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A Gold Explorer's Productive November Has Analysts Saying 'Buy'

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Multiple projects are showing positive and possible expansions for this gold miner.

On Nov. 20, Klondex Mines Ltd. (KDX:TSX; KLDX:NYSE.MKT) announced initial results from its Hatter Graben zone and recovery of Hollister ore at Midas Mill. The company highlighted a couple of key points:

  • Assays were received for the first five surface core holes at Hatter Graben. These are the first assays from an 11-hole drill program that was designed to infill drilling completed during 2008. The intent of this drill program is to develop an initial inferred resource at Hatter Graben.
  • Mineralization at Hatter Graben remains open in all directions. Drilling continues and is scheduled to be completed in early December. After which the company expects to receive final assays from the remaining six core holes by year-end.

Brian Morris, Klondex's senior vice president, exploration, said, "I am extremely encouraged by the initial results from our first five holes at Hatter Graben. The most optimal drill sites are now fully permitted and drilling is ongoing from these locations. We are infilling and stepping to the east in the most desirable elevations where we fully expect robust results."

Analyst Philip Ker with PI Financial stated in a Nov. 21 report that the "Hatter Graben target presents significant opportunity for Klondex to expand the Hollister mine and resource base in the future." He explained that "management also reaffirmed the Hatter Graben displays less clay content than the main mineralized zone at Hollister resulting in more competent rock. The increased competency, steep dip of veins and increased vertical extent suggest that Hatter Graben is suitable to less dilutive mining techniques such as long-hole stoping."

Ker concluded, "Our TOP PICK and BUY rating remains unchanged. We continue to derive our CA$4.85 target price with a 1.0x NAVPS multiple.

In a Nov. 15 announcement Klondex Mines updated its Fire Creek Mine exploration project. A few of the key points are:

  • Three surface drill holes totaling 4,171 ft (1,271 m) have been completed to-date on the Zeus target.
  • Drilling to-date has delineated a mineralized area within the structure approximately 650 ft (198 m) in length and 400 ft (122 m) vertically, within 400 ft (122 m) of surface and is open in all directions. Additional follow up holes are in progress to continue to expand and infill this significant high grade mineralization.
  • The up-dip underground drilling above the veins currently in production has returned significant assay results along a strike of 275 ft (84 m) and up-dip by 100 ft (31 m). The down-dip underground drilling below the Karen vein has returned significant assay results along a strike of 150 ft (46 m) and down-dip by 75 ft (23 m).

"The surface drill results are extremely exciting," Klondex's Morris stated. "These results demonstrate that the potential for high grade mineralization, similar to what is currently being mined at Fire Creek, exists within the Zeus structure about 4,000 feet northwest from our current underground development. Geophysics suggest this is a major 6,500 ft structure. We will continue step-out and infill drilling in this area to fully delineate this high grade structure with the intent to bring it into an inferred resource category in our year-end resource update to be released in Q1 2018."

ROTH Capital analyst Jake Sekelsky stated in a Nov. 16 report that Klondex "is achieving exploration success from surface and underground, which we believe should have a positive impact on Fire Creek's mine life." He highlighted the Zeus target's, "hole FCC-0092, which returned 1.27 opt over 14.0 feet including 8.25 opt over 1.7 feet. In our view, holes such as this serve as evidence that the program has uncovered significant additional high-grade mineralization outside of the existing areas being mined at Fire Creek."

Sekelsky pointed out that although "recent drill results are not included in the existing resource, we believe recent underground drilling has the potential to significantly expand the near-mine resource base. We view this development as a strong positive as new resources outlined in this program could have near-term impacts to Klondex's production profile at Fire Creek."

The ROTH analyst concluded that "Following the success exhibited at the Zeus target, we believe additional discoveries are probable and look forward to further exploration updates at Fire Creek." ROTH Capital rates Klondex as a Buy with a target rating of US$2.58.In a Nov. 16 report, PI Financial analyst Philip Ker, noted, "The success of up and down dip extensions of key veins, such as the Karen, Joyce and Honeyrunner veins, continue to demonstrate the potential for mine life and resource expansion at Fire Creek."

"Considering our more favorable long-term view on Klondex, we continue to remain firm on the management and operations team to meet the lower end of its 2017 guidance. As Hollister expands and its production profile begins to integrate further with the Nevada operations and Midas team, we continue to expect operating cost declines, increased long-hole stoping and exploration upside—particularly from the Hatter Graben zone," Ker concluded.

Klondex is currently trading at CA$2.86.

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1) Melissa Farley compiled this article for Streetwise Reports LLC and provides services to Streetwise reports as an employee. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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