Harte Gold Announces $24.8 Million Strategic Investment by New Gold and Indicative Proposal to Reschedule Senior Debt Payments

TORONTO, March 18, 2021 /CNW/ - Harte Gold Corp. ("Harte Gold" or the "Company") (TSX: HRT) (OTC: HRTFF) (Frankfurt: H4O) is pleased to announce that New Gold Inc. ("New Gold") (TSX:NGD) has agreed to make a strategic investment in Harte Gold.  The investment, by way of a private placement subscription by New Gold of 154,940,153 common shares of the Company ("Common Shares") at a price of $0.16 per share, will result in Harte Gold raising total gross proceeds of approximately $24.8 million and provide New Gold with a 14.9% interest in the Company's pro forma issued and outstanding Common Shares (the "Strategic Investment"). The Company is also pleased to announce that it has received a non-binding indicative proposal from BNP Paribas ("BNP") to re-schedule approximately $50 million of the scheduled amortization payments under the Company's senior debt facility with BNP (the "Debt Refinancing Proposal"), which would provide Harte Gold with significantly more financial flexibility over the next two years. The Company anticipates the closing of the Strategic Investment to occur on or about March 24, 2021 and to negotiate documentation with BNP in early Q2 2021.

Highlights of the Strategic Investment:

• Validation of the Sugar Zone investment thesis by a credible strategic party.
• Strengthens the shareholder registry with the introduction of New Gold.
• Investment price of $0.16 per Common Share represents a premium of approximately 15% over the 20-day volume weighted average price of the common shares of the Company.
• Net proceeds will be used primarily toward accelerated mine development, planned expansion and the scheduled March 31, 2021 US$3.3 million debt payment to BNP.

Highlights of Debt Refinancing Proposal:

• No further debt payments would be required to be made in 2021 after the scheduled March 31, 2021 payment.
• A total of approximately $50 million in debt payments would be deferred in 2021 and 2022.
• Strengthens Harte Gold's liquidity and significantly reduces associated refinancing risk, allowing the Company to focus on continued growth of the operations.
• The maturity of the BNP term loan would be extended from June 2024 to June 2025 and the maturity of the revolving loan would be extended from June 2022 to June 2023.

Frazer Bourchier, President and CEO of Harte Gold, commented:

"We are pleased to welcome New Gold as a strategic investor. New Gold's investment represents more than just a significant financing – it is an endorsement of the potential of the Sugar Zone mine and property, and a vote of confidence that Harte Gold's operational team will continue to deliver on our impending growth strategy. New Gold's management has a strong track record of growing long-term value for shareholders across other deposits analogous to the Sugar Zone mine.  We believe all Harte Gold shareholders will benefit from this mutualism and the de-risking of our growth strategy.  New Gold's investment today is one more catalyst to accelerating development and the future expansion of the Sugar Zone mine targeting 100,000 ounces per year by 2023 and we are excited to embark on this relationship."

Strategic Investment by New Gold:

Harte Gold will issue 154,940,153 Common Shares to New Gold by way of a private placement offering at a price of $0.16 per Common Share for gross proceeds of $24,790,424.

Following completion of the Strategic Investment, New Gold will beneficially own, and have control and direction over, approximately 14.9% of the issued and outstanding Common Shares.

Pursuant to the terms of an investor rights agreement, as long as New Gold holds not less than 10% of the issued and outstanding Common Shares:

• Commencing at Harte Gold's 2022 annual meeting of shareholders, New Gold will have the right to nominate one director to the Company's board of directors (the "Board"). In the event the Board increases in size to nine or more directors, New Gold will have the right to nominate an additional director.
• New Gold's nominee will be provided an observer right to the Board's Health, Safety, Environmental and Technical Committee.
• New Gold will have the right to participate in future equity financings to maintain its 14.9% interest.

In exchange for waiving the (i) right to receive up to 35% of the net proceeds of the Strategic Investment for debt repayment under the August 28, 2020 Facility Agreement ("Appian Facility"); and (ii) participation right under the November 23, 2016 Subscription Agreement, the Company will grant to ANR Investments B.V. ("Appian") a deferred participation warrant that will allow Appian to acquire up to 55,802,812 Common Shares at $0.18 per share for a period of 15 months following the closing of the Strategic Investment (the "Appian Deferred Participation Warrant"). The Appian Deferred Participation Warrant is not exercisable by Appian, subject to certain exceptions, for a period of 12 months following the closing of the Strategic Investment. New Gold will also be granted a warrant (the "New Gold Warrant") which provides New Gold with the right, subject to Appian exercising the Appian Deferred Participation Warrant, to acquire up to 8,314,619 additional Common Shares at $0.18 per Common Share in order to maintain its pro rata interest in the Company.

The closing of the Strategic Investment is subject to certain conditions, including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange.

Debt Refinancing Proposal:

The rescheduled principal repayments are highlighted in the following table and would take effect after the March 31, 2021 scheduled payment of US$3.3 million. The result would be the deferral of approximately US$38.4 million of scheduled debt payments over 2021 and 2022. 

