horizontal development over the next 12 to 15 months.
-- Reinforce underground equipment: The Company continues to be constrained
by poor mobile equipment reliability in some of its most critical
underground equipment, most notably the two-yard scoops. To address this,
additional capital is required to upgrade and further expand the current
fleet.
Key Performance Metrics -- Q3 2020 to Q3 2021
Unit Q3 Q4 Q1 Q2 Q32021
2020 2020 2021 2021
Daily Development m/day 9.2 11.4 14.0 10.0 10.4
Ore Tonnes Processed tpd 649 503 716 674 771
Head Grade g/t Au 5.7 7.7 6.1 6.1 7.1
Recovery % 93.4% 95.0% 93.7% 94.1% 94.9%
Avg. Monthly Gold
Ounces Produced Avg. oz Au / month 3,100 3,611 3,925 3,761 5,087
Strategic Review Process:
The Company initiated the Strategic Review Process in May 2021 to explore, review and evaluate a broad range of alternatives (which included the potential restructuring of its long-term debt and reviewing other potential strategic alternatives, including a full or partial sale of the Sugar Zone Mine) focused on ensuring financial liquidity and to fund accelerated life-of-mine capital critical for a sustainable 800 tpd process rate as well as a platform necessary to launch expansion towards a 1,200 tpd process rate.
On July 20, 2021, the Company announced that, in order to support the continuation of the Strategic Review Process, the Board established a Special Committee, comprised of the Company's independent directors, Joseph Conway and Douglas Cater.
The Strategic Review Process has not yet resulted in any binding offers being received by the Company. Discussions are, however, ongoing with a number of parties with respect to a potential transaction. There can be no assurance that such discussions will result in a transaction, what the value of any transaction might be, or what the terms or timing of such a transaction might be.
At the time of issuing this news release, the Company does not expect that the Strategic Review Process will result in a transaction which would provide any value for holders of Harte Gold's equity securities (including securities convertible into or exercisable for equity securities). As a result of the foregoing, holders of Harte Gold's equity securities (including securities convertible into or exercisable for equity securities) are cautioned that trading in such securities is highly speculative, and that the trading prices for such securities may bear little or no relationship to the actual realization of value, if any, by holders thereof at the ultimate outcome of the Strategic Review Process. Also, there can be no assurance that the Company's common shares will continue to trade on the TSX or on any other trading platform.
Based on the Company's current cash flow forecast, the Company will require additional financing prior to the end of 2021 in order to continue operations and conclude the Strategic Review Process. However, there can be no assurance that the Company will obtain the required financing or what the terms of such financing might be.
Revised 2021 Outlook and Guidance:
In order to preserve liquidity to support the Strategic Review Process, the Company has continued to defer the implementation of various mitigation measures that were aimed at addressing the production variance from plan experienced to date in 2021. The Company has also reduced certain sustaining and expansion capital expenditures which may adversely impact production over the short-term. At this time, the Company is unable to provide updated 2021 production guidance as the Strategic Review Process continues to evolve, but believes its revised 2021 guidance, issued on May 13, 2021, is at risk and may not be achieved.
The Company will provide further updates on guidance as appropriate.
Liquidity and Capital Resources:
-- The Company ended Q3 2021 with a cash balance of $11.4 million.
-- Agreement was reached with BNP to facilitate the continuation of the
Company's Strategic Review Process through BNP's agreement to refrain
from enforcing its rights and remedies under the BNP Debt Facilities
arising out of or relating to certain defaults or events of default.
-- On June 30, 2021, the Company obtained a 30-day waiver of its financial
covenant requirements pursuant to the BNP Debt Facilities. In addition,
BNP deferred the due date of (i) the principal and interest payments
under the BNP Debt Facilities originally scheduled for June 30, 2021, and
(ii) the settlement payment under the gold hedge program originally
scheduled for July 2, 2021 to July 30, 2021.
-- On July 30, 2021, the Company entered into a forbearance agreement with
BNP (the "Forbearance Agreement") pursuant to which BNP agreed, subject
to certain terms and conditions, to refrain from enforcing its rights and
remedies under the BNP Debt Facilities (including scheduled principal,
interest and gold hedge payments) until September 30, 2021. BNP also
agreed, subject to the terms of the Forbearance Agreement, to forbear
from exercising its rights and remedies under the BNP Debt Facilities in
respect of or arising out of or relating to certain defaults or events of
default under the BNP Debt Facilities, including financial covenant
breaches, which were anticipated to occur prior to September 30, 2021,
until the earlier of (i) September 30, 2021, and (ii) the occurrence or
existence of any terminating event, which includes bankruptcy events,
defaults not covered by the Forbearance Agreement and other customary
terms.
-- The Forbearance Agreement was amended on September 30, 2021, October 15,
2021 and October 29, 2021, to extend the forbearance period to October
15, 2021, October 29, 2021 and November 30, 2021, respectively.
-- On August 3, 2021, the Company received notice from Appian that events of
default had occurred under the Appian Debt Facility and related financing
agreements. Among other alleged events of default, Appian cited the
Company's default under the BNP Debt Facilities which triggers a
cross-default under the Appian financing agreements. Pursuant to the
terms of the Intercreditor Agreement dated August 28, 2020, between Harte
Gold, Appian and BNP, Appian is prohibited, without the prior written
consent of BNP, from taking any Enforcement Action (as defined in the
Intercreditor Agreement) until a minimum of 135 days has passed from the
date on which Appian delivers a notice to BNP. The terms of the Appian
Debt Facility provide for default interest at a rate per annum equal to
19.0% from the date of default.
-- The Forbearance Agreement, which includes BNP forbearing on the Company's
default in making scheduled payments through to November 30, 2021,
provides for the continuation of a sale and investment solicitation
process ("SISP"), among other things, as part of its Strategic Review
Process. The Strategic Review Process has not yet resulted in any binding
offers being received by the Company. Discussions are, however, ongoing
with a number of parties with respect to a potential transaction. While
the Forbearance Agreement allows for such discussions to continue, there
can be no assurance that such discussions will result in a transaction,
what the value of any transaction might be, or what the terms or timing
of such a transaction might be. There can also not be any assurance that
BNP will continue to forbear from exercising its rights and remedies on
expiry of the Forbearance Agreement or what the terms or timing of such
continued forbearance might be.
-- At the time of issuing this news release, the Company does not expect
that the Strategic Review Process will result in a transaction which
would provide any value for holders of Harte Gold's equity securities
(including securities convertible into or exercisable for equity
securities). As a result of the foregoing, holders of Harte Gold's equity
securities (including securities convertible into or exercisable for
equity securities) are cautioned that trading in such securities is
highly speculative, and that the trading prices for such securities may
bear little or no relationship to the actual realization of value, if any,
by holders thereof at the ultimate outcome of the Strategic Review
Process. Also, there can be no assurance that the Company's common shares
will continue to trade on the TSX or on any other trading platform.
-- Based on the Company's current cash flow forecast, the Company will
require additional financing prior to the end of 2021 in order to
continue operations and conclude the Strategic Review Process. However,
there can be no assurance that the Company will obtain the required
financing or what the terms of such financing might be, that the
Strategic Review Process will result in any transaction, whether BNP will
continue to forbear from exercising its rights and remedies on expiry of
the Forbearance Agreement or what the terms or timing of such a
transaction or such continued forbearance might be, or that the Company
will be able to continue as a going concern.
About Harte Gold Corp.:
