Tuesday, 1 October 2013

Klondex Mines prices special warrants offering, to raise $19.45 mln - UPDATE

Klondex Mines (TSE:KDX) has priced its special warrants financing announced yesterday, at a price of C$1.37 apiece, for total proceeds of C$19.45 million - well above the $15 million disclosed in the initial announcement. 
The company, which is working to get its flagship Nevada property into production, said Tuesday that it has received subscriptions for 14.2 million special warrants, through a syndicate of agents led by GMP Securities. 
Each special warrant will entitle the holder to one common share of the company, for no additional consideration. 
The new funds are to be used for the development of the company's Fire Creek project in Nevada, as well as to repay debt and for general working capital. The financing is expected to close in mid-October, subject to regulatory approvals. 
The news of a special warrant financing on Monday came just hours after the company provided investors 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 as the company prepares for initial production.
In the earlier release on 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. 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 first statement released Monday. "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."
As a first step to unlocking value, Klondex has been undertaking an underground development program 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. 
The company also announced metallurgy results earlier this week, with gold and silver recoveries coming in at 94.8 per cent and 82.4 per cent, respectively. Additional test-work is scheduled to be conducted throughout 2013. 
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. Production from initial bulk sampling is due to start later this year. 

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