Klondex Announces Fire Creek PEA Results, Including All-In
Sustaining Cash Costs of $636/oz Gold
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Apr 29, 2014) -
Klondex Mines Ltd. (TSX:KDX)(OTCQX:KLNDF) ("Klondex" or the
"Company") is pleased to announce the results of an independent
Preliminary Economic Assessment ("PEA") for its wholly-owned Fire
Creek Exploration Project ("Fire Creek" or the "Project") near
Elko, Nevada. The PEA was prepared by Practical Mining, LLC ("PM").
All figures are quoted in US dollars. The technical report
associated with the PEA will be filed on SEDAR within 45 days.
Fire Creek Project Estimates Highlights at $1250/oz
Gold: |
All-in sustaining (including Ag by-product) |
$636/oz |
Cash costs (including Ag by-product) |
$459/oz |
LOM estimate |
5 yrs |
Average LOM gold grade |
0.68 opt Au; 23.3 g/t Au |
Average LOM silver grade |
0.34 opt Ag; 11.7 g/t Ag |
Total production |
280k ozs Au; 139k oz Ag |
Capital costs |
$49.6 mm |
Pay-back period |
0.5 yrs |
After-tax cash flow |
$157.3 mm |
After-tax 5% NPV |
$141.5 mm |
Profitability Index (see definition:
http://www.klondexmines.com/s/definitions.asp) |
4.1 |
Note: The IRR could not be calculated because the cash
flow is positive in the first year and every succeeding year of the
project. |
Paul Huet, Klondex President and CEO, stated, "The Fire Creek
PEA represents a significant and encouraging milestone for Klondex.
The PEA details an initial mine plan with immediate positive cash
flows that have the potential to remain economic in low gold price
environments. We believe Fire Creek is a unique project, and what
sets it apart are the gold grades, short path to production, and
the substantial exploration upside. The PEA establishes that our
mining operation has the potential to be the cornerstone for our
growth for many years."
He continued, "Drilling in the past few years has been
constrained to surface and infill drilling for definition, within
7% of our land package. This year, we have allocated $9mm for waste
development and new drilling platforms to test new extensions of
our current veins and the potential for new discoveries,
particularly to the West and North Zones."
Assuming an average gold and silver price of $1,250 and $18 per
ounce, respectively, Fire Creek has an estimated $157.3 mm
after-tax cash flow, a $141.5mm after-tax net present value ("NPV")
at a 5% discount rate and a $128.3 mm after-tax NPV at a 10%
discount rate. The PEA cash flow is presented at the project level
and does not include obligations for servicing corporate debt.
The PEA is preliminary in nature and includes inferred mineral
resources that are considered too speculative geologically to have
the economic considerations applied to them that would enable them
to be categorized as mineral reserves. There is no certainty that
the preliminary economic assessment will be realized. Mineral
resources that are not mineral reserves do not have demonstrated
economic viability.
Mineral Resources
The PEA is based on a mineral resource estimate with an
effective date of December 31, 2013. The Fire Creek database used
for the mineral resource estimate includes 408 drill holes totaling
over 133,000 m (437,000 ft) and 1,120 channel and face samples and
is reflective of underground development work at Fire Creek during
2013 resulting in the processing of 8,007 tons of mineralized
material.
