Harte Gold – Where to from here?
It has been a tough start up year of production for Harte Gold Corp. (TSX: HRT) and investors were naturally disappointed with their recent 2019 Financial Year (FY) guidance, sending the stock price ~50% lower. Announced on November 1, guidance for 2019 was : “Quarterly results when compared to the Feasibility Study were below target. Based on results to-date, full year 2019 guidance has been adjusted to 24,000 – 26,000 ounces at an AISC of US$2,000 to US$2,200 per ounce. Previous guidance was 39,200 ounces at an AISC of US$1,300 to US$1,350 per ounce.”
Harte Gold Chairman Stephen Roman stated to InvestorIntel “Our ramp up issues at the Sugar Zone Mine will be resolved. We are working on the 2020 and Life of Mine Plan as well as management additions. More news to follow. Our biggest issues during 2019 have been lack of labour and insufficient underground development due to lack of labour as well as getting through surface low grade prior to getting into our forecasted mine grades.”
Harte Gold makes swift management changes
Clearly changes were needed at Harte Gold to fix the 2019 production results. Just three days after the 2019 guidance Harte Gold announced two new key management appointments – Sam Coetzer as President, Chief Executive Officer and Director, and Martin Raffield as Executive Vice President and Chief Operating Officer.
Sam Coetzer (President, Chief Executive Officer)
Sam has over 30 years of international mining experience and provides Harte Gold with strong leadership skills and an extensive knowledge of underground mining operations. Most recently, Sam was President and Chief Executive Officer of Golden Star Resources Ltd. During Mr. Coetzer’s tenure as CEO, he successfully:
• Transitioned the company from open pit operations to an underground-only producer.
• Attracted institutional capital including a large strategic investment.
• Grew the capital markets profile and increased overall share trading volume.
Martin Raffield (Executive Vice President and Chief Operating Officer)
Martin has over 25 years of experience managing underground mining operations across Canada and Africa. Most recently, Martin was appointed Executive Vice President and Chief Technical Officer of Golden Star, after joining Golden Star as Senior Vice President, Project Development and Technical Services. From June 2007 to 2011, Martin served as Principal Consultant and Practice Leader, SRK Consulting (US). Prior to SRK, he was Chief Engineer and Mine Superintendent at the Campbell Mine for Placer Dome Inc. Martin holds a Ph.D. in geotechnical engineering from the University of Wales and is a Professional Engineer registered in Ontario.
Harte Gold’s Sugar Zone Mine in White River Ontario, Canada
Harte Gold has a massive 79,335 hectares at their Sugar Zone property, with plenty of exploration upside. The current Resource estimate is 1,108,000 contained gold ounces @8.12g/t Indicated and 558,00 contained gold ounces @5.88g/t Inferred. Production is forecast to ramp up to 61,000 Au ounces pa over a 14 year mine life. With further exploration success the mine life could be extended or production volumes increased, or both.
Will new management be able to turn things around?
There is quite a long history of new production start ups having a rough first year before going on to be very successful. Most recently RNC Minerals production turned around to be on target for ~100,000 ounces per annum at an AISC of US$ 1,175 and falling, from a mine that was about to be sold 2 years ago due to not being profitable. In this case gold grades are only 2-4g/tonne, with some occasional bonus very high grade coarse gold finds.
In the case of Harte Gold they have grades in the range of 6-8g/tonne, so really there should be absolutely no reason why this mine cannot be very profitable going forward, assuming the gold price remains strong. The start up year has been a struggle, and AISC right now mean they are running at a loss. But looking ahead as they apply a more disciplined management approach and reach the high grade gold, Harte Gold should become a very profitable mine with AISC falling towards the previously forecast AISC of US$845 in the April 2019 Feasibility Study. Harte Gold is currently working on the 2020 and life of mine plan, so we will need to wait to see what comes from that.
Harte Gold – April 2019 Feasibility Study summary points
Given the current gold price is hovering just above US$1, 450, if Harte Gold can get their AISC down in 2020 to below this level, and then close to the US$845/oz as per the 2019 Feasibility Study (FS), then the outlook will brighten considerable in 2020 and 2021.
It is not unusual for underground mines to have a tough first year as they try to expand production. Harte Gold is working their way deeper to reach the higher grade gold. Also head office and other expenses (interest expense etc) are a relatively larger portion of costs until a mine can scale up production to higher volumes. My view is that a combination of new management, better ore grades, and economies of scale as production volumes increase, will see a significant improvement in the AISC in 2020 and beyond.
The gold is there in good grades, it just takes time to reach economies of scale. With two new key management appointments (CEO & COO) who have over 55 years of combined mining experience (especially underground), it looks highly likely that the problems of 2019 will soon be turned around in 2020.
Harte Gold Corp. is headquartered in Toronto, Ontario, Canada; and has a market cap of C$ 91 million. Analyst’s consensus is a buy with a price target of C$ 0.40, representing an upside of ~185%.