Gold and silver producer Klondex Mines Ltd (TSE:KDX, NYSE:KLDX) has plenty of irons in its fire and 2016 saw it continue to grow its cash and assets, while it expects to lift output by 36% in 2017.
The Nevada-focused miner put its third mine into production last year and met its cost and production guidance in 2016.
The fiscal year just gone also saw a resource upgrade and the group continues to see good exploration success, which bodes well for future production.
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.
At the end of January, Klondex revealed it had made a “significant new discovery” at True North that could materially add to estimated resources at the project.
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 last year 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.
Nevada exceeds expectations
Klondex produced a record 151,007 gold equivalent ounces from its Nevada operations last year, exceeding the high end of management's expectations.
Cash costs per gold equivalent ounce sold were $637, and were within the expected range of between $600 and $650 per ounce.
In 2016, the firm sold a record 159,118 gold equivalent ounces - 19.4% higher than the previous year, consisting of 138,516 gold ounces and 1,470,992 silver ounces.
Revenue was a record at $198.2mln from average selling prices per gold and silver ounce of $1,245 and $17.44, respectively. The net loss for the year was $1.7mln.
Focused on organic growth
The company says its near-term strategy is focused on organic growth.
"We expect to produce between 210,000 and 225,000 gold equivalent ounces in 2017, an increase of approximately 36 per cent from the prior year," said Paul Huet, chief executive in the recent results statement.
Expected cash costs will be a little higher at $680 to $710 per gold equivalent ounce sold.
The higher output expected for 2017 is put down to bulk sampling extraction at the Hollister mine in Nevada, as well as higher production from True North mine in Canada, as ramp-up continues.
Meanwhile, Fire Creek and Midas's 2017 production is expected to be in line with the prior year.
Capex is expected to be between $57-million to $62-million with an additional $3-million to $5-million to be spent on exploration.
Most of the cash is expected to be spent at Fire Creek as the company continues underground expansion in the form of primary access development and advancement of a second portal.
"The company also expects to spend $7-million to $9-million at the company's newly acquired Hollister mine in Nevada as it commences a bulk sampling mining program and underground definition drilling in the Gloria zone.
True North should become the next operating asset, reckons broker
In January this year broker Rodman said: : "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," it said.