The PEA provides a basis to estimate project operating and
capital costs and establish a projection of the potential mineable
mineral resources including measured, indicated and inferred
categories in accordance with National Instrument 43-101. The
mineral resource estimate which forms the basis of the PEA is as
follows, at a 0.225 opt Au cut-off grade:
|
Measured |
Indicated |
Cut-off Grade (opt) |
Tons (000's) |
Gold (opt) |
Silver (opt) |
Cont. Gold (000's oz) |
Cont. Silver (000's oz) |
Tons (000's) |
Gold (opt) |
Silver (opt) |
Cont. Gold (000's oz) |
Cont. Silver (000's oz) |
0.15 |
22 |
1.67 |
1.08 |
37 |
24 |
308 |
0.85 |
0.64 |
263 |
197 |
0.20 |
22 |
1.68 |
1.09 |
37 |
24 |
248 |
1.02 |
0.73 |
253 |
180 |
0.225 |
22 |
1.68 |
1.09 |
37 |
24 |
213 |
1.16 |
0.80 |
246 |
171 |
0.25 |
22 |
1.68 |
1.09 |
37 |
24 |
200 |
1.22 |
0.83 |
244 |
166 |
0.30 |
22 |
1.69 |
1.10 |
37 |
24 |
175 |
1.36 |
0.88 |
237 |
154 |
|
|
|
|
|
|
|
|
|
|
|
|
Measured and Indicated |
Inferred |
Cut-off Grade (opt) |
Tons (000's) |
Gold (opt) |
Silver (opt) |
Cont. Gold (000's oz) |
Cont. Silver (000's oz) |
Tons (000's) |
Gold (opt) |
Silver (opt) |
Cont. Gold (000's oz) |
Cont. Silver (000's oz) |
0.15 |
331 |
0.91 |
0.67 |
300 |
221 |
904 |
0.52 |
0.37 |
470 |
334 |
0.20 |
270 |
1.08 |
0.76 |
290 |
204 |
705 |
0.62 |
0.42 |
439 |
299 |
0.225 |
235 |
1.21 |
0.83 |
284 |
195 |
627 |
0.68 |
0.45 |
424 |
281 |
0.25 |
222 |
1.26 |
0.85 |
281 |
190 |
576 |
0.72 |
0.47 |
413 |
269 |
0.30 |
197 |
1.40 |
0.91 |
275 |
178 |
473 |
0.82 |
0.50 |
387 |
236 |
- Notes: Mineral resources, which are not mineral
reserves, do not have demonstrated economic viability. The estimate
of mineral resources may be materially affected by environmental,
permitting, legal, title, socio-political, marketing, or other
relevant issues.
- The quantity and grade of reported inferred mineral
resources in this estimation are uncertain in nature and there is
insufficient exploration to define these inferred mineral resources
as an indicated or measured mineral resource. It is uncertain if
further exploration will result in upgrading such inferred mineral
resources to an indicated or measured mineral resource
category.
- Mineral resources have been estimated at a cut-off grade of
0.225 opt (7.7 g/t) calculated with a $1,250 per ounce gold price,
$18 per ounce silver price 94% gold recovery and 92% silver
recovery mineral resources include allowances of 5% mining
losses and 10% dilution.
Mine Planning
The Fire Creek mine plan assumes that a total of 439,000 tons of
material containing 297,300 ounces of gold and 150,800 ounces of
silver will be mined over the five year period. Key projected
production statistics are summarized below.
Fire Creek Mine Plan (contained ounces) |
Mineral Resource Category |
|
2014 |
2015 |
2016 |
2017 |
2018 |
Total |
Measured |
kt |
9.2 |
7.0 |
1.6 |
4.5 |
9.6 |
32.0 |
|
Au
koz |
11.8 |
5.1 |
1.9 |
8.5 |
13.0 |
40.4 |
|
Ag koz |
8.2 |
3.1 |
1.0 |
5.6 |
9.0 |
26.9 |
Indicated |
Kt |
34.3 |
65.5 |
62.3 |
32.8 |
16.2 |
211.1 |
|
Au
koz |
24.1 |
45.5 |
45.5 |
20.8 |
9.0 |
144.9 |
|
Ag koz |
15.0 |
27.6 |
25.2 |
9.7 |
5.5 |
83.0 |
Total M & I |
Kt |
43.5 |
72.5 |
63.9 |
37.3 |
25.8 |
243.1 |
|
Au
koz |
35.9 |
50.6 |
47.4 |
29.4 |
22.0 |
185.3 |
|
Ag koz |
23.2 |
30.7 |
26.1 |
15.4 |
14.6 |
109.9 |
Inferred |
Kt |
16.8 |
20.6 |
64.7 |
89.5 |
4.3 |
195.9 |
|
Au
koz |
9.4 |
14.1 |
32.3 |
50.6 |
5.6 |
112.0 |
|
Ag koz |
6.0 |
9.3 |
9.1 |
13.6 |
2.9 |
40.9 |
The Fire Creek PEA mine plan only includes mineral resources
within the veins which can be readily accessed from the existing
development platform. The majority of mineral resources in the
North Zone and all of the mineral resources in the Far North Zone
were not considered in the current mine plan due to the mine
development requirements for these zones. As additional exploration
information is gained, the mine plan may be extended to the north
to include these mineral resources.
