Klondex Mines (TSE:KDX) (OTCQX:KLNDF) provided investors Monday with an update on its underground development and toll milling programs --from which it yielded almost $2 million so far -- as well as the results of the metallurgical test work from its Fire Creek project in Nevada as the company prepares for initial production.
As a first step to unlocking value, it has been undertaking an underground development program at the Joyce and Vonnie structures on the property as a way to monetize its high grades, with Klondex having toll milling agreements in place with both Newmont Mining (NYSE:NEM) and Veris Gold (TSE:VG) to treat the material.
In the release Monday, Klondex said that toll milling of the property's first lot is complete, with final receivables totaling $1.97 million, sold at an average gold spot price of US$1,332 an ounce. Processing of the first lot comprised 1,055 dry tonnes, at an average head grade of 50.7 grams per tonne (g/t). Milling of the second lot, which is comprised of 1,812 tonnes, started earlier this month.
"Continuing to toll mill and treat our second lot of material from the Fire Creek project is an important step moving forward," said CEO Paul Huet in the statement. "We are very fortunate to have multiple options (Newmont and Veris agreements) in place to treat the Fire Creek material. Through toll milling, we are able to better understand the metallurgical characteristics of the Fire Creek material, and the proceeds can be applied towards future exploration and development."
The Nevada gold company is developing the Fire Creek project with the aim of starting initial production later this year though bulk sampling. Over the past four months, the underground development program at the Joyce and Vonnie structures has yielded 4,375 tonnes of mineralized material, averaging 63.7 g/t gold. In August, at Joyce, grades from 192 samples came in as high as 486 g/t gold, over vein widths between 0.1 to 1.3 metres.
The company said Monday that the average grade from the development program is 43 per cent higher than the average grade from the latest mineral resource estimate, suggesting further upside.
Meanwhile, metallurgical test work was also conducted at an independent lab in Nevada on two samples taken from underground development to determine whether the Fire Creek material can be treated through a gravity/cyanidation process. The results, said the company, indicate that both samples were readily amenable to this type of treatment, with gold and silver recoveries coming in at 94.8 per cent and 82.4 per cent, respectively. Cyanide consumption was low, averaging 0.2 kg/mt of material, Klondex added.
"We are very encouraged by the high gold recoveries from our Fire Creek material," said general manager of the project, Mike Doolin, in the statement announcing the general update. "Additional test-work is scheduled to be conducted throughout 2013 in order to continue understanding the metallurgical characteristics of the Fire Creek deposit."
The latest resource estimate from the site consists of 295,900 ounces of gold at a grade of 44.7 g/t in the measured and indicated category, and 421,400 ounces of gold at a grade of 19.2 g/t, applying a 7 g/t gold cut off.
Klondex Mines last week raised $595,000 via a warrant exercise for the continued development of its flagship project, as it announced that its largest shareholder, The K2 Principal Fund L.P., exercised warrants to purchase 500,000 common shares at the price of $1.19 apiece. The news came a matter of days after the company released to market its new mineral resource estimate for Fire Creek, with the report emphasizing the high grades at the property and propelling the company closer to production.
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