payments.|
|3.||IRR calculated on a differential project level, after-tax cash flow between 1,200 tpd expansion and operating at a steady state of 800 tpd.|
Frazer Bourchier, President and CEO of Harte Gold, commented:
“We are encouraged by the robust results from the Feasibility Study to expand the Sugar Zone mine from 800 tpd to 1,200 tpd. The study presents a transformative opportunity and showcases the tremendous potential of the Sugar Zone mine. The Feasibility Study shows a clear pathway for Harte Gold to significantly increase its gold production, while substantially reducing costs for years to come, all of which is underpinned by a low capital requirement. As a result of this compelling outcome, the Company has made the decision to proceed with the expansion.”
Mr. Bourchier added “I am confident in the team’s ability to execute on this expansion and to leverage the work completed in 2020 to strengthen and stabilize our operations, which provides a solid foundation for continued growth. Starting with our stated guidance of 60,000 to 65,000 ounces of gold production for 2021, the Company will now embark on an attractive production growth profile that will maximize the value of this ore body for all shareholders.”
|Feasibility Study Summary – Expansion to 1,200 tpd by Q1 2023|
|Unit||2021||2023||LOM Average||LOM Total|
|Throughput: 800 tpd||Throughput: 1,200 tpd||2023 to 2027||2021 to 2029|
|Gold Price1||US$/oz Au||1,938||1,782||1,677||1,709|
|Tonnes Processed||K Tonnes||292||438||435||3,454|
|Gold Recovered||oz Au||62,458||102,261||98,743||751,601|
|Cash Cost – Before Royalties2||US$/oz Au||823||651||684||737|
|Cash Cost – Net of Royalties2||US$/oz Au||898||721||749||804|
|Mine Site AISC2||US$/oz Au||1,430||1,002||1,025||1,132|
|Mine Development||$ millions||26||21||23||199|
|Sustaining Capital||$ millions||18||17||12||126|
|Expansion Capital3||$ millions||3||2||–||21|
|Net Revenues4||$ millions||149||225||204||1,582|
|Mine EBITDA5||$ millions||84||140||119||878|
|Mine Free Cash Flow6||$ millions||36||96||80||512|
|NPV and IRR|
|Pre-Tax NPV5%||$ millions||417|
|After-Tax NPV5%||$ millions||332|
|IRR vs. 800 tpd7||89%|
|1.||Analyst consensus gold price estimates.|
|2.||Cash Cost and AISC are non-IFRS measures and reported at the project level. AISC excludes corporate G&A.|
|3.||Expansion capital is $3 million in 2021, $16 million in 2022 and $2 million in 2023.|
|4.||Revenues after transportation and refining charges, excludes hedge payments.|
|5.||Net revenues less production costs, excludes hedge payments, interest, tax, capital and corporate costs.|
|6.||Operating cash flow net of capital, tax and NPI, excludes corporate costs and hedge payments.|
|7.||IRR is calculated on a differential after-tax cash flow basis between 1,200 tpd expansion and operating at 800 tpd.|
Strategic Priorities and Liquidity Management
The expansion of the Sugar Zone mine to 1,200 tpd will provide shareholders with the best value-maximizing alternative, compared to operating at 800 tpd. In making the decision to proceed with expansion, the Company considered several factors including liquidity management during the expansion period.
As at December 31, 2020, the Company had a cash balance of approximately $8.5 million. Cash on hand, together with cash generated from operations, is expected to be sufficient to fund the working capital requirements as well as planned sustaining capital investment activities through 2021, but the Company may not have sufficient liquidity to fully cover scheduled senior debt principal repayments in 2021. The Company is in continued discussions with BNP regarding the deferral of principal repayments due during 2021. In the event that such principal repayments are not deferred, the Company will likely need to seek funding in order to make the required principal repayments.
Mineral Resource Estimate
The Mineral Resource estimate presented in the following table is dated September 30, 2020 and the Mineral Resource ounces are inclusive of Mineral Reserve ounces.
