Harte Gold’s (TSX: HRT) Sugar Zone deposit in northern Ontario will be in commercial production in the second quarter of 2018, chairman and CEO Stephen Roman told The Northern Miner’s Canadian Mining Symposium in London.
When Roman took over management of the company at the request of shareholders in 2009, Sugar was known to contain 200,000 oz. gold.
But the mining executive, who had sold Gold Eagle Mines the year before to Goldcorp (TSX: G; NYSE: GG) for $1.5 billion, had a hunch that the project, 25 km northeast of White River and 60 km east of the Hemlo area gold mines, held an awful lot more gold than that.
“Their property was fractured at the time so we cleaned up the company and acquired the other 51% of the property. We’ve been going hard ever since.”
So far Harte Gold has defined half a million ounces of gold in the Sugar Zone alone — one of seven zones defined on the 620 sq. km property.
“Initially nobody paid attention to this asset because it was small,” he said, despite its location within 100 km of three operating gold mines, Barrick Gold’s (TSX: ABX; NYSE: ABX) Hemlo mine, Richmont Mines’ (TSX: RIC; NYSE-MKT: RIC) Island Gold mine and Wesdome Gold Mines’ (TSX: WDO) Eagle River mine. Goldcorp’s Borden Lake gold project is also 100 km away.
The underground mine development sits on the relatively unexplored Dayohessarah belt, an Archean-aged greenstone belt and part of the Wawa geological subprovince, which also contains the 30 million oz. gold Hemlo-Schrieber gold belt.
“It’s all the same greenstone belt. It’s the same geology, it’s the same age as Hemlo and we feel we have excellent potential to increase ounces with further exploration,” Roman said. “It’s a phenomenal orebody that will continue to grow.”
The high-grade Sugar Zone contains 319,280 oz. gold in the indicated category (980,900 tonnes grading 10.13 grams gold per tonne) and another 155,960 oz. gold in the inferred category (580,500 tonnes grading 8.36 grams gold). That estimate was completed in 2012 and Harte Gold expects to finish a resource update before year-end.
The company released more high-grade drill results from its $15-million exploration program. Six rigs are active and will drill 75,000 metres this year. The company is also undertaking airborne geophysical surveying, geochemical and field mapping and grab sampling.
The latest results from infill and step-out drilling with three rigs in the Sugar Zone returned 115.49 grams gold over 2.1 metres in hole 17-162; 37.19 grams gold over 1.65 metres in hole 17-163; and 35.49 grams gold over 2.2 metres in hole 17-165.
New results from the Middle zone, just north of Sugar, include 8.03 grams gold over 7.6 metres in 17-75W2. The company says the results suggest convergence with the Sugar Zone at depth and two drill rigs are active in the zone doing step-out drilling to expand the mineralized envelope and infill drilling to bring mineralization into the resource category. The dimensions of the Middle zone are now 400 metres on strike and 800 metres down-dip, and the zone remains open down dip and south.
In the Wolf zone, 1.7 km northwest of the Sugar Zone, a sixth rig is working in an area where historic drilling returned an intercept of 9.5 grams gold over 7.5 metres, and follow-up drilling has resumed at depth.
Four other zones — Lynx, Marten, Moose and Fisher — are also being studied.
The Lynx zone has a strike length 3 km south of the Sugar Zone deposit and features five historic prospects, with high grades recovered from grab sampling that include 595 grams, 54.2 grams, 74.2 grams, 38.1 grams, 114.7 grams and 12.8 grams.
Harte Gold is initially targeting production in the Sugar Zone of 50,000 oz. gold a year.
“It’s not a big mine, but it should be a profitable mine,” Roman said. “The big upside is the regional exploration and the continued defining of a larger-sized deposit.”
The recently discovered Middle and Wolf zone deposits “are growing in size, and that’s why we feel in this area we have potential just on that 3,000-metre strike length of 3 million oz. — but it also extends south,” he added.
