Drill Tracker Weekly: Klondex Drilling Tests Historic High-grade Zones Outside Existing Reserves at Midas

Drill Tracker Weekly is not exclusive to Resource Investing News and is published with permission from Mackie Research Capital Corporation. It highlights drilling results in context with our database of over 10,000 drilling and trenching results. The purpose of this report is to highlight drilling and trenching results that stand out from the pack and compare them to their peer group. This report does not constitute initiation of coverage or a recommendation.

Klondex Mines (TSX:KDX)

Price: $2.70

Market cap: $303 million

Cash estimate: $43 million

Project: Midas

Country: Nevada, US

Ownership: 100 percent

Resources: proven and probable reserves of 242,000 tonnes at 18.8 g/t gold

Project status: mining since 1988

• Klondex Mines announced results from infill and step-out drilling at the 100-percent-owned Midas mine in Northern Nevada. Klondex acquired the Midas mine and mill facility from Newmont Mining (NYSE:NEM) for US$55 million in cash, 5 million warrants and the assumption of a US$28-million reclamation bond. The mine and mill is fully permitted with three years of tailings capacity; an expansion permit is expected in Q3 2015. Franco-Nevada (TSX:FNV,NYSE:FNV) holds a 2.5-percent net smelter royalty (NSR) starting in 2019.

• Highlights from underground drilling include 1.5 meters grading 280.3 g/t gold and 2.1 meters of 41.6 g/t gold in the 505 vein (uncut). Additional drilling in the 905 vein intersected 1.3 meters grading 108.3 g/t gold. The objective of the current 7,600-meter underground drilling program is to test gaps in the existing reserve and follow up on historic drill results from additional vein systems outside of the current resource outline.

• The Midas mine currently has proven and probable reserves of 242,000 tons grading 18.8 g/t gold with a remaining mine life of 2.8 years. In Q3 2014, the mine reported production costs of US$613 per gold equivalent ounce.

• The acquisition of the Midas mill provided Klondex with a path to a relatively quick start up for its 100-percent-owned Fire Creek project, located 180 kilometres to the south. The 90-percent-permitted Fire Creek deposit has proven and probable reserves of 185,800 tons grading 1.3 ounces per ton gold (44.6 g/t gold equivalent). Shipping costs between Fire Creek and Midas are expected to be $34 per ton ore. The total operating costs for Fire Creek are projected at $492 per ounce gold net of silver by-product.

Development history (Newmont 1998 to 2013): past production at Midas mine of approximately 2 million ounces gold; Klondex acquired the Midas mine and mill facility in December 2013 for US$83 million

Current holes: 1.5 meters at 280.3 g/t gold; 2.1 meters at 41.6 g/t gold; 1.3 meters at 108.3 g/t gold

Risks Analysis

Data contained in DRILL TRACKER WEEKLY is based on early stage exploration activity. The results are obtained at the very early stages of exploration and therefore, individual results may not be reproducible with additional trenching or drilling, nor may the results ultimately lead to the discovery of an economic deposit. Delineation of a resource body requires an extensive data gathering exercise according to guidelines set out in National Instrument 43-101 before investors can be reliably assured of a competent body of mineralization that may be of economic interest. DRILL TRACKER WEEKLY is designed to highlight individual trench or drill results, which stand out as being materially anomalous and are particularly worth of note – a type of early warning flag for a particular property that warrants further attention. Hence, DRILL TRACKER WEEKLY does not provide a recommendation to buy, sell or hold a specific equity – it is an information reference source to help quantify the meaning and relevance of early stage exploration results. 

Relevant Disclosures Applicable to: Drill Tracker Weekly

1. The research analyst or a member of the research analyst’s household owns and/or has options to acquire shares of the subject issuer. At the date of this release the author, Wayne Hewgill, owns shares in the following company: Fission Uranium Corp. (TSX.FCU)
2. Integra Gold Corp. (ICG) is currently under coverage at Mackie Research Capital by analyst Peter Campbell
3.  In March 2014, Peter Campbell visited the Lamaque Gold Project in Val-d’Or, Québec. Travel to and from the site in Val d’Or were paid by Integra Gold Corp. 

Analyst Certification

I, Wayne Hewgill certify that the information in this report is sourced through public documents that are believed to be reliable but accuracy and completeness as represented in this report cannot be guaranteed. The author has not received payment from any of the companies covered in this report. This report makes no recommendations to buy, sell or hold. Each analyst of Mackie Research Capital Corporation whose name appears in this report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the analyst’s personal views and (ii) no part of the research analyst’s compensation was or will be directly or indirectly related to the specific conclusions or recommendations expressed in this research report. 

Editorial Disclosure: Klondex Mines is a client of the Investing News Network. This article is not paid-for content.