Nevada-focused gold exploration and development companyKlondex Mines (TSE:KDX) (OTCQX: KLNDF) says it has completed two major milestones at its Fire Creek project ahead of initial targeted production, including the first shipment of mineralized material to Newmont Mining under a processing agreement signed between the two parties last month, and the conversion of the site's power to electrical grid from generator.
The agreement with Newmont (NYSE:NEM) is part of the gold development company's way to monetize its high grade material, with CEO Paul Huet highlighting at Klondex's annual shareholder meeting earlier in the summer that these deals will be a "great opportunity to improve margins and separate the high grades over 3 ounces that [the company] has." Proceeds from the processing of this material will be used toward funding the company's own waste development ahead of the 2014 bulk sampling program, and for a second drill to follow up on recent discoveries ahead of targeted initial production later this year.
At the end of last month, Klondex reported that it yielded 1,302 tonnes (1,435 tons) of mineralized material in June from its underground development program at its Fire Creek project in Nevada, which will be used for processing by U.S. mining giant Newmont.
The initial shipment of 1,000 tons of Fire Creek material to Newmont began on August 5, the company said, with processing scheduled to begin today. It expects to receive payment for the shipment in the third quarter.
The underground development program at the Joyce and Vonnie veins is expected to continue throughout the rest of the year.
"We're extremely pleased with the timely progress the team is making during this pivotal year for Klondex. Processing the Fire Creek material through Newmont's milling facility allows us the opportunity to monetize the mineralized material from the underground development program," said the project's general manager, Mike Doolin.
Also at Fire Creek, where initial production from bulk sampling is due to start later this year, with an updated resource from drilling due this summer, the company said the power line is now fully connected and energized by way of the Klondex-owned substation built in 2012. The substation was connected to the NV Energy electrical grid earlier this year.
As a result of this, Klondex said Monday it expects "increased efficiencies in its development work", in addition to a significant reduction in unit cost for electricity. "Energizing Fire Creek with grid power allows greater flexibility and support for our increasing power needs as we continue to develop Fire Creek," said Doolin. "Assuming our consumption increases on average by 30% and the unit cost decreases to $0.12/kWh, we expect to realize a savings of approximately 25% of the current power costs."
Being surrounded by major producers, the Fire Creek property is as expected also proximate to 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.
The company announced last month that it secured $2.39 million in bridge loans as a means to support the development of the project.
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