Tenuous times for Harte Gold

The creditor for Harte Gold is providing additional time for the struggling White River gold miner to raise money and sort out its debt obligations.

BNP Paribas has agreed with Harte Gold to an extension of a forbearance agreement, from Sept. 30 to Oct. 15, to enable the Toronto-based mining company to continue with a strategic review process and possibly secure a deep-pocketed partner.

Harte Gold operates the Sugar Zone Mine, 25 kilometres north of White River.

Harte has run into its share of financial and operational woes in the last couple of years, encountering difficulties in keeping to a schedule of loan payments to its biggest lender, BNP Paribas.

Harte and BNP Paribas entered into a forbearance agreement last July.

A forbearance agreement is a legal tool used by lenders when borrowers breach the terms of a loan. It grants the borrower some time to resolve financial issues and return to an acceptable payment schedule in return for certain conditions to be met.

BNP Paribas came aboard in 2019 to help Harte refinance its debt soon after the mine went into commercial production in 2019.

Harte has been in discussions with BNP Paribas on restructuring its debt since the middle of last year. The mining company ran into cash problems in early 2020 when the whole operation in White River went into shutdown mode between March and July at the onset of the pandemic.

Another lender, Appian Capital, put together a $40-million financing package last year to help with the mine's restart. Appian served up a default notice to Harte in August.

Harte started the strategic review process last May after falling short in some key performance areas and failing to reach production targets at the mine over the last year. Harte needs a cash infusion to further develop and expand production at the three-year-old mine.

The company wants to eventually ramp up production from an 800-tonne-a day operation to 1,200-tonnes per day but there have been a slew of challenges in sourcing labour - particularly to work underground - along with equipment issues, and the need to do more underground infill drilling to pick up the pace of mine development.

With the review process underway, Harte Gold said some of the alternatives available include an equity investment by a strategic partner, a joint venture with another mining company or even a sale.

Management is giving no assurances that anything will come out of this process or what BNP Paribas might do once the forebearance agreement expires.

Last March, Harte Gold closed a deal with New Gold, making that company a 15 per cent equity owner in exchange for $24.8 million "strategic investment" in keep operations going in White River and to help with scheduled US$3.3-million debt payment.

Harte is cash preservation mode in reducing spending on anything that might adversely impact gold production over the next few months.

Last May, the company reduced its gold production target for 2021, dropping its guidance from 60,000 to 65,000 ounces this year to 50,000 to 55,000 ounces. Now the company said that target might not be reached. Harte management said due to the evolving nature of the strategic review process the revised 2021 guidance "is at risk and may not be achieved."