Precious metals miner Klondex Mines Ltd (TSE:KDX, NYSE:KLDX) has had an encouraging few months and in July posted operating results for its second quarter, which it described as the "best in its history".
Other recent highlights include an initial mineral reserve estimate for the Hollister mine in popular mining jurisdiction Nevada and "highly encouraging" drill results from its True North gold mine project in Manitoba, Canada, which further expand the potential mineralisation there.
Broker Rodman & Renshaw repeated a 'buy' stance on the stock and targets C$6.25 a share, which is a nice distance from where they are now at C$4.
What does it do?
Klondex is a junior gold and silver miner, which owns 100% of the Fire Creek mine and the Midas mine and ore milling facility, both of which are in Nevada, USA.
It also owns all of the True North gold mine and mill in Manitoba, Canada.
It has also recently acquired 100% of the Hollister mine and the Aurora mine and ore milling facility - both in Nevada.
Well positioned to meet guidance after second quarter
When it posted second quarter operating results, the group said it was "well positioned" to meet its annual companywide production guidance of between 210,000 and 225,000 gold equivalent ounces.
It produced 66,629 gold equivalent ounces (GEO) - up 94% compared to the first quarter this year and sold 107% more - at 69,522 GEOs.
It processed all the ore stockpiled at the Midas mill at the end of the first quarter, and in the year to date, output was 101,019 gold equivalent ounces from Midas, Fire Creek and True North.
At Fire Creek, it produced 45,733 gold equivalent ounces. At Midas it produced 13,962 gold equivalent ounces. True North saw output of 6,911 gold equivalent ounces, up 82% from the first quarter.
Meanwhile, at Hollister, the firm produced 7,069 gold equivalent ounces, which were stockpiled and expected to be processed at the Midas mill in the second half of this year.
True Gold drill assays point to expanding the resource...
Recent assays came from 104 underground holes totalling 19,576 metres, targeting the updip extension of the 710 zone from the 6,350 level and the downdip extension of the 710 and 710 footwall lens at the 32 level.
The firm already in May this year had upgraded the resource at True North. The total proved plus probable (2P) mineral reserve at the gold mine was put at 147,900 ounces of gold - a 25% increase on the previous estimate
Meanwhile, the probable tailings mineral reserve was put at 43,200 gold ounces at a grade of 0.75 g/t, contained within 1.95mln tons - an increase of about 33% from the previous estimate.
Maiden Hollister resource..
That was also recently put at an initial proven and probable (P&P) reserve at 199,500 tonnes at a grade of 19.9 g/t gold equivalent for a total of 116,100 gold equivalent ounces.
Approximately 44% of the proven and probable gold equivalent ounces came from the Hollister Main zone, while the remaining 56% came from the Gloria zone, noted broker Rodman.
Analyst Heiko F. Ihle highlighted that the estimate did not include any drill results from the Hatter Graben 2017 program, which began on June 17 this year and is expected to cover 20,000 feet.
"If successful, the company could potentially develop an inferred resource on the vein system as early as the end of the year," said Ihle.
What's it worth?
Rodman said its valuation for Klondex (C$6.25 a share) was based on an equally weighted composite of 14 times' the broker's estimates for 2017 CFPS (cash flow per share) and a DCF (discounted cash flow) of operations at Fire Creek, Midas, and True North.
"We utilize discount rates of 8% for the firm’s Nevada assets and 10% at True North, which we expect to revisit once a full year of production is achieved at the Canadian project.
"Further, we expect to include a DCF of Hollister into our model later this year once more information is gained with respect to their respective operating parameters in addition to the 2017 production guidance," it said.