VANCOUVER, BC — Klondex Mines Ltd. reported Feb. 1 its preliminary operating results for the fourth quarter and full-year 2017.
“2017 was a year of progress and learning for Klondex,” said Paul Huet, president and CEO. “The company produced more ounces than any year in the company’s history, 28,000 gold equivalent ounces or 17 percent more than last year. Our core operations, Fire Creek and Midas, continue to perform well, as expected.
2017 operating results
• Mined 222,233 gold equivalent ounces
• Produced 189,456 gold equivalent ounces, an increase of 17 percent from 161,289 gold equivalent ounces produced during 2016
• Fire Creek and Midas delivered gold equivalent ounces production in-line with guidance
• Sold 190,865 gold equivalent ounces, an increase of 20 percent from 159,118 gold equivalent ounces sold during 2016
• Total gold equivalent ounces produced were less than the lower end of the most recent guidance range primarily due to results from Hollister and True North. At Hollister, the company made the prudent decision to defer the processing of a majority of the mined Hollister ore as it continued to optimize recoveries at the Midas mill for this ore. Stockpiles at the end of 2017 contained approximately 15,000 gold equivalent ounces from 44,000 tons at a gold equivalent ounces grade of 0.40 opt. Mined ounces at Hollister were in line with expectations. In addition, the expected production results were not achieved at True North as a result of aggressive expectations and operational issues.
The Fire Creek mine continues to excel and performed in line with guidance for the year. For the fourth quarter, 28,162 tons at a grade of 0.76 AuEq opt were mined at Fire Creek. For the year, 123,754 tons at a grade of 0.90 AuEq opt were mined. Fourth quarter and year-to-date recovered gold equivalent ounces were 21,180 and 108,126, respectively. Sold ounces for the same periods were 25,420 and 112,455 gold equivalent ounces as metal inventories were depleted during the year.
The Midas mine also performed in line with guidance for the year. For the quarter, 37,454 tons at a grade of 0.36 AuEq opt were mined at Midas. For the year, 156,927 tons at a grade of 0.33 AuEq opt were mined. Fourth quarter and YTD recovered gold equivalent ounces were 10,371 and 45,062, respectively. Sold ounces for the same periods were 10,512 and 47,298 gold equivalent ounces as metal inventories depleted throughout the year.
The Hollister mine had its best quarter of mining in the fourth quarter, mining over 9,000 gold equivalent ounces, as the majority of the underground rehab was completed in the third quarter and development was advanced providing additional access to the Gloria vein. For the quarter, Hollister mined 20,440 tons at a grade of 0.44 AuEq opt. For the year, Hollister mined 66,453 tons at a grade of 0.38 AuEq opt. Fourth quarter and YTD recovered gold equivalent ounces were 5,914 and 7,371, respectively. Sold ounces for the same periods were 4,752 and 5,281 gold equivalent ounces. Stockpiles at the end of 2017 contained approximately 15,000 gold equivalent ounces from 44,000 tons at a GEO grade of 0.40 opt.
As previously reported, metallurgical test work is being performed to identify processing improvements to increase the gold and silver recoveries of the Hollister ore processed through the Midas mill. The recent mill modification, eliminating all cyanide in the grinding circuit, planned for the fourth quarter was not finished until the first week of January 2018. As a result, the decision was made to stockpile the Hollister ore during the fourth quarter in order to limit the risk of lower mill recoveries and less revenue. In 2018, the company has already milled approximately 15,000 tons of Hollister ore at estimated gold and silver grades of 0.48 and 3.20 opt, respectively. Gold and silver recoveries for that material are estimated at approximately 80 percent and 65 percent, respectively. Ongoing metallurgical test work supports that gold recoveries of 85-90 percent can be achieved with additional modifications to the Midas mill circuit, including increasing leach time and finer grinding. Design and engineering of these modifications are being evaluated.
“Integrating our two recently developed assets, Hollister and True North, simultaneously was more challenging than we thought it would be,” Huet said. “The processing of Hollister ore through the Midas mill was delayed during the year as we work to improve ore recoveries, which resulted in production delays and a stockpile accumulation. In addition, we were not able to deliver on our plans at True North and had to make a difficult decision there, placing mining operations on care and maintenance.”
The True North mine in Manitoba, Canada produced 9,169 and 27,919 Gold equivalent ounces for the fourth quarter and full year, respectively, approximately 7,000 Gold equivalent ounces short of the low end of the revised guidance for the year. This shortfall was due to mining lower than forecasted grades from the True North and Cohiba mines. The lower mined grades are attributed to three issues:
Delays in waste development postponed mining planned stopes in the 711/713 areas of the True North mine; excessive dilution from a hanging wall failure at True North, resulting in additional tons with no grade; negative model grade reconciliation at the Cohiba mine.
For the quarter, True North mined 82,159 tons at a grade of 0.12 AuEq opt. For the year, True North mined 228,495 tons at a grade of 0.12 AuEq opt. Total fourth quarter and YTD recovered gold equivalent ounces from the mine were 8,906 and 24,636, respectively. Total sold ounces for the same periods were 8,730 and 22,606 gold equivalent ounces.
Tailings milled during the quarter totaled 7,547 tons at a grade of 0.04 Au opt. For the year, True North milled 80,848 tons from tailings at an average gold grade of 0.04 Au opt. Recovered gold ounces from tailings for the fourth quarter and YTD were 263 and 3,285 respectively.
As previously announced, following an extensive review of the operational performance at True North, the company decided to place the mine under care and maintenance to review strategic options and to provide optionality at higher metal prices. This decision was largely based on the site’s inability to achieve planned operating and cash flow targets in 2017 and to refocus company resources on Nevada assets. The company will continue to process tailings through the mill for the foreseeable future in order to maximize cash flow and offset expected care and maintenance costs.
The company expects to produce between 186,000 and 202,000 total gold equivalent ounces during 2018 at an expected cash cost of $675 to $725 per gold equivalent ounce sold. Total production will not be equally distributed by quarter during the year as higher levels of production are expected during the second and third quarters due to the processing of tailings. It is anticipated that production could vary 5,000 to 10,000 ounces between the highest and lowest producing quarters. Production from the Fire Creek and Midas mines are expected to be in-line with 2017. Hollister mine production is expected to ramp up during the year as the benefit of processing the stock pile from 2017 is realized. In addition, Klondex has begun processing historical Hollister tailings at the Aurora mill and expects to realize incremental production from that operation during 2018. Production from the True North mine in Canada will decrease as mining operations will be suspended and most of the Gold equivalent ounces produced will come from the processing of tailings. Total all-in sustaining costs are projected to be between $940 and $990 per gold ounce sold for 2018.
The company anticipates its 2018 capital expenditures to be between $48 and $56 million, including $16 to $18 million of capital to be spent on the expansion of the tailings facility at the Midas mill. Total CapEx guidance consists of $36 to $42 million of sustaining and $12 to $14 million of nonsustaining capital. The majority of the capital is expected to be spent at Fire Creek as the company continues underground expansion in the form of primary access development. Total exploration expense is planned to be $10 to $12 million in 2018.
“Looking forward, we expect that Fire Creek and Midas will continue to deliver consistent results from our operations in Nevada. We also expect significant growth in production at Hollister in 2018,” Huet said. “The new modifications to the Midas mill are underway and recoveries for the Hollister ore are now approximately 80 percent, with additional improvements expected. In addition, the changes we have made at True North will result in improved profitability for the Company and provide optionality as we evaluate the district. Overall, we have learned from the challenges of 2017, and I am confident in our team and the plans we have developed for a successful 2018.”