Drill core from the Joyce vein at the Fire Creek project.(Image: Klondex Mines)

Drill core from the Joyce Vein at the Fire Creek project (Image: Klondex Mines)

Klondex Mines (KDX.to) is a new high grade gold producer in Nevada. Management has been busy in 2014 acquiring a mill, commencing production, and drilling to update current resource estimates. The goal at Klondex is to be cash flow positive by the end of 2014.

Klondex has produced ~40,000 ounces year to date from the Midas Mine and bulk sampling from Fire Creek. The Midas Mill was purchased earlier this year from Newmont and is located ~100 kilometres north of the high grade Fire Creek project. The synergies between the two projects have helped Klondex deliver strong operating results this year.

Assay results were released this morning and show the Fire Creek project continues to expand in size along strike and up and down dip.  124 infill and exploration holes have been drilled at the project so far this year. Investors are looking forward to an updated mineral resource estimate due out before the end of the year.

Drilling Highlights:

• 157.8 g/t (4.6 opt) Au over 3.55 m (11.4 ft) - FCU-0199 -- Karen Vein
• 85.7 g/t (2.5 opt) Au over 4.68 m (15.0 ft) -- FCU-0209 -- Karen Vein
• 1,474.6 g/t (43.0 opt) Au over 0.62 m (2.0 ft) - FCU-0043 -- Joyce Vein
• 367.6 g/t (10.7 opt) Au over 1.87 m (6.0 ft) -- FCU-0086 -- Joyce Vein
• 1,404.6/t (41.1 opt) Au over 0.53 m (1.7 ft) - FCU-0011 -- Vonnie Vein
• 174.9 g/t (5.1 opt) Au over 1.00 m (3.2 ft) - FCU-0160 -- Hui Wu Vein

b-kristof

Mr. Kristof

Brent Kristof, Chief Operating Operator of Klondex, commented,

"We are encouraged by these high grade drill intercepts and the results of additional infill and exploration drilling at Fire Creek. All vein structures remain open along strike and up and down dip. Given this, Klondex continues to look to expand the life of the Fire Creek Project through its drilling programs.We intend to continue delineating the veins and increasing the quality of the mineral resource. We are excited to update our technical report later this year. The new mineral resource will add more data from the West Zone, including the Karen, Hui Wu and Honeyrunner, as well as the new drilling on Joyce and Vonnie."

Klondex stock has performed well this year, starting out at $1.50 then reaching a high of $2.20 before falling to $1.80 today. A correction has brought the stock back just like the rest of the gold equities in September and October.

Management continues to focus on generating a profit and free cash flow for shareholders.  Upside potential for the stock price should result from continued strong production with guidance of 75,000 to 85,000 ounces this year and the ability to generate free cash flow. 2015 production guidance has yet to be issued. Another catalyst will be the mineral resource update (Q4) which if positive will allow for a longer mine life.

  • Symbol: KDX.T
  • Share price: $1.83
  • Shares outstanding: 121.45 M
  • Market Cap: $222.2 M

Read: Klondex Reports Fire Creek Drill Results

I have no position in any of the stocks mentioned. This is not investment advice. As always please do your own due diligence.