Klondex Announces a Reduction in Underground Operations and Workforce at True North and Executive Management Change
January 09 2018 - 6:35PM
Klondex Mines Ltd. (TSX:KDX) (NYSE American:KLDX)
(“Klondex” or the “Company”) today announced a change in operations
in Canada, which includes the immediate reduction of underground
mining operations and workforce at its True North mine in Manitoba,
Canada.
Following an extensive review of recent
operational performance at True North, the Company has decided to
limit underground mining to areas already developed. Once these
areas are depleted, underground mining will be suspended. The
decision was largely based on the site’s inability to achieve
planned operating and cash flow metrics in 2017. Preliminary
full-year 2017 gold ounce production from True North is estimated
to be approximately 24,000 – 27,000 ounces, which is less than the
35,000 – 45,000 ounce range of the Company’s guidance.
The mine will be placed on care and maintenance
status after the developed areas are mined to review strategic
options and to provide optionality at higher metal prices. The
Company will continue to process tailings, as contained in its
reserve estimate, through the mill for the foreseeable future in
order to maximize cash flow and offset expected care and
maintenance costs. Going forward, Klondex projects annual
site free cash flow of $2 to $4 million at current metal price
levels assuming a processing rate of approximately 1,400 tpd from
tailings grading 0.035 Au/opt (1.20 Au/gpt) from April through
October, weather dependent. The average tailings grade processed in
2017 was approximately 0.05 Au/opt (1.71 Au/gpt). Additional
information regarding True North and Ogama-Rockland will be
discussed at the Company’s February 7, 2018 Investor Day in
Toronto.
The Company is encouraged by certain positive
operational improvements made and additional understanding of the
vein structures and mining methods gained during the past year.
This information will help Klondex better define future
alternatives. Infrastructure has been identified that needs
upgrading such as the chutes, automating the loading pocket and the
need to advance development. At the True North mine, the Company
had a successful drilling campaign in 2017 and expects to release a
new resource estimate in Q1 2018. In addition, the Ogama-Rockland
property, recently acquired through the Bison Gold Resources
acquisition, is approximately 30 kilometers from the mine and has
an inferred resource of 337,000 gold equivalent ounces. As we move
forward, we will assess the potential of processing ore from both
the True North mine and the Ogama-Rockland property through the
True North mill to improve the economics for our properties in the
region.
Mr. Paul Huet, President and CEO commented,
“Klondex is committed to creating shareholder value.
Following the True North acquisition, the Company implemented an
aggressive plan to start up production. We have extensively
evaluated our progress to date and have determined that it is in
the best interest of the Company and our shareholders to revise our
plans for the True North mine.” Mr. Huet continued, “We regret the
implications these actions will have on our workforce and other
stakeholders but must ensure the long-term sustainability of the
Company. True North and the recently acquired Bison Gold Resource
properties continue to be valuable assets and we are taking the
necessary steps to build the foundation for their long-term success
within the Klondex portfolio.”
Executive Management
ChangeKlondex announced today that John Seaberg, former
Senior Vice President, Strategic Relations, has left the
Company.
Mr. Huet commented, "John has been an important
part in the development and growth of the Company. On behalf of
everyone at Klondex, I thank John for his contributions, and wish
him the best in his new endeavors.”
About Klondex Mines Ltd.
(www.klondexmines.com)Klondex is a junior-tier gold and
silver mining company focused on exploration, development, and
production in a safe, environmentally responsible, and
cost-effective manner. The Company has 100% interests in four
producing mineral properties: the Fire Creek Mine, the Midas Mine
and ore milling facility, the Hollister Mine, all of which are
located in the state of Nevada, USA, and the True North Mine and
mill in Manitoba, Canada. The Company also has a 100% interest in
the Aurora mine and ore milling facility, also located in Nevada,
USA.
Contact: Mike
BecksteadDirector, Investor RelationsO: 775-284-5757M:
406-290-4165mbeckstead@klondexmines.com
Cautionary Note Regarding
Forward-looking InformationThis news release contains
certain information that may constitute forward-looking information
or forward-looking statements under applicable Canadian and United
States securities legislation (collectively, “forward-looking
information”). This forward-looking information entails various
risks and uncertainties that are based on current expectations, and
actual results may differ materially from those contained in such
information. These uncertainties and risks include, but are not
limited to, building a foundation for a successful long-term future
at True North; the Company working to facilitate future operational
flexibility by developing multiple ore sources for mill feed; the
financial benefit of the tailings allowing the True North operation
to be cash flow neutral while ongoing work is completed; changes to
provide the adequate infrastructure for the long-term success and
sustainability of the True North mine and mill; True North being
de-risked and in a position to realize its full operational
potential in the future; free cash flow estimates. Risks and
uncertainties about the Company’s business are more fully discussed
in the Company’s disclosure materials filed with the securities
regulatory authorities in Canada and United States available at
www.sedar.com and www.sec.gov, respectively. Readers are urged to
read these materials. Klondex assumes no obligation to update any
forward-looking information or to update the reasons why actual
results could differ from such information unless required by
law.
Non-GAAP Performance MeasuresWe
have included the non-GAAP measure “Free Cash Flow” in this press
release. Management uses Free Cash Flow as a non-GAAP measure
to analyze cash flows generated from operations. Free Cash Flow is
Net cash provided by operating activities less Expenditures on
mineral properties, plant and equipment as presented on the
Statements of Consolidated Cash Flows. The Company believes Free
Cash Flow is also useful as one of the bases for comparing the
Company’s performance with its competitors. Although Free Cash Flow
and similar measures are frequently used as measures of cash flows
generated from operations by other companies, the Company’s
calculation of Free Cash Flow is not necessarily comparable to such
other similarly titled captions of other companies. Klondex
has not reconciled forward-looking full year non-GAAP performance
measures contained in this release to its most directly comparable
GAAP measures, as permitted by Item10(e)(1)(i)(B) of Regulation
S-K. Such reconciliations would require unreasonable efforts at
this time to estimate and quantify with a reasonable degree of
certainty various necessary GAAP components, including for example
those related to future production costs, realized sales prices and
the timing of such sales, timing and amounts of capital
expenditures, metal recoveries, and corporate general and
administrative amounts and timing, or others that may arise during
the year. These components and other factors could materially
impact the amount of the future directly comparable GAAP measures,
which may differ significantly from their non-GAAP
counterparts.