Klondex Announces First Quarter 2014 Results
VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 13, 2014) -
- Reports 16,052 AuEq ounces recovered
- Successfully integrates Midas mine and mill into Company
operations
Klondex Mines Ltd. (TSX:KDX)(OTCQX:KLNDF) ("Klondex" or the
"Company") today announces it has filed its unaudited consolidated
financial results for the first quarter ending March 31, 2014. In
the first quarter 2014, the Company realized revenue from sales of
precious metals for the first time in its history through its
income statement. Klondex's full financial results for the first
quarter are available on SEDAR, at www.sedar.com, and also have
been posted on the Company's web site at www.klondexmines.com.
Dollar amounts are in Canadian dollars unless otherwise stated. A
conference call will be held tomorrow at 10:30 am EST; details are
at the bottom of this press release.
Paul Huet, Klondex President and CEO, stated, "In the first
quarter, we made significant progress with our strategy to build
Klondex into a leading integrated precious metals producer. In
February, we acquired and successfully integrated the Midas mine
and mill into Klondex's operations, providing a strong platform for
growth and creating value for our shareholders. We are pleased with
the acquisition of the Midas mine and mill and remain on track to
achieve free cash flows this year, and to process 43,500 AuEq
ounces from Fire Creek in 2014, as set out in our recently
announced independent preliminary economic assessment, in addition
to production from the Midas mine."
First Quarter Highlights |
|
Units |
Q1 2014 |
Gold equivalent production |
Ounces |
16,052 |
Total mineralized material mined |
Tons |
22,370 |
Recovery |
Au |
94.5% |
Recovery |
Ag |
94.3% |
Revenue |
$ |
2,626,573 |
Net Income (loss) |
$ |
(2,411,623) |
Cash |
$ |
7,638,711 |
Working Capital |
$ |
2,054,260 |
The table below summarizes the activity for the first quarter of
2014:
|
Gold Equivalent Ounces |
Recovered |
16,052 |
|
|
Distribution of produced ounces |
|
Fire Creek revenue (sold) applied to mineral properties |
2,438 |
Midas revenue (sold) |
1,849 |
Finished goods, dore & refined metal |
9,148 |
Work-in-process |
2,617 |
Total |
16,052 |
Financial Highlights
For the three months ended March 31, 2014, the Company received
payment of $3.3 million (US$3.0 million) from the sale of 2,439
ounces of gold delivered to the Midas mill in 2013. This amount was
reported as sale of mineralized material and credited to the
carrying value of Fire Creek mineral properties. The Company also
sold 930 ounces of gold and 58,053 ounces of silver from Midas that
were recorded as revenue. At March 31, 2014, the Company had
finished goods and work-in-process inventory of 11,765 gold
equivalent ounces which we anticipate will generate approximately
$15 million in cash flow for use in operations. Subsequent to the
quarter, in early April, the Company recorded revenue and received
payment of US$8.7 million for 6,620 ounces of gold sold under Fire
Creek's gold supply agreement for its March refined gold
production.
The production costs for the quarter were $1.7 million or $906
per gold equivalent ounce. Production costs per gold equivalent
ounce is a non-IFRS measure and is discussed below. The
depreciation and depletion costs were $1.7 million. The gross
profit was $0.7 million.
General and administrative expenses in the quarter were $2.2
million (2013 Q1 - $1.0 million). The increase in general and
administrative expenses was mainly due to an increase in employee
and share-based compensation (principally for additional
personnel), legal and regulatory expenses and other general
expenses associated with the growth of the Company from an
exploration stage company to one with two producing properties. The
Company recognized $1.9 million in business acquisition costs from
the purchase on the Midas mine and mill from Newmont, a $0.6
million gain on the fair value of a derivative related to a gold
supply agreement and $1.5 million in finance charges principally
related to financing agreements entered into for the acquisition of
the Midas mine and mill.
The Midas Project
After entering into a stock purchase agreement in December 2013
with Newmont Midas Holdings Limited, a wholly-owned subsidiary of
Newmont USA Limited, Klondex Holdings USA Inc., a wholly-owned
subsidiary of the Company, acquired the Midas mine and mill on
February 11, 2014. The purchase price of the acquisition was
approximately US$55 million in cash and the issuance by the Company
to Newmont USA of 5 million warrants to purchase common shares of
Klondex at an exercise price of $2.15, with a 15-year term, which
are subject to acceleration in certain circumstances. The Company
was also required to deposit approximately $28 million for
reclamation bonds to replace Newmont USA's surety arrangements with
Nevada and federal regulatory authorities. In addition, the Company
paid approximately US$3 million for a mining tax which was
associated with the acquired company.
The acquisition was funded by a three-part financing consisting
of a $42.6 million subscription receipt equity financing, a $25
million debt financing and a US$35 million gold purchase agreement
and royalty from Franco-Nevada Corporation. The 2.5% royalty to
Franco-Nevada will begin in 2019, after the gold under the gold
purchase agreement is delivered.
Midas Mine
Mineral and waste development at Midas totaled 334 m (1,098 ft)
and 268 m (880 ft), respectively, in the first quarter of 2014. The
Company extracted a total of 16,145 tons of mineralized material
containing 1,945 ozs Au and 182,622 ozs Ag in the quarter.
Midas Mill
The Company's Midas mill started operations on February 19,
2014. During the last five weeks of the quarter, the mill processed
13,961 tons of Midas material containing 1,726 ozs Au and 157,918
ozs Ag, and 7,766 tons of Fire Creek material containing 10,027 ozs
Au and 10,027 ozs Ag.