Additionally, some of the mineral resources near the current
development platform are contained in veins of insufficient width
to meet cut-off grades when minimum mining widths are applied.
Alternative mining methods which reduce dilution and/or development
requirements should be investigated for the extraction of these
mineral resources.
Underground Mining
The proposed mining methods for Fire Creek will be any one or
more of the following: end slice stoping with delayed backfill,
also referred to as long hole stoping; cut and fill stoping; and
shrinkage stoping. The final choice of mining method will depend
upon the geometry of the stope block, proximity to main access
ramps, ventilation and escape routes, the relative strength or
weakness of the mineral resources and adjacent wall rock, and
finally the value or grade of the mineral resources. The choice of
mining method for individual stoping areas will not be made until
stope delineation and definition drilling is completed.
Metallurgy & Processing
Mined material from Fire Creek will be shipped to Klondex's
Midas Mill for processing. The Fire Creek material will be blended
with the Midas material prior to milling.
The Midas Mill was constructed in 1997 and has a nameplate
capacity of 1,200 short tons per day. The mill uses conventional
leach technology with counter current decantation followed by
Merrill Crowe precipitation. Doré is further refined at Johnson
Matthey refineries in Utah. Process toll milling has been performed
periodically since 2008. Historically, the gold recovery has ranged
from 92% to 97%, and silver recovery from 87% to 93%, depending
upon processing rates and ore types. Mill availability for the life
of the project is estimated at 95%.
Klondex began operating the Midas Mill on February 19, 2014 and
immediately began processing a blend of the Fire Creek and Midas
mineralized material at a rate averaging 25 tons per hour. At the
end of the first quarter of 2014, over 7,800 tons of Fire Creek
mineralized material was processed with gold and silver recoveries
calculated at 96% and 95%, respectively. Currently, the mill is
being operated at 50% of its capacity.
Capital Costs
Projected Life of Mine (LOM) constant dollar capital
expenditures are detailed in the table below. Mine development
comprises over 57% of total capital requirements, resource
conversion drilling 23% and mining equipment 11%.
Fire Creek Capital Costs (mm's) |
Category |
2014 |
2015 |
2016 |
2017 |
2018 |
Total |
Waste Development |
6.7 |
6.8 |
9.4 |
5.5 |
0.0 |
28.4 |
RIB Construction |
0.7 |
0.0 |
0.0 |
0.0 |
0.0 |
0.7 |
Site Facilities |
1.6 |
1.1 |
0.0 |
0.0 |
0.0 |
2.7 |
Environmental Assessment |
0.9 |
0.0 |
0.0 |
0.0 |
0.0 |
0.9 |
Mining Equipment |
0.4 |
2.2 |
2.0 |
0.9 |
0.0 |
5.5 |
Drilling |
2.3 |
3.0 |
3.0 |
3.0 |
0.0 |
11.3 |
Total |
12.7 |
13.1 |
14.4 |
9.4 |
0.0 |
49.6 |
Operating Costs
Projected operating costs are based on actual costs incurred to
date, internal estimates and costs from similar operations in the
area. Operating cost estimates are summarized in the following
table.
Fire Creek Operating Costs |
Category |
|
$/dry ton |
|
$/oz |
Mining Cost |
|
$ 169.74 |
|
$ 266.57 |
Surface Transportation |
|
$ 36.75 |
|
$ 57.72 |
Processing |
|
$ 40.00 |
|
$ 62.82 |
Site Administration and Overhead |
|
$ 13.67 |
|
$ 21.47 |
Refining and Sales |
|
$ 3.18 |
|
$ 5.00 |
Royalties Payable |
|
$ 8.84 |
|
$ 13.89 |
Nevada Net Proceeds |
|
$ 25.46 |
|
$ 40.03 |
Silver By-product Sales Credit |
|
$ (5.68) |
|
$ (8.93) |
Total Cash Cost |
|
$ 291.96 |
|
$ 458.57 |
|
|
|
|
|
Capital |
|
$ 113.01 |
|
$ 177.48 |
Total Cost |
|
$ 404.97 |
|
$ 636.05 |
Project Sensitivities
The project shows resilience to variances in gold price from
$750/oz Au up to $1750/oz Au.
