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New Gold acquires 14.9% interest in Harte Gold

Sugar Zone mine. Image from Harte Gold.

Canadian gold producer New Gold Inc. (TSX: NGD) announced on Friday that it has agreed to make a strategic investment in Harte Gold Corp. (TSX: HRT), owner of the Sugar Zone mine in White River, Ontario.

By way of a private placement, New Gold will purchase approximately 155 million common shares of Harte Gold at a price of C$0.16 per share, for total consideration of C$24.8 million. This would provide New Gold with a 14.9% strategic interest in Harte Gold’s pro forma issued and outstanding common shares.

The investment price represents a 15% premium over the 20-day volume weighted average price of Harte Gold’s common shares.

The gold miners will also enter into an investor rights agreement, under which New Gold will, as long as it holds not less than 10% of Harte Gold’s shares, have the right to participate in certain equity financings by Harte Gold to maintain its 14.9% interest.

Net proceeds of the private placement will be used primarily toward accelerated mine development at Sugar Zone

New Gold will be subject to an 18-month standstill, which prohibits New Gold from taking certain actions, including acquiring more than 14.9% Harte Gold’s common shares.

Harte Gold says net proceeds of the private placement will be used primarily toward accelerated mine development at Sugar Zone, planned expansion and a debt payment due to BNP Paribas at the end of March.

“New Gold’s investment represents more than just a significant financing – it is an endorsement of the potential of the Sugar Zone mine and property, and a vote of confidence that Harte Gold’s operational team will continue to deliver on our impending growth strategy,” Harte Gold president and CEO Frazer Bourchier said in a news release.

The Sugar Zone mine entered commercial production in 2019, becoming the first new mine in Ontario’s Hemlo gold camp in three decades. Production guidance for this year is set at 60,000-65,000 oz. The company sees further expansion potential with a target of 100,000 oz per year by 2023.

Meanwhile, Harte Gold has received a proposal from BNP to reschedule approximately C$50 million of the scheduled amortization payments under the company’s senior debt facility. This means no further debt payments would be required over the next two years after the March payment.

Shares of Harte Gold jumped 10.7% by noon EST following news of New Gold’s strategic investment. Its market capitalization now stands at approximately C$135 million.