Gold and silver recoveries achieved for the quarter were 94.5%
and 94.3%, respectively. Total metal recovered from both the Fire
Creek and Midas operations was 13,545 ozs Au and 158,372 ozs Ag,
for a total of 16,052 ozs AuEq (63 ounces of silver :1 ounce of
gold).
Subsequent to the quarter, Klondex signed a toll milling
agreement with French Gulch Mining Corporation to process gravity
concentrates from the Washington Mine in California. The Company is
currently in discussions with other groups for additional toll
milling agreements.
Permitting
Required production permits at Midas have been maintained since
operations began in 1998. Klondex has begun to assess the options
for permitting a new tailings impoundment or expanding the current
tailings.
Exploration
The Company has initiated exploration drilling and underground
mining in the 7-4640 South area of the Midas Mine. The Company
began an underground exploration drilling program at Midas, in
March of 2014, to develop the southern portion of the eastern
veins. A total of 3,702 m (12,179 ft) of underground drilling was
completed during the first quarter, with assays expected in the
second quarter 2014.
Fire Creek Project
The Company continues to transition the Fire Creek Exploration
Project into a fully-permitted operation in 2015. Subsequent to the
quarter, Klondex announced the results of an independent
Preliminary Economic Assessment ("PEA") for its wholly-owned Fire
Creek project ("Fire Creek" or the "Project") near Elko, Nevada,
including expected all-in sustaining cash costs of $636/oz Gold
(see press release dated April 29, 2014).
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 PEA will be realized. Mineral resources that are not mineral
reserves do not have demonstrated economic viability.
Operations
The current bulk sampling program is expected to continue
throughout 2014, to evaluate mining methods and the metallurgical
characteristics of the Fire Creek material. Mineral and waste
development at the Fire Creek Project totaled 139 m (457 ft) and
189 m (621 ft), respectively in the first quarter of 2014. A total
of 66 m (218 ft) and 73 m (239 ft) of mineral development was
completed on the Joyce Vein and Vonnie Vein, respectively, in the
quarter. The Company extracted a total of 6,225 tons of mineralized
material, containing 6,244 ozs Au and 7,393 ozs Ag in the
quarter.
Subsequent to the quarter, Klondex announced that it began
initial drifting at Fire Creek Project on the newly discovered
Karen Vein, located 45.7 m (150 ft) west of the main decline,
parallel to the Joyce Vein and Vonnie Vein. As of May 5, 2014, 25 m
(82 ft) of exploration development had been completed along strike
of the Karen Vein. The weighted average grade of samples from the
Karen Vein was 74.9 g/t (2.18 opt) Au with an average width of 0.5
m (1.5 ft) (May 5, 2014).
Permitting
Currently, Klondex is operating Fire Creek under a small scale
mining permit which allows for the extraction of up to 120,000 tons
of mineralized material over a three year period. During the
quarter, full-production baseline investigations and data
collection continued.
The Rapid Infiltration Basins are expected to be permitted and
constructed during Q2 2014. The completion of the RIB will mark the
final construction project at Fire Creek.
Exploration
The Company continued underground infill drilling during the
first quarter of 2014, testing the continuity and extent of the
Joyce Vein and Vonnie Vein. In addition, underground drilling to
test the West Zone was completed from existing infrastructure.
Assays were announced May 5, 2014. A total of 2,788 m (9,171 ft) of
underground drilling was conducted in the first quarter.
The Fire Creek project continues to indicate the potential for
exploration upside, with exploration totaling only 7% of the total
land position. Klondex plans to fund a $5 million infill and
exploration drilling program with cash from operations.
Conference Call
Klondex will host a conference call on Wednesday May 14, 2014 at
10:30 am EST with representatives from senior management, to
discuss the results of the quarter and the recent Fire Creek
preliminary economic assessment.
Dial in numbers are as follows:
Canada and US: 1-800-319-7310
Toronto and International: +1-416-915-3227
Passcode: 42231#
Non-IFRS Measures
The Company has included a non-IFRS measure for "Production
costs per gold equivalent ounce" in this management's discussion
and analysis, dated May 12, 2014, related to its financial
statements which are presented in accordance with IFRS. Management
believes that this measure provides investors with an improved
ability to evaluate the performance of the Company. Non-IFRS
measures do not have a standardized meaning prescribed under IFRS.
Therefore they may not be comparable to similar measures employed
by other companies. The data is intended to provide additional
information and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
IFRS. The following table provides a reconciliation of production
per the financial statements to cash cost per gold ounce sold:
Three months ended |
March 31, 2104 |
Production costs |
$1,675,071 |
Gold equivalent ounces |
1,849 |
Production costs per gold equivalent ounce |
$906 |
Qualified Person
The technical information contained in this press release has
been reviewed and approved by Mark Odell (Nevada PE 13708 and SME
2402150) for the purposes of National Instrument 43-101. Mr. Odell
is considered an Independent Qualified Person 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 NI 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
sampling activities, the timing and success of the bulk sampling
program at the Fire Creek Project, the final mine design and timing
of receipt of the determination for full production at the Fire
Creek Project, the timing and success of mining operations, the
capacity of the Midas mill and processing of mineralized material
at the mill, the expansion of the tailings capacity at Midas. 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; 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.com Klondex Mines Ltd.Alison
TullisManager, Investor
Relations647-233-4348atullis@klondexmines.comwww.klondexmines.com
Klondex Mines Ltd. (AMEX:KLDX)
Historical Stock Chart
From Jun 2024 to Jul 2024
Klondex Mines Ltd. (AMEX:KLDX)
Historical Stock Chart
From Jul 2023 to Jul 2024