HAR to acquire USA gold project, gold processing plant in heart of the famous US gold rush

Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 7,025,000 HAR shares and have $40,000 Invested in a HAR Convertible Note. Some shares are subject to approval in an upcoming EGM. The Company has been engaged by HAR to share our commentary on the progress of our Investment in HAR over time.

175 years ago, there was a huge gold rush on the west coast of the United States that transformed the country into an economic powerhouse.

In fact the term "gold rush" itself likely originated from the California Gold Rush of 1848-1849...

The “OG” gold rush.

~100 hours ago, US President Donald Trump signed an Executive Order that made gold production in the USA a strategic priority.

This morning our Investment Haranga Resources (ASX:HAR), announced that it is acquiring 5.8km of an exceptionally high-grade part of a gold belt...

The richest section of the famous “Mother Lode” belt.

The Mother Lode is known for its high grades and for being at the centre of the famous California Gold Rush.

There are multiple gold deposits here that are open along strike and at depth for HAR to go after.

The deal comes with a 100% owned built and permitted 350kta gold processing plant, an 880m decline (the tunnel that goes underground to get to the gold), plus offices and a workshop.

In total it's over $90M of sunk capital.

Ready for HAR to (hopefully) discover some more high grade gold and monetise it.

Many of the surrounding historic mines produced millions of ounces of gold down to 1.7km underground.

HAR’s first priority is to drill test a 286k ounce gold resource at 9.29g/t (non-JORC) that has only been drilled and mined up to 150m deep.

It’s good timing for a new, advanced gold project given Trump’s recent Executive Order prioritising gold mining in the USA and gold trading above record prices of US$3,000/oz.

Post-transaction and associated capital raise, HAR will be capped at $15M with $6M in performance shares on issue (at 5c).

HAR will have just over $5M in the bank and most of the project vendor shares will be escrowed for 4-6 months (more on the deal terms later).

We are putting cash into the HAR placement because we want to see the company define a >1M ounce JORC resource here.

(and because precious metals in the USA is currently one of our favourite thematics - in case you couldn’t tell)

Also, if HAR can make some new deeper gold discoveries they will already have a fully permitted, 100% owned gold processing plant (over $90M invested in mine infrastructure to date):

HAR’s current resource is based on drilling down to depths of only ~150m.

Most historic mines nearby go much deeper than this.

One of the deepest mines in the district has historical production of 2.83M oz of gold down to depths >1,500m.

We are backing HAR to drill down at depth and try to increase its resource to >1M ounces.

As part of this deal, HAR is acquiring the Lincoln gold mine, which sits on a granted Conditional Use Permit.

(This permit is very important, we’ll touch on this later)

HAR’s project is in Amador county - one of the epicentres of historical California gold production - this is a county that has produced at least 6.3M ounces of gold (from 1880 through 1959, excluding the first ~30 years of mining in the area). (Source)

Inside the ~6km of strike HAR will control there has been historic gold production of ~3.4M Oz.

HAR’s project currently has a non-JORC 286k ounce gold resource at 9.29g/t of gold.

(And there is at least up to ~682k ounces of gold that HAR thinks could be there based on data from back in 2008)

(Source)

Luckily for HAR, the plant is fully permitted which puts HAR in gatekeeper status on other resources in the region being developed.

We think HAR could potentially use the permit and mill as a bargaining chip to scoop up smaller deposits in the region.

With the gold price at record highs and especially gold in the USA now of interest (even to the very top levels of US government), we think HAR’s project can finally attract the capital it needs to get the processing plant up and running again.

Post-transaction and associated capital raise, HAR will be capped at $15M with $6M in performance shares on issue (at 5c), with ~$5M in the bank.

A key part of the deal we liked was that HAR pays for the asset almost exclusively with shares (~60M shares and 120M performance options).

AND almost all of the shares (and performance options) are escrowed for 4-6 month periods.

The escrows are good, because it will give HAR time to deliver strong newsflow and hopefully build some momentum in its share price without any weight on the company’s share price.

We are putting $200k cash into the capital raise, Increasing our position in HAR.

The transaction is getting voted on in the coming weeks and following that we will put out our customary Investment Memo on the stock.

Today’s deal changes HAR’s operations in a big way and we think the gold project will be the primary focus for HAR going forward.

So given the change in focus, we will put out an updated Investment Memo once the deal is settled.

In that memo we will lay out the reasons why we hold HAR, what we want to see the company achieve and the risks to our Investment.

In the meantime here is what we will cover about today:

• The 8 reasons why we Increased our Investment in HAR
• How we think HAR can grow its resource closer to 1M ounces of gold
• More on the Californian gold rush
• Our take on the deal terms
• What we want to see next from HAR

The 8 key reasons we Increased our position in HAR:

1. Gold macro thematic is very strong right now, especially in the USA.

The US$ gold price recently broke out into all time highs above US$3,000 per ounce and is setting new highs every day.

