White River miner Harte Gold might grind operations to a halt at the Sugar Zone Mine unless it gets a fresh infusion of cash before the year is out.
In posting negative third-quarter results, the Toronto-based company issued a dire warning that it needs additional funding before the end of 2021 to continue operating.
The company reported a net loss of $3.1 million in the third quarter, spiralling down from the $900,000 net loss in the second quarter.
With mounting debt, Harte is trying to keep its biggest creditor at bay in striking a forbearance agreement with BNP Parabas. Harte has defaulted on a loan with another creditor, Appian Capital.
Harte management expressed doubt that a critical strategic review process launched last summer will result in a transaction that will result in a full or partial sale of the three-year-old Sugar Zone Mine, a restructuring of its long-term debt, or any other "strategic alternatives."
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Harte said there have been plenty of discussions with a "number of parties" on a potential transaction but nothing that looks of any value or represents a binding offer.
Harte further mentioned it can provide no assurance that its common shares will continue trading on the TSX "or on any other trading platform."
Operationally, the company called it a successful quarter over the previous one in terms of the strides made in increased gold production, underground development, ore tonnes processed and head grade. But these improvements aren't sustainable.
As of Sept. 30, the company held $11.4 million in cash on hand.
To preserve money, the company has curtailed development into the Middle Zone area of the Sugar Zone Mine, which would open up a new area to mine. The company said this will catch up to them in the fourth quarter. Production is currently coming from the Sugar Zone North and South areas.
Despite being situated in high-grade gold country, the company is facing a plethora of problems.
The operation is understaffed and Harte Gold is facing difficulties attracting and retaining people to come to White River and go work underground.
The company said it needs capital to do more infill drilling in order to confidently bring new areas of the mine into production and it needs to accelerate the rate of underground development, particularly with a decline ramp.
The rate of underground development during the third quarter averaged 10.4 metres day.
But to sustain a rate of moving 800 tonnes per day, Harte said it needs to pick up the pace of development to 15 metres a day over the next six to nine months, and then increase it to 18 metres day over the next 12 to 15 months for achieve the "ultimate plan" of 1,200 tonnes per day.
The company is further having problems with the reliability of its mobile underground equipment, "most notably the two-yard scoops." Capital is needed to upgrade and expand the fleet.
On the production guidance side, Harte said it is unable to provide an updated production target for 2021. Last May, the company dropped its guidance from 60,000 to 65,000 ounces a year to 50,000 to 55,000 ounces. Harte said that target might not be achieved.
The Sugar Zone Mine entered commercial production in 2019 and has an anticipated mine life of approximately 13 years at current production levels.
