The deal includes a $74.5 million buyer’s credit, reflecting the value of the loans Harte owes the Perth-based miner. It also involves nearly $22 million in a cover book and accounts associated with the operation of the sugar field, the issuance of Silver Lakes shares with an estimated value of $28 million and cash consideration. not exceeding $3 million, the companies said.
Silver Lake has also entered into an agreement with an affiliate of Appian Capital, to acquire a combined 2% net smelter royalty on the entire Sugar Zone property. The $22 million transaction payable in Silver Lake stock is subject to the successful acquisition of Harte Gold, he said.
The Sugar Zone mine, 30 km north of White River, sits on approximately 81,000 hectares of a gold-rich greenstone belt which houses the gold mines of the Hemlo region. The asset, in operation since 2019, is expected to have a productive life of 13 years at current production levels.
By 2023, Sugar Zone is expected to produce 102,000 ounces of gold by 2023, with sustainable annual production of 98,700 ounces by 2027.
Despite its potential, the asset gave Harte Gold many headaches early on. In addition to dealing with poor underground ventilation, the company has had to deal with equipment failures, freezing of its tailings due to extreme weather conditions, higher than expected costs and both the quantity and the grade of gold recovered at the mine being lower than expected.
These factors prompted the struggling Canadian miner to announce in May that it would not generate enough cash from the deal to fully fund its planned investing activities, including a proposed mine expansion, and its service obligations. debt to the French bank BNP Paribas.
Shortly after, the Toronto-based company launched the process of finding a buyer last year, as part of a strategic review process.
Harte said in fall 2021 he was in danger of running out of money and warned of an imminent closure of the mine by the end of the year unless there was an injection of cash.
Silver Lake entered the scene in November by acquiring credit facilities granted by BNP Paribas to Harte Gold. This too pledged to lend the Canadian miner up to C$10.8 million ($8.6 million) to finance mining operations under the Creditor Protection Proceedings.
The Sugar Zone underground mine has 797,000 ounces of gold reserves at 7.18 g/t, similar in nature to the Rothsay and Mt. Monger mines that Silver Lake operates in Australia, where it produces approximately 250,000 ounces of gold per year.
Canada’s Silver Lake foray is one of the latest forays into North America for Australian mid- and large-cap gold miners.
Northern Star (ASX:NST) bought the Pogo gold mine in Alaska from Sumitomo in 2018. Newcrest Mining (ASX, TSX:NCM) followed suit, securing the Red Chris mine in British Columbia for 1.1 billion in 2019 and buying Pretium Resources in November.
Evolution Mining (ASX:EVN) and St Barbara (ASX:SBM) have also acquired properties and juniors in Maple Leaf country, but have yet to make a major purchase.
Earlier this week, Newcrest Mining (ASX, TSX:NCM) cemented its $2.8 billion (C$3.5 billion) acquisition of Pretium Resources, which saw the world’s largest gold producer Australia to access the target company’s Brucejack underground gold mine in British Columbia.