Consensus price target for Harte Gold Corp. (TSX: HRT) is $1.00 per share, implying an upside potential of more than 60%
SmallCapPower | August 3, 2017: Harte Gold Corp. (TSX: HRT), an exploration and development company, has seen its share price more than double year to date (YTD) as the Company advances its 100%-owned Sugar Zone gold project. Located 60 km east of the Hemlo area gold mines and northeast of the town of White River, the Sugar Zone project comprises over 80,000 hectares and continues to progress well towards targeted commercial production in 2Q18 with regulatory approvals received for a 70,000 bulk sampling in 2015 and first phase production permit on January 12, 2017. Although Harte Gold stock has been gradually trending downward since hitting its yearly high of $0.80 on April 11, 2017, and may continue to face some pressure in the near term, the stock looks attractive from a long-term perspective as Harte Gold moves into commercial production, which is expected to start in 2018.
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Share price of Harte Gold ($)
Investment Thesis
- On track to move its Sugar Zone project to commercial production in 1Q18
- Significant exploration upside
- Sufficient capital ($50 million on books) to fund the exploration and development of the project
Advancing its Sugar Zone to commercial production
Harte Gold is advancing its 100% owned pre-production stage Sugar Zone project and is targeting commercial production in 2Q18. Located 60 km east of the Hemlo area gold mines and northeast of the town of White River, the project comprises over 80,000 hectares and continues to progress well towards production with regulatory approvals for a 70,000 bulk sampling received in 2015 and first phase production permit on January 12, 2017, which would allow the Company to mine an additional 30,000 tonnes. The Phase I permit was granted as an interim step and facilitates continued production until full commercial permitting is received. In the near future, Harte Gold will submit an amended closure plan for full commercial production to include the currently defined Sugar Zone Deposit, and additional resources that may be developed on strike and at depth, as well as milling on site. Harte Gold anticipates receipt of Commercial Production permits in Q3 2017 and commencement of full production in 2Q18. The Company estimates Phase 1 target production at 540 tpd.
Sugar Zone Project Development Timeline
Source: Company Presentation
Bulk sampling yields positive results: Harte Gold completed the 70,000 bulk sampling that comprised mine development of more than 2,500 m shipping 67,454 DMT for a decent gold grade of 8.5 g/t. The successful completion paves the way for commercial production.
Continued positive drilling results from drilling
In March 2017, Harte Gold initiated an aggressive $15 million drill program covering 75,000 metres with six rigs active and continues to report positive results. As of June 2017, the sample drill results show one hole yielding a high grade of 115.5 g/t over 2.05 m. The results indicate higher grades than originally anticipated and could positively impact the project economics.
Sample drill results as of June 2017
Source: Company Presentation
Potential for significant increase in resources
As per the 2012 Preliminary Economic Assessment, the Sugar Zone deposit contains an Indicated resource of 980,900 tonnes, grading 10.13 g/t, for 319,280 ounces of contained gold and an Inferred Resource of 580,500 tonnes, grading 8.36 g/t, for 155,960 ounces of contained gold. The resource could increase significantly in the near future with the near mine exploration currently underway. Harte Gold is targeting a resource of 3 Moz and will be part of the updated NI 43-101 technical report to be released in 4Q17.
Sufficient funds for continued drilling and development; Raises $25 million in July
Harte Gold has so far raised more than $50 million for the development of the Sugar Zone project. After raising $25 million in late 2016, Harte Gold raised another $25 million in a private placement last month. With the latest funding, the Company’s cash balance will increase to nearly $50 million, which will be sufficient to complete the drilling activities as well as the permitting and other activities for advancing the project to commercial production.
Valuation and outlook
Harte Gold is currently an exploration company and as such does not generate any operating revenues. Although the stock has more than doubled year to date to $0.60 from $0.30 and may face some pressure in the near term, the stock looks attractive from a long term perspective as the Company is fast approaching commercial production. According to P/NAV multiple, Harte Gold trades at 0.56x, which seems attractive given developers are trading at 0.67x and mid-tier producers at 0.88x. The consensus price target for the stock is $1.00/share, implying an upside potential of over 60% from the current market price of $0.62.
Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.
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