Michael Gray of Macquarie Research says the Sugar Zone could be “the tip of the iceberg,” and that the company “is in the early innings of exploring and expanding its Sugar Zone project resources.”
The mining analyst says there is “high potential for on strike and subparallel zones to be discovered in the more than 3 km Sugar Deformation Zone, and throughout the large land position for over 5 million oz. ultimate potential … the Sugar Zone project has a large, 620 sq. km consolidated land position covering a vastly unexplored series of greenstone belts — especially given the region hosts the more than 30 million oz. Hemlo Gold belt and the plus 2 million oz. Island Gold mine.”
In the meantime, Gray forecasts the underground mine could run at 40,000 oz. gold a year in 2018, with cash costs of US$450 per oz. and all-in-sustaining costs (AISCs) of US$700 per oz., followed by “staged expansions to 90,000 oz. gold a year in 2023.”
Based on its bulk sample, the company says it can produce at 540 tonnes a day, which keeps the operation below the provincial permitting guidelines. But full commercial production permitting is underway to eventually increase this rate. (Federal authorization is needed to raise the throughput rate above 600 tonnes per day.)
An impacts and benefits agreement with the Pic Mobert First Nation is moving along and should be completed in June or July.
“We engaged the First Nations from the moment we took over managing this company, and they have been involved with us all through,” Roman said. “They’re working at the site; they’re working underground; they’re working at the shop; they helped us build the roads; they’re crushing and hauling to Barrick’s mill. It’s a big engagement.”
Roman also noted that the estimate for US$700 per oz. AISCs should go down once the company builds its own mill (commissioning is expected to start in the first quarter of 2018).
“We’ve shipped 67,454 dry tonnes to Barrick so far at a grade of 8.5 grams gold — that’s what they’ve recovered for us,” he said. “With our own mill, we can recover a higher grade than that.”
He points out that because mining will be by long-hole stoping, and because it’s a steeply dipping orebody, it will be “a very low-cost operation.”
Roman noted that with the completed bulk sample, Harte confirmed the geology, continuity, mineralized widths, modelled grades and mining method.
“It’s a narrow deposit but high grade, and we were wondering whether we could mine it with long-hole methods. It has proven extremely good for long-hole mining, with little dilution and excellent recoveries.
“We’re around the 10-gram-per-tonne range, which puts us ahead of many other gold projects.”
Pierre Vaillancourt of Haywood Securities says the project has robust economics. At US$1,200 per oz. gold, the project has a $326-million net present value at a 5% discount rate and could generate a 100% internal rate of return, based on a 550-tonne-per-day operation increasing to 800 tonnes per day (subject to permitting) and a 1 million oz. resource.
Vaillancourt says Harte’s next resource estimate could increase from the 2012 estimate to at least 1 million oz. gold grading 9 grams gold. He writes in a June 15 research note that “longer term, the current mineralization zones — Sugar, Middle and Wolf — each have the potential to deliver a 1 million oz. resource.”
“With a property covering more than 620 sq. km, including 30 km of strike length along the Dayohessarah deformation zone, the regional potential is significant,” he notes. “The geology at the south and northwest parts of the property suggests a mineralization style that compares to the Hemlo gold mines … as the resource grows and the regional potential comes into focus, Harte Gold, which has already received interest from several producers, could become a takeover target.”
The company also has a team with deep mining experience, including vice-president of projects Roger Emdin, who has held operating roles with large mines, including Glencore’s (LON: GLEN) Nickel Rim mine; and general manager Stephen Ball, who held project-management roles at Vale’s (NYSE: VALE) narrow-vein Coleman mine, and at Voisey’s Bay.
As of May 9, the company had $25 million in cash.
Harte has 453 million outstanding shares at 69¢ apiece for a $313-million market capitalization.
United Kingdom-based investment fund Appian Natural Resources is the company’s largest shareholder, with a 17% stake. Macquarie’s Gray notes that Appian was also a pre-construction investor in Roxgold (TSX: ROXG; US-OTC: ROGFF).