Klondex Mines Ltd. (KDX:TSX; KLDX:NYSE.MKT) reported that project development activities continue to advance and are on schedule and within budget. The company expects to release a mineral resource update by the end of the third quarter and to make a production decision after that.
Jamie Spratt, an analyst with Clarus Securities, in his June 16 research report, notes that Klondex "offers a unique mix of low-cost production, internally fundable production growth and credible management." The long-hole stoping test program is "giving positive results with two long hole test stopes completed to date in the Cohiba zone."
The True North project is expected to recover between 8,000 and 12,000 ounces gold in 2016 through a combination of test stope mining and tailing reprocessing. Spratt says that because the recovery will be through reprocessing tailings and test stope mining, "minimum capital investment will be required."
Spratt expects "companywide production of 145 Koz Au eq at an AISC of US$850/oz in 2016, "rising to 200 Koz Au eq in 2017, "a compelling 37% production growth." He also expects "an uptick in production in H2/16 driven by higher grade and throughput at both Midas and Fire Creek that should also lead to lower costs." The Midas and Fire Creek projects are located in Nevada. True North is the company's only Canadian operation.
Spratt believes the "current valuation for Klondex is not reflective of its low-cost production and growth profile."
Philip Ker, an analyst with PI Financial, has focused on Klondex's rebranding of its Canadian operations. He believes that True North's 8,000–12,000 ounce gold 2016 production will "offset capital costs associated with revamping the operation from care & maintenance."
Klondex, notes Ker, is moving ahead with True North exploration: "In the near term, Klondex expects to continue to target infill drilling on the 710/711 zone and commence its bulk sample in the 710 zone in July."
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