Harte Gold Announces Execution of Subscription Agreement and Loan Agreement and Makes Application Under Companies’ Creditors Arrangement Act

HARTE GOLD CORP. announces that it will file today (December 7, 2021) an application to the Ontario Superior Court of Justice for an Initial Order under the Companies’ Creditors Arrangement Act.

In conjunction with the commencement of the CCAA Proceedings, Harte Gold has entered into a subscription agreement (the “Subscription Agreement”) with 1000025833 Ontario Inc. (the “Investor”), a wholly-owned indirect subsidiary of Silver Lake Resources Limited (“Silver Lake”) (ASX: SLR), pursuant to which the Investor, if it is the successful bidder at the conclusion of the SISP (defined below) and is approved by the Court, would become the sole shareholder of Company in a transaction which provides for the continuation of its business and operations as a going concern.

Harte Gold and the Investor have also entered into a loan agreement pursuant to which the Investor has agreed, subject to the terms and conditions contained therein, including Court approval, to loan up to $10.8 million (the “DIP Financing Agreement”) to the Company, to fund operations and the CCAA Proceedings. The DIP Financing Agreement, if approved by the Court, will provide Harte Gold with the liquidity required to continue the operations of Sugar Zone Mine until closing of a transaction. Together, the Subscription Agreement and the DIP Financing Agreement demonstrate Silver Lake’s strong support of the Sugar Zone Mine and the restructuring process.

The Investor is the lender to Harte Gold under the Amended and Restated Credit Agreement made as of August 28, 2020 with BNP Paribas (as amended to the date hereof, the “Credit Agreement”). The Subscription Agreement is a “credit bid” which provides for (1) payment in full of all claims ranking in priority to, or pari passu with, the amounts owing under the Credit Agreement; (2) payment in full of the properly perfected and secured obligations owing to AHG (Jersey) Limited under the Facility Agreement dated August 28, 2020 (the “Appian Facility”); and (3) the assumption of up to $7.5 million in trade accounts payable. The Subscription Agreement provides no recovery for other stakeholders ranking subordinate to the Appian Facility, including holders of of existing equity interests in the Company.

If the Court grants the Initial Order, Harte Gold will seek the approval of a sale and investment solicitation process (“SISP”) and authority to use the Subscription Agreement as a “stalking horse” in the SISP in order to provide interested parties with the opportunity to submit superior proposals and to enable Harte Gold to determine the highest and best available transaction for the Company and its stakeholders. Unless the successful bid at the conclusion of the SISP provides for significantly higher value than the Subscription Agreement, there will be no recovery for holders of existing equity interests in the Company.

The execution of the Subscription Agreement and the DIP Financing Agreement is the culmination of the Strategic Review Process undertaken by the Company over several months. After careful consideration of all available alternatives and stakeholder interests, the board of directors of Harte Gold determined that it was in the best interests of the Company and its stakeholders to execute the Subscription Agreement and the DIP Financing Agreement and to commence the CCAA proceedings and undertake the SISP.

Trading in Securities of Harte Gold

Trading in Harte Gold’s common shares on the Toronto Stock Exchange (“TSX”) is expected to be halted. The Company currently anticipates that its common shares will be delisted in due course.

Additional Information

A further update will be provided following the hearing of the CCAA application by the Court.

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