Gold demand in the US is also at record highs. For the month of January 2025, Australia delivered a record amount of gold to the USA. Gold is also being flown out of vaults in London, into New York to satisfy the US demand.

We think gold explorers/developers will do well in this macro environment.

1. The “Mother Lode” is in one of the most prolific gold producing jurisdictions, ever

HAR’s project is in Amador county - one of the epicentres of historical California gold production - this is a county that has produced at least 6.3M ounces of gold.

California in general has produced over 115M ounces of gold and was the centre of one the biggest gold rushes in history.

Back in the late 1840s the world descended on California in search of gold.

HAR will now own 100% of a ~6km trend where there has previously been ~3.4M ounces of gold production in the past.

1. High-grade gold resource with expansion potential

HAR’s project area has a current non-JORC 286k ounce gold resource at 9.29g/t of gold.

In today’s announcement, HAR showed us that there are actually ~682k ounces of non-JORC resources sitting inside its project area so we can see how the resource could grow quickly...

1. Exploration upside - target to grow to >1M ounces of gold

Many of the mines in the region have produced gold down to depths of up to 1,700m.

HAR’s resource is based on drilling down to depths of ~150m.

We think that with some drilling (and luck), HAR can grow its resource beyond the current 286k ounce number.

1. Permitted processing plant with district scale consolidation opportunity

HAR holds a Conditional Use Permit (CUP) for its 350ktpa processing plant.

The CUP means HAR can operate its project without having to go through a lengthy permitting process.

Permitting in California can be a 15+ year process and so this puts HAR in a strong position to leverage its permits to potentially “roll up” regional opportunities.

California’s permitting landscape has historically been challenging, but HAR’s Lincoln Mine acquisition avoids many of these obstacles by already holding key approvals.

AND, anyone who wants to monetise their resources in the area will likely have to speak to HAR.

(Source)

1. $90M has been invested in the project to date, including a 350ktpa processing plant

Over A$90M has been invested into the project to date including into a 350ktpa processing plant which was built in 2012-2014.

This is a BIG mine complex that little HAR has managed to get its hands on:

1. Conventional, simple metallurgy with high recovery rates.

The project is also technically de-risked from a metallurgical perspective. Previous metallurgical test work showed recoveries ranging between 64-99% using fairly common processing methods.

When it comes to metallurgy, simplicity is key.

HAR’s project is a well understood style of mineralisation which has been mined and processed for many decades.

1. HAR’s geology is well understood by the mining industry and the ASX market

ASX / Australian investors know this type of high grade vein mineralisation well and would know how to mine/value it accurately.

One of the most profitable mines in the world is the Fosterville mine in Victoria which is a similar deposit style geologically to the type of gold HAR is chasing.

We think that the market will be more open to re-rating HAR if a big enough resource is proven because of the listed examples of successful companies that have worked on this style of geology.

HAR appears to be putting its uranium ambitions on the back burner for now.

And as we mentioned above, HAR has picked a pretty good time to be acquiring an advanced stage gold project with a built and permitted processing plant in the USA.

The gold price hit all time highs again this week >US$3,000/oz and it looks like it wants to keep running.

Gold demand out of the world’s biggest economy is as high as it’s ever been.

In January, the US purchased US$2.9BN in gold from Australia, the most in a single month on record...

Gold is literally getting flown out of vaults in London (on actual airplanes) to keep up with US demand.

Roughly a month ago we noticed a sudden increase in mentions of gold by ultra high profile figures with hundreds of millions of social media followers - the likes of Donald Trump, Elon Musk, Tucker Carlson. (Read that weekend edition here).

We still don't know exactly why the US is suddenly so interested in gold.

AND as we mentioned above, there was some pretty big breaking news last Friday morning...

Trump signed an executive order to “increase American mineral production” and explicitly mentioned GOLD in the order:

(You can read the entire Executive Order here)

The US appetite for gold is definitely increasing.

And we think there is a good chance projects based in the US will start to become of more interest to the market.

While regulations and permitting may not sound sexy, HAR’s appeal as a US based gold investment hinges on a key bit of permitting.

We mentioned earlier that HAR’s project sits on a granted “Conditional Use Permit”.

This is like gold itself when it comes to mine permitting.

Conditional Use Permits were granted back in 2007 and are in good standing into perpetuity.

That means HAR is fully permitted to operate its plant for up to 315,000 tonnes per year (with the ability to increase that with new applications).

This permit is an absolutely crucial element for HAR’s project.

With this permit in hand, we think HAR could leverage its fully permitted mill as a bargaining chip to scoop up smaller deposits in the region.

A regional “roll up” might be on the cards here if all goes well.

HAR’s project is in Amador county - one of the epicentres of historical California gold production - this is a region that has produced over 35 Moz of gold.