The Mineral Resource estimate was prepared using Leapfrog software for the wireframing and grade estimation. The wireframes were created in Leapfrog Geo using the vein modeling tool, guided by the geological interpretation corresponding to each domain. The Mineral Resource grade estimate was carried out using Leapfrog Edge. Grade was estimated by ordinary kriging or inverse distance squared using a 2D estimation approach. The Mineral Resource estimate was verified and validated by means of nearest neighbour and inverse distance methods, previous resource estimates, swathplot comparisons of estimates, reconciliation to production and visual inspections. The Mineral Resource estimate does not include any external dilution.
|Mineral Resource Estimate as at September 30, 2020|
|Notes to the Mineral Resource estimate:|
|1.||The stated Mineral Resources comply with the requirements of National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) and are classified in accordance with the Canadian Institute of Mining, Metallurgy and Petroleum’s “CIM Definition Standards – For Mineral Resources and Mineral Reserves” (the “CIM Definition Standards”).|
|2.||Mineral Resources, which are not Mineral Reserves, do not have demonstrated economic viability.|
|3.||The estimate of Mineral Resources may be materially affected by environmental, permitting, legal, title, taxation, socio-political, marketing, or other relevant issues.|
|4.||The Inferred Mineral Resource in this estimate has a lower level of confidence than that applied to an Indicated Mineral Resource and must not be converted to a Mineral Reserve. It is reasonably expected that the majority of the Inferred Mineral Resource could be upgraded to an Indicated Mineral Resource with continued exploration.|
|5.||The Mineral Resource estimate was prepared by Mr. Vincent Cardin-Tremblay (P.Geo), former VP Geological Services for the Company. Mr. Cardin-Tremblay is a QP as defined by NI 43-101.|
|6.||Mineral Resources have been estimated as of September 30, 2020 using a gold price assumption of US$1,600 per ounce Au.|
|7.||A resource cut-off grade of 3.0 g/t Au has been estimated based on operating cost projections and applicable metallurgical recovery. The cut-off grade was used in combination with a minimum mining width factor of 1.8m to define the resource.|
|8.||Numbers may not add due to rounding.|
Mineral Reserve Estimate
The Mineral Reserve estimate presented in the following table is current to December 31, 2020. The Mineral Reserve estimate was prepared using the resource model discussed above under “Mineral Resource Estimate”. The Deswik stope optimizer software was used to evaluate the resource block model and identify economic longhole stoping blocks above a 3.5 g/t Au marginal cut-off grade and Deswik mine design software was used to refine these optimized blocks into mineable stope shapes. The optimization/design process included planned dilution based on geotechnical characteristics and historic experience in the orebody. Decline and lateral, ore and waste development were designed to efficiently access the stoping blocks. The stope shapes were further evaluated on a level to level basis to ensure that the mined material met the 5.0 g/t Au cut-off grade and marginal stopes with grades down to a 3.5 g/t Au cut-off grade were added to the design where development was already planned to access stopes above the 5.0 g/t Au cut-off and these marginal stopes were tested for economic viability before inclusion in the reserve. An ore development cut-off grade of 1.5 g/t Au was used, which accounts for cost to process the incremental ore material. Unplanned dilution and ore recovery estimates were applied to the stope tonnage estimates prior to reporting, the minimum mining width for the Mineral Reserve estimate was considered to be 1.8 metres and an additional factor for unplanned dilution was added which ensured that the minimum diluted width in the reserve shapes was 2.1 metres.
|Mineral Reserve Estimate as of December 31, 2020|
|Notes to the Mineral Reserve estimate:|
|1.||The stated Mineral Reserves comply with the requirements of NI 43-101 and are classified in accordance with the CIM Definition Standards. Mineral Reserve estimates reflect the Company’s reasonable expectation that all necessary permits and approvals will be obtained and maintained.|
|2.||Mineral Reserves are the economic portion of the Indicated Mineral Resources. Mineral Reserve estimates include mining dilution at grades assumed to be zero.|
|3.||The 2020 Mineral Reserve estimate was prepared under the supervision of Mr. Chris McCann (P.Eng), Director of Technical Services for the Company. Mr. McCann is a QP as defined by NI 43-101.|
|4.||The Mineral Reserves were estimated as of December 31, 2020 using a gold price assumption of US$1,450 per ounce Au.|
|5.||A mining cut-off grade of 5.0 g/t Au has been estimated based on operating cost projections, sustaining capital development cost, mining dilution and recovery, royalty payment requirements and applicable metallurgical recovery.|
|6.||Numbers may not add due to rounding.|
The Feasibility Study was based on analyst consensus forward price estimates incorporating 31 broker estimates and a fixed USD:CAD conversion rate of 0.76.