The Debt Refinancing Proposal is subject to certain conditions including: (i) the closing of the Strategic Investment; (ii) obtaining final internal BNP approvals; (iii) the extension of the maturity of the Appian Facility from June 2023 to June 2025, to which Appian has agreed in principle, subject to negotiating final terms.  Shareholder approval for the extension of the Appian Facility would be sought by the Company at its upcoming meeting of shareholders in June 2021; and (iv) negotiation of definitive documentation with BNP and Appian.

Other amendments to existing terms include a customary amendment fee, adjustment of interest rates to reflect a market-based margin over LIBOR, inclusion of a Debt Service Coverage Ratio covenant and operational performance tests, and limitations/restrictions on certain types of expenditure, dependent on amount of cash generated from operations.

The grant of the Appian Deferred Participation Warrant described herein is a "related party transaction" as defined in Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Company is exempt from the requirements to obtain a formal valuation or minority shareholder approval in connection with such grant in reliance on sections 5.5(a) and 5.7(1)(a), respectively, of MI 61-101, as the fair market value of such grant does not exceed 25% of the Company's market capitalization calculated in accordance with MI 61-101. The material change report is being filed less than 21 days before the closing of the transaction as the Company requires the consideration it will receive in connection with the Strategic Investment in order to make its scheduled March 31, 2021 US$3.3 million debt payment to BNP. The grant of the Deferred Participation Warrant was considered and approved by the board of directors of the Company not affiliated with Appian (the "Independent Board Members"). The Board members affiliated with Appian recused themselves from voting. The Independent Board Members voted unanimously to approve the transaction.

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 81,287 hectares covering a significant greenstone belt. Harte Gold trades on the TSX under the symbol "HRT", on the OTC under the symbol "HRTFF" and on the Frankfurt Exchange under the symbol "H4O".

Cautionary note regarding forward-looking information:

This news release includes "forward-looking statements", within the meaning of applicable securities legislation, which are based on the opinions and estimates of management and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements.  Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "budget", "plan", "continue", "estimate", "expect", "forecast", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Specific forward-looking statements in this press release include, but are not limited to, closing of the Strategic Investment on or about March 24, 2021; negotiating documentation with BNP in early Q2 2021; net proceeds being used primarily toward accelerated mine development, planned expansion and the scheduled March 31, 2021 US$3.3 million debt payment to BNP; no further debt payments being made in 2021 after the scheduled March 31, 2021 payment; a total of approximately $50 million in debt payments being deferred in 2021 and 2022; strengthening Harte Gold's liquidity and significantly reducing associated refinancing risk; the extension of the maturity of the BNP term loan from June 2024 to June 2025 and the maturity of the revolving loan being extended from June 2022 to June 2023; the expansion of the Sugar Zone mine targeting 100,000 ounces per year by 2023; issuing 154,940,153 Common Shares to New Gold for gross proceeds of $24,790,424; following completion of the Strategic Investment, New Gold beneficially owning, and having control and direction over, approximately 14.9% of the issued and outstanding Common Shares; Appian acquiring up to 55,802,812 Common Shares at $0.18 per share for a period of 15 months following the closing of the Strategic Investment; New Gold acquiring up to an additional 8,314,619 Common Shares at $0.18 per share in the event that Appian exercises the Appian Deferred Participation Warrant and New Gold exercises the New Gold Warrant to maintain its pro rata interest; the closing of the Strategic Investment being subject to certain conditions, including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange; gold production of 60,000 to 65,000 oz Au for 2021; and the Company having further potential through exploration at the Sugar Zone Property. Forward-looking statements are necessarily based upon a number of estimates and assumptions including material estimates and assumptions related to the factors set forth below that, while considered reasonable by the Company as at the date of this press release in light of management's experience and perception of current conditions and expected developments, are inherently subject to significant business, economic, and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements, and undue reliance should not be placed on such statements and information. Such risks and uncertainties include, but are not limited to, there being no events of default or breaches of key financing agreements, including agreements with BNP Paribas and Appian; the Company being able to attract and retain qualified candidates to join the Company's management team and board of directors, risks associated with the mining industry, including operational risks in exploration, development and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of reserve estimates; the uncertainty of estimates and projections in relation to production, costs and expenses; the uncertainty surrounding the ability of the Company to obtain all permits, agreements, consents or authorizations required for its operations and activities; and health, safety and environmental risks, the risk of commodity price and foreign exchange rate fluctuations, the ability of Harte Gold to fund the capital and operating expenses necessary to achieve the business objectives of Harte Gold, the uncertainty associated with commercial negotiations and negotiating with contractors and other parties and risks associated with international business activities, as well as other risks and uncertainties which are more fully described in the Company's Annual Information Form dated March 25, 2020, and in other filings of the Company with securities and regulatory authorities which are available on SEDAR at www.sedar.com.

Due to the risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors in securities of the Company should not place undue reliance on these forward-looking statements. Readers are cautioned that the foregoing list of risks, uncertainties and other factors are not exhaustive.  The forward-looking statements contained in this news release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or in any other documents filed with Canadian securities regulatory authorities, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. The forward-looking statements are expressly qualified by this cautionary statement. The Toronto Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this news release.

All figures are in Canadian dollars unless otherwise stated.

SOURCE Harte Gold Corp.

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