The Company's unaudited financial results for three months ended
Q2 2021 Highlights:
- Gold production: Total production of 11,283 oz Au for Q2 2021, compared to 11,776 oz Au in Q1 2021. Q2 2021 production was adversely affected by a six-day mill closure towards the end of June due to a workplace transmission of COVID-19. Subsequent to the announcement, the workplace transmission was contained and the Company did not experience any further adverse effects.
- Ore tonnes processed: Average throughput rate of 674 tonnes per day (tpd) for Q2 2021, compared to 716 tpd in Q1 2021. Ore processed was adversely affected by the six-day mill closure in June.
- Head Grade: 6.1 g/t Au for Q2 2021, compared to 6.1 g/t Au in Q1 2021.
- Revenues:
$26.1 million in revenue from 11,855 gold ounces sold for Q2 2021, compared to$27.4 million from 12,349 gold ounces sold in Q1 2021. - Net earnings/(loss):
$0.9 million net loss in Q2 2021, compared to net earnings of$5.8 million in Q1 2021. - Mine Operating Cash Flow1:
$9.3 million in Q2 2021 as compared with$9.2 million in Q1 2021. - Gold hedge impact: Incurred
$2.4 million expense in Q2 2021 for the settlement of 4,800 gold ounces hedged. Average Realized Gold Price1 after hedge in Q2 2021 wasUS$1,631 /oz. - EBITDA1:
$3.1 million for Q2 2021, compared to$1.6 million in Q1 2021. - Liquidity position: Cash on hand at
June 30, 2021 was$11.9 million ($8.2 million atDecember 31, 2020 ). Based on the Company's updated outlook and guidance for 2021, the Company will require additional funding by Q4 2021. The Company's liquidity position is further discussed below under "Liquidity and Capital Resources".
"
The Company remains focused on maintaining its liquidity while funding the critically important strategic review process which was commenced in
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1 Mine Operating Cash Flow, Average Realized Gold Price, EBITDA, are non-IFRS measures, refer to the definitions of non-IFRS measures in the Company's MD&A for a reconciliation |
Q2 2021 Operating and Financial Summary
3 months ended | |||||
Units | 2021 | 2021 | 2020 | 2020 | |
Operating Performance | |||||
Ore Tonnes Processed | Tonnes | 61,354 | 64,418 | 46,288 | 36,367 |
Average Daily Throughput | tpd | 674 | 716 | 503 | 649 |
Head Grade | g/t | 6.1 | 6.1 | 7.7 | 5.7 |
Recovery | % | 94.1% | 93.7% | 95.0% | 93.4% |
Gold Ounces Produced | oz | 11,283 | 11,776 | 10,835 | 6,218 |
Gold Ounces Sold | oz | 11,855 | 12,349 | 9,228 | 4,882 |
Key Financial Data | |||||
Revenues, net | 000 $ | 26,054 | 27,368 | 21,950 | 12,215 |
Mine Operating Cash Flow1 | 000 $ | 9,343 | 9,152 | 8,679 | 4,690 |
EBITDA1 | 000 $ | 3,101 | 1,606 | 1,935 | (677) |
Net income / (loss) | 000 $ | (920) | 5,833 | 10,562 | (11,750) |
Net increase / (decrease) in cash | 000 $ | (9,184) | 12,806 | (13,185) | 16,511 |
Cash on hand at end of period | 000 $ | 11,870 | 21,054 | 8,248 | 21,433 |
Key Statistics | |||||
Average Realized Gold Price1 | US$/oz | 1,798 | 1,768 | 1,843 | 1,898 |
Realized Gold Price After Hedge1 | US$/oz | 1,631 | 1,491 | 1,547 | 1,374 |
Cash Operating Cost | C$/tonne | 277 | 287 | 291 | 210 |
Cash Cost1 | US$/oz | 1,159 | 1,183 | 1,122 | 1,177 |
AISC1 | US$/oz | 2,033 | 1,916 | 2,882 | 2,197 |
1) | Non-IFRS measures. Refer to definition of non-IFRS measures in the Company's MD&A for a reconciliation. |
Operational Update
The following operational update covers the periods of both Q2 2021 and
From An Operational Perspective, Mine Production Has Temporarily Plateaued
Mine performance for Q2 2021 was generally inline with performance seen for Q1 2021. Earlier in the year, the Company announced that, after collecting and then analyzing key operational metrics, it was determined that achieving sustainable throughput of 800 tpd at an average reserve grade would be achieved later than previously planned (see press release dated
The fundamental production plateau is consistent with what the Company has previously communicated, underpinned by the following:
- Ongoing challenges with a labour shortfall, particularly with underground labour, and its related adverse impact on mine performance.
- Criticality of accelerating definition infill drilling to better understand ore grade distribution.
- Necessity of accelerating capital mine development to increase the number of working areas and to improve mine planning and flexibility.
- Improving mobile equipment reliability and suitability, particularly the underground 2yd3 LHDs.
July Production Has Trended Positively Following Progressive Actions, Sustainable in the Near to Medium Term
Positive trends observed in July resulted in the
Mine production performance for July was underpinned by progressive actions taken by the Company over the past 3 quarters, including bolstering the mine workforce with temporary contracted labour, progressive and more expansive infill drilling, increasing sill development and associated production longhole drilling and mobilizing some additional mobile equipment to support development rates.
