Harte Gold Announces Granting of Initial Order under Companies’ Creditors Arrangement Act and Approval of DIP Financing Agreement

HARTE GOLD CORP. announces that the Ontario Superior Court of Justice (Commercial List) (the “Court“) has granted the Company’s application for an Initial Order under the Companies’ Creditors Arrangement Act.

Pursuant to the Initial Order, the Company has obtained protection from its creditors under the CCAA for an initial period expiring December 16, 2021 (the “Stay Period“), the maximum permitted under the CCAA. The Court also approved an initial advance of $400,000 to the Company under the DIP Financing Agreement, as defined below, and has appointed FTI Consulting Canada Inc. as Monitor (the “Monitor“) of the Company. While under CCAA protection, management of the Company will remain responsible for the day-to-day operation of the Company under the general oversight of the Monitor and supervision of the Court.

As previously announced, 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.

Also as previously announced, 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. If approved by the Court, the DIP Financing Agreement 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.

At a hearing scheduled for December 16, 2021, Harte Gold will seek the Court’s approval of the DIP Financing Agreement and 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. At the hearing on December 16, 2021, Harte Gold will also seek an extension of the Stay Period to March 31, 2022.

Earlier today, the Toronto Stock Exchange (“TSX“) suspended trading of Harte Gold’s common shares and has put the Company under delisting review under its expedited review process. The TSX has advised the Company that a meeting has been scheduled for December 15, 2021 to consider whether or not to delist the securities of the Company.