News: SLR Harte Gold Announces Execution Of Subscription Agreement And Loan Agreement And Makes..., page-47

There seems to be some confusion as to how much SLR is paying for Harte Gold.

From what I can tell its not $104 million but rather the issue of 24.5 million SLR shares worth around $40 million AUD to Appian Capital. (See ASX announcement on the 8th December).

In exchange SLR becomes the holder of Bonds/Loans worth around US$65 million or around $90 million AUD face value.

On top of that SLR has lent 10.8 million CAD or 12 million AUD for ongoing capital.

If anybody wants to stop SLR from getting Harte's assets they will need to pay out the full value of the loan meaning SLR would pick up a tidy profit in the short term.

I doubt anyone will so in my view SLR is getting a bargain.

Effectively they are getting a reserve of around 700,000 ounces for $52 million plus creditors which at last report was around $15 million CAD.

There is also another 1 million of high grade indicated resources at 11.9g/t and a number of other high grade prospects on the cards as well.

The $20 million in mark to market hedging losses is only a paper loss relative to the gold price not the cost of producing so provided SLR get the gold out of the ground for less than the sale price they lose nothing. Even though its a put/call arrangement so a higher gold price may eliminate the losses as well.

A large part of recent losses was due to Covid shutdowns and Financing costs. i.e. Interest accumulating at 11% whilst the mine was shut down isn't a good thing. It would appear Harte has been cash strapped for a long time which has hampered operating performance. This won't be the case with SLR.

I've attached the Feasibility study which shows that for another $21 million CAD or around $23 million AUD they can lift production to over 100,000 ounces.

So all up Harte will probably cost $95 million or so including upgrades to get the mine up to around 100,000 ounces for well into the future.

I think its an excellent purchase subject to execution of course but SLR have not blown up the balance sheet with this purchase so there is limited downside in my view.

The upside will be lifting the production profile to almost 400,000 ounces a year from 2023 and a reserve of over 2 million ounces. This should start to see SLR get rerated just on size not to mention considerable cashflow that Deflector is going to be bringing in.

Yes SLR could have tried to buy something in WA but I doubt they could have a found an operating mine with a high grade reserve of 700,000 oz for around 100 million. BGL has a reserve of around of a million ounces, is still building its mill and its EV is worth a billion. So it would have been pretty hard to find something of a decent size for less than $500 million in WA, not to mention the lunatic who is running the place.

I was happy with the quarterly - it would seem that Mt Monger stockpiles are going to continue to grow this year which begs the question as to whether or not SLR needs to expand the mill or take over BC8 which is building a mill. BRB also has a decent indicated resource next door to Aldiss as well so there is potential to maybe do something there even though I am not sure of the quality of the ore with BRB.

My only concern with SLR is at the moment is that the ore from Daisy is not reconciling to reserve grade - last year was 5.7g/t v a reserve of 8.1g/t (See Annual report) and this year the reserve is 8.7g/t but the last quarterlies u/g grade didn't seem to match up to that either. So management need to come clean about that - it may be a case that development ore from Easter Hollows is dragging the chain but an extra couple of grames per tonne out of Daisy would see production lift by over 20,000 ounces on an annual basis from Mt Monger would could lift production closer to 300,000 ounces before the Harte addition.

All up SLR has very attractive growth profile, enhanced by the purchase of Harte with a strong balance sheet and lots of prospective opportunities to boot.

GLTA/IMHO

Last financials

ni-43-101-tr-fsfe.pdf (hartegold.com)

Feasibility studies