In Australia in primary school we were taught about the Victorian gold rush and the riches it brought Australia, starting in 1851.

Meanwhile in the US, kids learned about the Californian gold rush which started in 1849... (more on this later)

From 1849 to almost a hundred years later, mining continued in Amador county where HAR’s new ground sits.

Millions of ounces were produced, but suddenly it all stopped in the middle of World War 2.

It wasn’t reserve depletion though - mining labour had to be urgently shifted to factories to support the war effort.

And herein lies what we think is the big opportunity for HAR...

HAR’s project currently has a non-JORC 286k ounce gold resource at 9.29g/t of gold.

(that’s seriously high grade, considering most resources are in that 1-4g/t range nowadays)

AND this ground hasn't seen any deep modern exploration on it for decades.

In fact, the current resources were “blind discoveries”, meaning there was hardly any subsurface targeting work done.

With modern geophysics we think the odds of exploration success could be a lot higher.

One of the deepest mines in the district has historical production of 2.83M oz of gold down to depths >1,500m.

HAR’s current resource is based on drilling down to depths of only ~150m.

We are backing HAR to drill down at depth and try to increase its resource to >1M ounces.

The main thing we want to see HAR focus on in the short term is proving up the current resource into JORC compliance.

AND then drilling testing the project at depth.

We noticed in today’s announcement that from what HAR knows already, there is at least ~682k ounces of non-JORC compliant resources HAR is already aware of:

Once we know how much gold sits below its Lincoln Mine, later HAR also has the optionality of switching its focus on regional consolidation.

Our Investment on HAR is essentially a bet that the company can drill deeper and add size/scale to its resources.

We’ve summarised that enticing prospect in the image below:

Does history repeat? The Californian Gold Rush

When people think of Northern California, they usually think of San Francisco’s Golden Gate Bridge and the glistening buildings of Silicon Valley where many of the world’s largest tech companies operate.

Trillions of dollars of wealth have been created in the tech industry in this state.

But lately, we’ve noticed some of our favourite Silicon Valley investors are suddenly loving gold as an investment right now.

Maybe, these “tech bros” will start looking at what’s in the ground in their own backyard (California).

Will President Trump’s Executive Order last week be the start of the California Gold Rush of the 2020s?

In the foothills of the Sierra Nevada mountains, inland from San Francisco, and roughly ~50kms to the east of California’s capital Sacramento, history might repeat.

Indulge us for a moment as we transport you back in time to the mid-1800s in the US...

(This history is actually super important to understanding the still untapped potential of HAR’s proposed new project)

The story starts in a place called Sutter’s Mill in 1848, just 50kms to the north of HAR’s project.

A chance encounter with a shiny metal, suddenly became a global obsession.

When gold was initially found at Sutter’s Mill in 1848, it set off an immense rush that brought hundreds of thousands of prospectors to the Sierra Nevada foothills (this is California’s major mountain range), particularly to where HAR’s project sits in Amador County, and surrounding regions.

In the space of a year, the gold rush transformed San Francisco into a booming city filled with makeshift tent-houses, hotels, stores, saloons, gambling halls, and shanties.

By 1849, as the gold rush fever swept through the country, the city's population exploded.

San Francisco erupted into a chaotic, glittering metropolis almost overnight, swelling from a sleepy coastal village to a wild, lawless frontier city teeming with fortune seekers, gamblers, and outlaws.

Gold poured in from the Sierra foothills, turning the port into a frenzy of commerce where clipper ships sat abandoned as their crews dashed inland to strike it rich.

Meanwhile, Sacramento rose from the riverbanks as the gateway to the goldfields, its muddy streets lined with makeshift saloons, bustling supply depots, and roaring camps where dreams were made and broken in the blink of an eye.

The California Gold Rush of 1849 completely transformed the American West, creating (for the lucky few) sizable fortunes.

Towns like Jackson, Sutter Creek, and Plymouth (just 10kms to the north of HAR’s project), quickly became key mining hubs.

Initially though, the gold prospecting looked like this poor fellow:

(Source - Wikipedia)

People like those seen in the image above were referred to as “Forty-Niners” (yes, this is where the American football team from San Francisco got their name).

The Forty-Niners were prospectors and fortune seekers who flocked to California in 1849 following the discovery of gold at Sutter’s Mill the previous year.

These early prospectors were a mix of Americans, Europeans, Latin Americans, and Chinese immigrants who all endured harsh conditions and lawless boomtowns in a relentless pursuit of gold.

With rich hard-rock deposits littered throughout places like Amador county where HAR’s project sits, smaller scale river bed mining was later followed by deep underground operations:

(Source)

This is a photo of HAR’s current project, the Lincoln Mine from 1900, 125 years ago.

