Case Study? Is Harte a case study? Were there early indicators that might have provided hints about what was coming? Are there lessons to be learned here that might make me a better investor in the future?
To me, the problems started with a geologist trying to take a project into production. It was the problem of the dentist changing his brakes: he was acting outside his core competencies and the results might be problematic. It takes three completely different skill sets to 1) find a mine, 2) develop a mine, and 3) operate a mine. Not to say someone can't successfully lead a group through all three stages, - some people are broadly competent, and others know where they are lacking and how to surround themselves with competent people to cover those areas. Still, a project is more likely to successfully transition into production if it's being led by someone who has done it before. I think all the problems at Harte are various manifestations of that one basic problem.
Trying to get to production without a feasibility study was another early red flag. There is a reason the normal path goes through a preliminary economic estimate, followed by a pre-feasibility study, with various increasing resource estimates along the way, followed by a feasibility study, followed by a production decision, followed by permitting and financing, before construction. That feasibility study might cost you a million bucks, but skipping it is a false economy.
That million dollar feasibility study gives the financial guys comfort that they know exactly what you plan to do with their money, and how you're going to pay them back. Without it, the best financial institutions won't be interested at all, and the ones who are interested in lending you money will want higher interest rates, and other conditions (like hedges).
Without it institutional investors can't get a solid idea what's there and how it's likely to play out. So when you try to finance with equity you wind up getting low share prices, which means high dilution. Harte was a case of extreme dilution.
And without that independent study, retail investors can't double check the company's public relations spin. You can't always trust the “independent” guys the company pays to do these studies, but you can never trust the PR guy. It's his job to paint a rosy picture and he's been practicing it every day for years.
Again, that's not to say it can't be done in special cases. Minera Alamos (MAI) for instance, But that mine (similar oz/yr to HRT) cost a total of $10 million. It was financed with a third of the shares of HRT, and no debt, by a management team that has done it before.
Another early incident that seemed like an indicator of things to come was the re- financing. I may have the details wrong, but early on Sprott gave them a financing package which they took, and then a year or so later they paid Sprott off, with significant penalties, to re-finance with BNP. That screamed to me of leadership that really didn't know what they were doing in the financial game – babes in the woods. That incident was a precursor to several financial moves that kept getting worse and worse.
I'm sure there were other lessons to be learned here. Anyone want to contribute some?