|Macroeconomic Assumptions (“Base Case”)|
The Feasibility Study returned a pre-tax NPV5% of $417 million and an after-tax NPV5% of $332 million. An after-tax IRR of 89% was calculated based on the return of incremental after-tax cash flows between 1,200 tpd and at 800 tpd throughput.
NPV and IRR are summarized in the following table using Base Case and flat gold price estimates:
|NPV5% and IRR at Varying Gold Price|
|Pre-Tax NPV5%||$ millions||$329||$402||$417||$476||$549|
|After-Tax NPV5%||$ millions||$267||$321||$332||$371||$420|
|1.||IRR calculated on a differential after-tax cash flow between 1,200 tpd expansion and operating at 800 tpd|
The economic model was subjected to a sensitivity analysis to determine the effects of changing metals prices, production costs, capital costs and sustaining capital. The NPV is most sensitive to gold price, FX and mine costs.
|After-Tax NPV5% Sensitivity (C$M)|
Overview of 1,200 TPD Expansion
The Feasibility Study examined an expansion whereby the existing infrastructure and mine development could be leveraged to increase overall mine production. The Company is currently developing to the Middle Zone and expects initial access to this zone by mid-2021. Once the Middle Zone is sufficiently developed, the Company will have the flexibility to be mining concurrently from three independent zones: Sugar Zone North, Sugar Zone South and Middle Zone. These three zones combined can provide enough stoping areas to support 1,200 tpd mine production.
Development will continue via ramp access and an overall top-down mining approach will be used over the LOM.
Long-hole stoping will continue to be the primary mining method, however additional equipment (presented in Capital section below) is required to accommodate the increased tonnage rate and increase in number of concurrent working faces.
To support increased mine production, an expansion of infrastructure is required, including an expansion of the throughput capacity of the existing process plant facilities (presented in Capital section below).
On completion of the expansion, mill recoveries are expected to increase to 94.4% as a result of upgrades to and expansion of the flotation concentrate circuit.
To date, the Company has utilized unconsolidated rockfill to backfill mined stopes. A detailed analysis and design of the paste backfill plant and underground distribution system was included in the scope of the Feasibility Study to support increased production rates, increased pillar recovery and better geotechnical consolidation at depth.
While the existing paste plant is currently being utilized to support the dry stack portion of tailings deposition, the Company will undertake construction work for underground paste distribution starting in 2022 with the expectation of commissioning underground paste backfill in 2023. Material changes to the paste plant include substitution of the current ceramic disk filter with a traditional cloth disk filter, increasing filtration capacity from 650 tpd to 1,200 tpd. The larger filter will require lower maintenance and will provide more continuous filter cake production.
An additional lift of the existing Tailings Management Facility (“North TMF”) is recommended for 2021 to accommodate continued deposition at 800 tpd. The North TMF will be utilized through mid-2025 for filtered dry-stack and hydraulic tails deposition. To support continued operation, a second tailings impoundment area, the South TMF, will be required. Construction of the South TMF will begin in 2024 with commissioning targeted for mid-2025.
Gold Production Schedule
The following table outlines plant throughput, grade, recovery and gold production forecasted over the LOM.
|Mine Operating Plan|
|Tonnes Processed||K t||292||292||438||438||438||432||428||416||280|
|Gold Recovered||oz Au||62,458||71,812||102,261||92,136||93,239||114,085||91,997||67,570||56,044|
From 2023 to 2027, cash costs are expected to average US$749 per ounce Au, including royalties, (representing a 17% decrease from 2021 estimates) and all-in sustaining costs US$1,025 per ounce Au (representing a 28% decrease from 2021 estimates).
On a per tonne of ore processed, site operating costs for 2021 are expected to total $221 per tonne, broken down into mining, processing and site G&A.
