Ontario-focused Harte Gold (TSX: HRT; US-OTC: HRTFF) has announced plans to go ahead with an expansion of its Sugar Zone mine to 1,200 tonnes per day, from the current 800 tonnes per day throughput, based on strong feasibility study economics.
The latest study suggests that an incremental $21 million in expansion capital could grow throughputs by 50% starting in the first quarter of 2023. As a result, annual gold production would average 98,700 oz. between 2023 and 2027. All-in sustaining costs are forecast to drop down to an average of US$1,025 per oz. in those five years - this year's AISC guidance stands at US$1,400 to US$1,550 per ounce.
According to the feasibility, this expansion would deliver strong returns: the differential cash flows between the current and expanded scenarios deliver an after-tax net present value estimate of $332 million, at a 5% discount rate and based on an average gold price of US$1,709 per oz. between 2021 and 2029. The after-tax internal rate of return for this expansion is pegged at 89%.
"The study presents a transformative opportunity and showcases the tremendous potential of the Sugar Zone mine," Frazer Bourchier, Harte Gold's president and CEO, said in a news release. "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."
The $21.1 million capital cost estimate for the expansion includes $16.3 million for an expansion of the process plant and $4.6 million for additional mine equipnment. The bulk of this amount ($16.3 million) is budgeted for 2022.
With a cash balance of $8.5 million at year-end, Harte expects this balance, together with its cash flow from operations, to fund its 2021 capital requirements but it may not have the liquidity to cover this year's scheduled senior debt principal repayments. The company is in discussions with BNP about the potential for deferral of principal repayments due this year. If these are not deferred, "the company will likely need to seek funding in order to make the required principal repayments."
Underground, Harte is currently developing access to the Middle Zone. Once this is established, it will be able to concurrently mine three areas: Sugar Zone North, Sugar Zone South and the Middle Zone. These three areas are expected to provide enough stoping areas to support a 1,200 tonnes per day output.
The latest feasibility includes updated resource numbers. Probable reserves now total 3.5 million tonnes grading 7.18 grams gold per tonne, with indicated resources of 2.8 million tonnes at 11.87 grams gold per tonne. Additional inferred resources stand at 1.9 million tonnes grading 9.45 grams gold per tonne.
Harte sees additional upside potential beyond the latest study numbers. These include expanding near-mine mineralization, stepping out the mineralization at depth and a trade-off analysis of backfill methods (rockfill versus pastefill ).
This year, the Sugar Zone mine in White River is expected to produce 60,000 to 65,000 oz. of gold.