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Thursday, 20 June 2013
Klondex Mines highlights high grade advantage of Fire Creek at AGM
Klondex Mines (TSE:KDX) is working hard at having the next new producing asset in Nevada, with the gold company having the advantage of grade on its side, according to president and CEO Paul Huet, who made the assurance to investors at the company's annual general meeting on Tuesday.
The gold development company is developing its Fire Creek project in Nevada, situated at the intersection of the Battle Mountain trend and Northern Nevada Rift, which also hosts the Midas and Hollister narrow-vein epithermal gold deposits. The company is planning to start initial production from bulk sampling later this year, with an updated resource from drilling due this summer, to be followed by a new and comprehensive mine plan.
"The Fire Creek project is an amazing asset. We have the advantage of grade. It's a high class, simple asset that demonstrates some of the best grades you're going to see in the world," said Huet, who came on board at Klondex late last year, making his appearance at the meeting his first presentation to investors.
Illustrating his point, the company, ahead of the meeting on Tuesday, released more drill results from Fire Creek, finding high grades in new, unexplored areas that prompted the gold developer to delay its resource update by a month to ensure the latest results are included. The company said a new mineralized structure was found running parallel and to the west of the Joyce vein at the site, which included an intercept grading a whopping 869 grams per tonne (g/t) gold over 0.12 metres.
The results also support the fact that the Fire Creek project is underexplored to say the least, as the 2.1 million ounces delineated so far cover just 7 per cent of the land package, meaning 93 per cent remains to be drilled or "tested completely".
Huet, who himself was raised in one of Canada's most prolific mining districts in Timmins before moving on to build and manage the operations of both the Midas and Hollister mines, says he is therefore confident in the growth and opportunities the asset provides.
Indeed, in May, the Nevada-focused company yielded 682 tons of mineralized material at an average grade of 73.8 grams per tonne (g/t) through a metallurgical sampling program, for some 1,400 contained gold ounces, part of the company's strategy to improve margins with its high grades.
"The material has been sent out to a direct smelter, as the grades are so high that putting it into a mill risks a potential loss in recoveries. It's a great opportunity to improve our margins and separate the high grades over 3 ounces that we have," Huet said. The direct smelting agreement is now being finalized.
"It's something we will do for as long as we encounter it to maximize our margins."
The CEO also boasted at the meeting about the company's three different mine plans -- at gold prices of $700, $1,000 and $1,300 per ounce -- giving Klondex the ability to react quickly to the changing metal prices amid a volatile climate for the commodity, which witnessed a sharp decline in April that took many gold producers by surprise.
"The advantage is that the deposit is not homogenous, and in the case where gold is declining, we have the opportunity to increase the gold cutoff grade. Costs remain the same but we can get a lot more from the revenue end, giving us the opportunity to survive at different metal prices," assured the chief.
He explained that the nature of the deposit allows the mining of selective areas, but more importantly, 75 per cent of the indicated ounces at the deposit remain at a higher cut off grade, something Huet says is an advantage from any operator's standpoint, and one Klondex "will make sure to capitalize on".
The chief also acknowledged the delay in the resource update at the annual general meeting, which was initially planned for the end of June, but said that the one month wait was "not a big deal considering the quality [they] will have."
"We will have a document that anyone can hang their hat on and that we can build from, something we didn't have before."
In the past eight months, Klondex says it has made three discoveries at the deposit, and is well along the way to completing its vent raise access, after which the company plans to move into its bulk sampling program. The company has a toll milling agreement in place with Veris Gold for the bulk sampling, which will go to the Jerrit Canyon Mill 120 miles northeast.
"I have negotiated four milling agreements prior to this one, with the latest providing the same best terms, allowing us to generate cash flow much sooner," said Huet.
Aside from being surrounded by major producers, the property is as expected also proximate to power, transportation, infrastructure and a milling facility in the heart of the U.S. state’s gold trend. Apart from the Rapid Infiltration Basin permit, which has been submitted and is on track for the third quarter, most other major permitting is in place.
Huet concedes that though the company's share price is not yet where he wants it to be, noting that the CEO himself holds a large stake in Klondex with a 1.4 per cent interest, it is doing well compared to the industry in a difficult time for gold. "Our share price has been holding up incredibly well," he said.
The chief executive gave shareholders at the meeting a goal to which to look forward. "The grade is there, funding is in place, and we are imminent to power with phenomenal infrastructure at our hands. This will be a pivotal year as we become the next gold producer in Nevada."
The company, which currently trades at around $33 per ounce versus an average of $45 an ounce for industry peers, is expected to see a boost in credibility and profile after the new resource model is announced, according to chairman Larry Phillips, as the document "will remove a lot of questions around there."