The largest mining cost activity component includes longhole stoping, ore development, haulage and backfill. Labour is a critical cost component across all mining cost areas. Total unit mining costs are expected to remain flat through expansion. Unit haulage and backfill costs are expected to increase as operations continue deeper in the mine. This increase in unit costs is offset by economies of scale.
Processing costs are largely comprised of labour, power and plant consumables and decrease 22% on a per unit basis following expansion.
Site G&A is comprised of site administration, services and camp accommodations. Following expansion, site G&A is expected to decrease 25% as a large portion of site costs are fixed and will benefit with scale. The breakdown of unit operating costs over the LOM is summarized as follows:
|Site Operating Cost Breakdown|
|C$/t Ore||C$/t Ore||C$M|
|Total Operating Costs||221||197||704|
A total of $346 million is expected to be spent on capital over the LOM and includes expansion capital, mine development capital and sustaining capital.
|Life-Of-Mine Capital (C$M)|
The expansion capital of $21.1 million will be incurred from mid-2021 to Q1 2023. Expansion capital is comprised of process plant expansion ($16.3 million), mine equipment ($4.6 million) and permitting ($0.1 million).
Mill expansion capital includes:
Mine equipment includes the purchase of additional equipment to accommodate increased tonnage and working faces. Key equipment includes:
Permitting capital includes consultant costs for amendments to existing permits and other miscellaneous costs. Expansion capital expenditures start in mid-2021 with the bulk of the expenditures occurring in 2022.
|Expansion Capital By Year (C$M)|
|Figures may not add due to rounding||2021||2022||2023||LOM|
Mine Development Capital
A total of $199 million will be spent on underground development, including 34,200 metres of ramp and lateral waste development over the LOM. Development costs average $23 million annually, with unit rates ranging from approximately $5,100 per metre to $6,000 per metre as depth increases.
A total of $126 million will be spent on sustaining capital over the LOM on the following:
|Sustaining Capital (C$ Millions)|
|Tailings and Water Management||27|
|Mine Equipment Maintenance||18|
|Reclamation / Closure Costs||8|
|Total Sustaining Capital||126|
Production at the Sugar Zone mine is subject to two net smelter return (“NSR”) royalties. Each NSR is 2.0%, for a combined total of 4.0%.
Given existing tax pools, the Sugar Zone mine is expected to pay minimal tax for the next two years (2021 and 2022). Over the LOM, the effective combined federal and Ontario mining tax rate is expected to average approximately 21%.
Permitting will commence in the first quarter of 2021 and is expected to be completed within an 18-month timeframe. The Sugar Zone mine is situated in a well-known mining jurisdiction where Harte Gold has successfully operated since 2017. The Company also benefits from a strong relationship with its proximal First Nations and government agencies.
The expansion can be implemented with amendments to the closure plan, amendments to existing operating permits and a construction permit that is issued following an engineering review, all of which are granted by provincial governmental agencies. There is no requirement for any federal permits or new environmental assessment.
Opportunities to Further Enhance Value
The Company has identified several opportunities to further enhance the economics of the Sugar Zone mining operation and will continue to evaluate these opportunities over the remainder of 2021 and into 2022:
The Feasibility Study was consolidated by Harte Gold’s technical team in collaboration with the following third-party consulting firms in their respective areas of expertise:
NI 43-101 Technical Report
An updated NI 43-101 technical report for the Sugar Zone mine reflecting the Feasibility Study will be filed on SEDAR (www.sedar.com) by March 5, 2021.
Scientific and technical information contained in this news release was reviewed and approved by Chris McCann, P. Eng., who is a “qualified person” as defined by National Instrument 43-101 – Standards of Disclosure for Mineral Projects.
The Mineral Reserve estimate was prepared under the supervision of Mr. Chris McCann (P.Eng), Director of Technical Services for the Company. Mr. McCann is a QP as defined by NI 43-101.
The Mineral Resource estimate was prepared by Mr. Vincent Cardin-Tremblay (P.Geo), former VP Geological Services for the Company. Mr. Cardin-Tremblay is a QP as defined by NI 43-101.
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. Production guidance is 60,000 to 65,000 oz Au for 2021. 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 TSX, on the OTC and on the Frankfurt Exchange.
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