Average head grade also had a positive impact on ounces produced for July as the Company mined higher-grade areas of the north and south Sugar zones during a 3 to 4 month cycle during which there remained a greater proportion of higher-grade longhole ore stopes as compared with lower grade sill ore development. A greater contribution of the mine production for Q2 2021 was from sill development, which has provided the Company with greater flexibility in stoping material with more areas to draw from for July and through into Q4 2021.
July metrics were a general improvement over Q2 2021 on several fronts. Management reiterates that the
Key Performance Metrics – Q3 2020 to | ||||||
Unit | Q3 | Q4 | Q1 | Q2 | July | |
m/day | 9.2 | 11.4 | 14.0 | 10.0 | 10.0 | |
Ore Tonnes Processed | tpd | 473 | 503 | 716 | 674 | 905 |
Head Grade | g/t | 5.7 | 7.7 | 6.1 | 6.1 | 7.2 |
Recovery | % | 93.4% | 95.0% | 93.7% | 94.1% | 94.7% |
Avg. Monthly Gold Ounces Produced | Avg. oz Au / | 3,100 | 3,611 | 3,925 | 3,761 | 6,133 |
Accelerating Capital Plan Expected to Continue to Unlock Mine Production Growth
The Company has a plan that would allow it to achieve a sustainable 800 tpd run-rate and would support continued future growth towards 1,200 tpd. The plan includes accelerating capital originally scheduled for 2022 and beyond as well as recommencing the Feasibility Study expansion capital.
The "Accelerate Capital Plan", subject to the outcome of the Strategic Review Process, is focused on four key areas:
Improvement Opportunities | Action Plan and Benefits | Timing to see Benefits |
Accelerate Infill Drilling |
| Throughout 2022 |
| Q4 2021 to Q2 2022 | |
Bolster Mine Workforce |
| Q3 2021 to Q4 2021 |
Enhance Underground Equipment |
| Q3 2021 to Q4 2021 |
Strategic Review Process Currently Underway:
The Company initiated the Strategic Review Process on
A Special Committee, comprised of the Company's independent directors,
The Company will provide an update when further disclosure is required or otherwise appropriate.
Outlook and Guidance:
In order the ensure sufficient liquidity to support the Strategic Review Process, the Company has deferred the implementation of various mitigation measures that were aimed at addressing the production variance from plan experienced to date in 2021. The Company has also reduced certain sustaining and expansion capital expenditures, which may adversely impact production over the next six months. At this time, the Company is unable to provide updated 2021 production guidance as the Strategic Review Process continues to evolve, but believes its revised 2021 guidance, issued on
The Company will provide further updates on guidance as appropriate.
Liquidity and Capital Resources:
- The Company ended Q2 2021 with a cash balance of
$11.9 million . - The continuation of the Company's Strategic Review Process was facilitated by BNP's agreement to refrain from enforcing its rights and remedies under the BNP Debt Facilities.
- On
June 30, 2021 , the Company obtained a 30-day waiver of its financial covenant requirements pursuant to the BNP Debt Facilities. In addition, BNP deferred the due date of (i) the principal and interest payments under the BNP Debt Facilities originally scheduled forJune 30, 2021 , and (ii) the settlement payment under the gold hedge program originally scheduled forJuly 2, 2021 toJuly 30, 2021 . - On
July 30, 2021 , the Company entered into a forbearance agreement with BNP (the "Forbearance Agreement") pursuant to which BNP agreed, subject to certain terms and conditions, to refrain from enforcing its rights and remedies under the BNP Debt Facilities (including scheduled principal, interest and gold hedge payments) untilSeptember 30, 2021 . BNP also agreed, subject to the terms of the Forbearance Agreement, to forbear from exercising its rights and remedies under the BNP Debt Facilities in respect of or arising out of or relating to certain defaults or events of default under the BNP Debt Facilities, including financial covenant breaches, which are anticipated to occur prior toSeptember 30, 2021 , until the earlier of (i)September 30, 2021 , and (ii) the occurrence or existence of any terminating event, which includes bankruptcy events, defaults not covered by the Forbearance Agreement and other customary terms. - On
August 3, 2021 , the Company received notice from Appian that events of default have occurred under the Appian Debt Facility and related financing agreements. Among other alleged events of default, Appian cite the Company's default under the BNP Debt Facilities which triggers a cross-default under the Appian financing agreements. Pursuant to the terms of the Intercreditor Agreement datedAugust 28, 2020 betweenHarte Gold , Appian and BNP, Appian is prohibited, without the prior written consent of BNP, from taking any Enforcement Action (as defined in the Intercreditor Agreement) until a minimum of 135 days has passed from the date on which Appian delivers a notice to BNP. The terms of the Appian Debt Facility provide for default interest at a rate per annum equal to 19.0% from the date of default. - To support the continuation of the Strategic Review Process, the Company is actively managing its liquidity and capital resources, including reducing certain sustaining and expansion capital expenditures, which may adversely impact production over the next six months. The Company does not expect that it will generate sufficient cash from operations in the next 12 months to fully fund planned investment activities and debt service obligations.
- There can be no assurance that the Strategic Review Process will result in any transaction, whether BNP will continue to forbear from exercising its rights and remedies on expiry of the Forbearance Agreement or what the terms or timing of such a transaction or such continued forbearance might be, or that the Company will be able to continue as a going concern.
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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, the Company requiring additional funding by Q4 2021; forecasted additional rate improvements in Q3 2021 of approximately 15% to 40% across key metrics; the need for accelerating capital and some additional capital;
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