Now, 125 years later after this photo, HAR has secured a foothold in one of the most storied gold districts in history: the legendary Mother Lode at Sutter Creek.

Again, here is what the mine and processing plant looks like today:

HAR’s Mother Lode deposit has been at the heart of California’s gold mining history since the first major discoveries in the mid-1800s.

By the late 1800s, the Mother Lode had solidified its place as one of North America’s most productive gold belts, yielding millions of ounces from high-grade quartz veins.

While the gold miners’ focus later shifted to Nevada’s Carlin-type deposits (we have two Investments in Nevada, SS1 and JBY), the Mother Lode remained a consistent source of gold, albeit at a smaller scale through to the middle of World War 2.

These mines where HAR’s ground sits were not abandoned because of reserve depletion, but because labour was needed to craft weaponry and supplies for the WW2 war effort.

Which means there could be plenty left below ground, if HAR can just test areas in the Mother Lode below 150m...

There’s a connection between California’s gold frenzy and a similar event that took place in Australia too...

The history of the Mother Lode reminds us a lot of what happened in Victoria here in Australia which saw its own gold rush beginning in 1851, just a few years after California’s.

In fact - many Californian “Forty Niners” eventually ended up in Australia...

(Source - Wikipedia)

The Victorian goldfields, like the Mother Lode, are characterised by high grade quartz vein mineralisation.

So Australians and ASX geologists should understand HAR’s new Mother Lode quite well from an investment and historical perspective.

But despite the long history of mining in Amador County where HAR will be focussing its efforts, much of the Mother Lode remains underexplored with modern geological methods.

Again, mines along the Jackson-Plymouth segment historically extended to depths of nearly 2,000 meters, but much of the HAR’s area has yet to be systematically drilled below 150 meters.

It's a rich domain in which HAR will soon go hunting for a new, now strategically important gold deposit.

What is HAR paying for the project?

There are a few moving parts to the deal terms that caught our attention.

There is an upfront payment, performance milestones and a few debt conversions that are all being settled in HAR shares.

The main thing we liked about the deal structure is that almost all of the shares being issued to purchase the asset come with mandatory escrow periods.

(Escrows meaning the vendors aren't able to sell the shares on market for a specified period of time).

Here is a brief overview:

1. Upfront payment (40,000,000 HAR shares) - escrowed for 6 months from the issue date with only ~$500k (10M shares) able to be traded for the first 6 months.
2. Performance shares (120,000,000 HAR shares) - escrowed for 4 months from the date the performance milestones are met and shares are issued. All four of these seem relatively achievable, especially the first three which we think could all be achieved inside a ~12 month period.

1. Settlement of the private companies debts (19,300,000 HAR shares) - escrowed for 6 months from issue.
2. Facilitation fee (10,000,000 HAR shares) - escrowed for 4 months from issue.

We also noticed that as part of the deal, there were vendor royalty/debt deals that were restructured:

1. A US$1.5M offtake debt - which HAR converted into a 0.5% net smelter royalty. HAR has the option to buy that back for US$1.75M within 24 months.
2. A US$8.9M deferred payment - this one is tied to production milestones, so HAR won't have to make any payments until its project is back in production. HAR said today it would look to re-cut this deal, so we we will wait to see more from HAR on this in the coming months.
3. A 1.5% Net Smelter Royalty debt - HAR restructured the terms for this one so that when the US$1.453M in debt is repaid, the royalty reduces to 0.75%.

At a very high level, HAR is paying ~A$9.5M for the acquisition (189.3M shares at 5c) and will assume ~US$10.53M in debts tied to offtake/royalty deals.

What we want to see next from HAR next

In the short term, the key piece of news will be seeing HAR complete its acquisition.

The acquisition needs to go to shareholders for approval and will likely be voted on in May 2025 at a shareholder meeting.

Beyond that, once HAR is in control of the project, we want to see:

1. HAR convert its current non-JORC 286k ounce gold resource at 9.29g/t of gold into a maiden JORC resource estimate for the project.
2. Start drilling to try and extend the resource to the east/west and hopefully make new discoveries at depth.

1. Complete the acquisition of the US gold project

Milestones:

✅ Capital raise

🔄 Shareholder vote to approve the transaction

🔲 Transaction completed

2. Maiden JORC resource estimate & drilling to start

Milestones:

🔲 Maiden JORC resource estimate

🔲 Drilling commences

What are the risks in the short term?

The main risk in the short term is “deal completion risk”.

HAR will need to get shareholder approvals to complete today’s acquisition.

That means HAR will need to get a 50.1% + vote approving the deal.

There is always a risk that the deal gets voted down or falls over during the due diligence process.

If the deal were to fall over, then we would expect the HAR share price to be impacted negatively.

Once the transaction is complete, we will put out a detailed Investment Memo, which will list more of the risks to our HAR Investment.

Be on the lookout for that in a few weeks time.