After-tax NPV @ 5% Discount ($ mm's) |
Gold Price |
$750 |
$1,000 |
$1,250 |
$1,500 |
$1,750 |
NPV |
$32 |
$92 |
$141 |
$200 |
$256 |
Environmental
Klondex conducts mineral exploration activities in compliance
with all applicable local, state and federal environmental
protection legislation. Klondex is unaware of any existing
environmental issues or compliance problems which have the
potential to impact proposed production at Fire Creek. Klondex is
working closely with all regulators to ensure that the permitting
and compliance strategies are acceptable and minimize delays in
production or mine development. At this time, there are no
community or social impact matters associated with work being
completed at Fire Creek.
Future Permitting
Klondex is currently waiting for approval to an amendment to the
Plan of Operations and Reclamation permits (NVN-07976 and
reclamation permit 0028); this amendment will allow Klondex to
construct and operate two Rapid Infiltration Basins (RIBs) at Fire
Creek. Klondex received approval for the Water Pollution Permit for
construction and operations of the RIBs (WPCP2013102) in February
2014. Also, Klondex does not anticipate any delays or permitting
issues associated with acquiring the required permits for Fire
Creek full production. Klondex has initiated a baseline data
collection program to as part of anticipated future permitting
necessities.
Qualified Person
The technical information contained in this press release has
been reviewed and approved by Mark Odell (Nevada PE 13708 and SME
2402150) and Karl Swanson (SME 443076 and AusIMM 304871), who are
considered independent Qualified Persons as defined by Canadian
National Instrument 43-101.
About Klondex Mines Ltd. (www.klondexmines.com)
Klondex Mines is focused on becoming a leading integrated gold
producer. It is focused on the production, development and
exploration of its high quality gold and silver projects, including
its central 1200 tpd mill in North Central Nevada. The company is
operating an ongoing bulk sampling program at Fire Creek, and is
producing gold and silver on an ongoing basis from the Midas
Project, located ~100 miles north of Fire Creek.
Cautionary Note Regarding Technical Information and
Forward-looking Information
A production decision at the Midas mine was made by prior owners
of the mine, prior to the completion of the acquisition of the
Midas mine by Klondex. To the knowledge of Klondex, this production
decision was not based on a feasibility study of mineral reserves
demonstrating economic and technical viability prepared in
accordance with National Instrument 43-101 but was based on
internal studies conducted by the prior owner of the mine. Klondex
has no reason to believe that the data on which such studies were
based or that the results of such studies are unreliable. However,
readers are cautioned that there is increased uncertainty and
higher risk of economic and technical failure associated with such
production decisions.
This news release contains certain information that may
constitute forward-looking information under applicable Canadian
securities legislation, including but not limited to information
about current expectations on the timing and success of
exploration, development and metallurgical sampling activities, the
timing, extent and success of mining operations, the Company's
intention and ability to monetize mineralized material, the
successful execution of the bulk sampling program at the Fire Creek
Project, project development and related permitting, the results of
economic analyses in respect of the Fire Creek Project (including
those contained in the PEA), the extension of the proposed mine
plan beyond the existing development platform at the Fire Creek
Project, the ability to expand mineral resources beyond the current
mineral resource estimate at the Fire Creek Project, estimates of
gold and silver prices, estimates of costs, and estimates of mine
development and construction. 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, the strength of the global
economy; the price of gold and silver; operational, funding and
liquidity risks; the degree to which mineral resource estimates are
reflective of actual mineral resources; the degree to which factors
which would make a mineral deposit commercially viable are present;
the risks and hazards associated with underground operations; and
the ability of Klondex to fund its substantial capital requirements
and operations. 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 available at www.sedar.com. 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.
Klondex Mines Ltd.Paul HuetPresident &
CEO775-284-5757investors@klondexmines.comKlondex Mines Ltd.Alison
TullisManager, Investor
Relations647-233-4348atullis@klondexmines.com
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