Thursday Morning News – Klondex Mines and Torex Gold

POSTED ON June 18, 2015 BY James Fraser
CATEGORY Stories, Torex Gold,

Fire Creek Mine. (Image: Klondex)

A look at what I found interesting in the mining related press releases out this morning.

Klondex Mines - (KDX:TSX) - Klondex has received a key permit for the high grade Fire Creek project in Nevada. The receipt of a water pollution control permit will allow the tonnage cap to be lifted.

The WPCP permit allows for Fire Creek to ramp up to full production levels. Previously the operation was limited to 120,000 tonnes per year.

Fire Creek mined 17,493 tons in the first quarter at a staggering 1.005 AuEq oz/ton.

Mike Doolin, Klondex Vice President Business Development commented, "This news represents a milestone for the Fire Creek Project. I would like to recognize the efforts of the regulators and our environmental Manager, Lucy Hill, through this process. Together, they have completed a very detailed, thorough review in a timely manner. Klondex's environmental team continues to demonstrate some of our industry's best standards. Environmental stewardship is a key focus to our company's objectives."

A strong chart for Klondex Mines in 2015 generating significant shareholder gains even in a terrible resource market.

Klondex is delivering free cash flow for shareholders earning $10.6 million in the first quarter. Klondex is definitely helped by having high grade ore. First quarter production was 32,542 gold equivalent ounces at 20.1 grams per tonne.

I am a big fan of small producers generating free cash flow. I was discussing in CEO LIve the other day why invest in a major( that is not profitable) when you have companies like Klondex delivering solid operational results. Klondex has $54.9 million (US) at the end of Q1 and will self fund growth.

Read: Klondex Receives WPCP Permit from State of Nevada; the Tonnage Constraint at Fire Creek is Lifted.

Related (Video BNN - June 17th) : Klondex Mines CEO digs some of richest ore on the planet

Torex Gold - (TXG:TSX) - Torex has released step out drill results from the Media Luna deposit in Guerrero State, Mexico. The results will be incorporated in an updated mineral resource. Media Luna currently hosts 5.8 million gold equivalent inferred ounces. Following the updated mineral resource estimate a PEA is expected in July.

Torex's April presentation states that the deposit is open in all directions and is currently only 30% explored.

Highlights:

5.59 g/t Au Eq. over 105.2 m in borehole NWZML-25A;
14.13 g/t Au Eq. over 4.0 m in borehole MLN-07;
4.13 g/t Au Eq. over 28.2 m in borehole MLN-08;
5.10 g/t Au Eq. over 8.4 m in borehole NWZML-23;
10.20 g/t Au Eq. over 4.4 m in borehole MLN-04.

It will be interesting to see the updated mineral resource estimate as the last update was in 2013.

Following the resource update I would expect the PEA to be fairly robust as the average gold grade in 2013 was 2.63 g/t (4.55 g/t gold equivalent). The grade is similar to the 2.61 g/t gold open pit El Limon/Guajes gold mine of Torex that is finishing up construction with first gold pour expected in Q4.

Fred Stanford, President & CEO of Torex stated: "In July we expect to release the summary of an updated Technical Report (TR) for the Morelos Property. In keeping with Securities regulation requirements for a single 'current' technical report for a specific property, this technical report will include an update on the feasibility study for El Limon / Guajes, as well as a PEA for Media Luna assessing the potential for developing Media Luna as a satellite deposit. The geological examination and interpretation of the Media Luna results has advanced our knowledge of the entire mineralizing system, including El Limon-Guajes. The updated feasibility study for El Limon-Guajes will take advantage of this enhanced knowledge of the mineralizing system and incorporate it in an updated resource estimate and mine plan for Guajes." He added, "The age and extensive nature of the dikes encountered in the area of this just completed drill program, as well as the enhanced copper grade, help to inform the geological model as to the potential source of the mineralizing system. We look forward to seeing the inclusion of these drill results into an updated Media Luna inferred resource next month."

Torex is getting to set to enter a period of re-rating from a gold development stock to a producer (Q4). History shows that as cash flow begins mining companies tend to get re-rated to the upside.

Investors will want to watch for the mine starting up on time and ramping up. Over the past couple years I have seen numerous companies have issues ramping up to commercial production.

Read: Torex Reports Assay Results of Step Out Drilling Program at Media Luna

Discuss in CEO Live

This is not investment advice. All facts are to be checked and verified by reader. As always please do your own due diligence.

James Fraser

Mr. Fraser joined CEO.ca in October 2014. He is passionate about the mining industry. His passion led to co-authoring the e-book "Mining Stocks Investor Guide: A Guide to Investing in Mining Companies." He has a finance background and has completed his Canadian Securities Course (CSC) and Conduct and Practices Handbook (CPH). When Fraser is not "digging" up the latest mining stock, he can be found enjoying a wide variety of sports or travelling the world. More →

Twitter: @miningstocks

james@miningstocksguide.com

James Fraser

Twitter: @miningstocks

james@miningstocksguide.com

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