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Klondex Mines Ltd: THE INVESTMENT CASE

Klondex Mines has irons in Fire Creek and more

This year saw the Nevada-focused firm put its third mine into production
Klondex Mines has irons in Fire Creek and more
INVESTMENT OVERVIEW: KDX The Big Picture
Klondex has mining assets in Nevada

Gold and silver producer Klondex Mines Ltd (TSE:KDX, NYSE:KLDX) still has plenty of irons in the fire and 2016 saw it continue to grow its cash and assets.

The Nevada-focused firm put its third mine into production and repeated its full year output guidance for the 2016 year to end December.

It also saw a resource upgrade and continues to see good exploration success, which bodes well for future production success.

Fire Creek, Midas Mine and True North all producing

Klondex owns 100% of two assets - the Fire Creek mine, and around 100miles away,  the Midas Mine and ore milling facility, both in Nevada, USA.

It also acquired the True North mining complex (previously Rice Lake in Manitoba, Canada) in January last year - an underground mining operation consisting of several underground narrow-vein gold deposits along with a mill to process up to 2,500 tons per day.

Recent drilling results excitingly showed two zones could host more mineralisation than is currently defined and may refine the 2017 mine plan.

The year also saw the miner complete its acquisition of the gold and silver Hollister mine, announced in July, which lies 18miles south east of the Midas mine and where an underground resource is expected to be released in second quarter of 2017.

A boost to reserves and resources in Nevada

Its mid-tier mining company goal was further boosted in September by a reserve and resources upgrade for the Nevada assets.

Klondex revealed that the total proven and probable reserve (economically feasible to exploit) had increased 5% from 444,000 gold equivalent ounces  (AuEq) to 468,000 ounces. The resource for the Fire Creek and Midas Mine also headed north.

Indeed subsequently, in November, there has been a further drilling success at Fire Creek subsequent to the upgrade, where intersections included three metres of 18.01 g/t gold.

Income from operations doubled

Results from the firm's third quarter to end September underscored the progress, at a time when the outlook for precious metals is  on the upswing. It also showed the impact of the addition of first gold from the True North mine.

Net income rose to $7.21mln in  the quarter, compared to $4.12mln in the same period a year ago.

Revenue was also lifted to $53mln, up from $38mln a year ago, while the cost of sales edged up but income from operations more than doubled to $13.1mln from $6.4mln.

In terms of cash, following a C$129.5mln equity offering, the cash balance was $131.1mln and working capital $119.9mln.

Broker Rodman & Renshaw repeated a 'buy' and lifted the price target to $6.25 a share, due mainly to lowering estimated cash costs at Fire Creek.

True North should become the next operating asset, says broker

"We highlight that in 3Q16, first gold was poured at the Truth North Gold Mine through the processing of existing tailings. The firm now estimates 2016 production from the site of 8,000 to 12,000 ounces, while we expect a positive production decision for the site.

"We note that Klondex released an updated resource estimate for the mine and a positive production decision with preliminary operating parameters estimating production of 45,000-65,000 ounces of gold at all-in sustaining costs of C$950-C$1,050 per ounce.

"Given that capital requirements to bring the project back into production are estimated at just C$15-C$25 million, we think True North should be moved forward in short order following an updated resource estimate in early 2017," said analyst Heiko F. Ihle.

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Klondex Mines Ltd Timeline

Article
November 16 2015
Newswire
October 05 2015
Newswire
September 10 2015

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