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Fire Creek is Klondex Mines' flagship property in North Central Nevada where the Company has discovered an NI 43-101 compliant Indicated Mineral Resource exceeding 1.6 million ounces of gold equivalent and an Inferred Mineral Resource of 0.46 million ounces of gold. Fire Creek's updated resource is detailed in the table below ( on It's 100% owned Fire Creek Project.)
Fire Creek Project - Indicated and Inferred Resource
Fire Creek is located in Lander County near the center of the Battle Mountain gold belt in Crescent Valley, approximately ten miles northwest of the massive Pipeline deposit of Barrick (7 million ounces) and five miles southeast of the Mule Canyon deposits of Newmont (3 million ounces). All of this mineralization exists in volcanics within the trend in Crescent Valley that runs south as far as Buckhorn (Barrick).
For much of its history, Fire Creek was considered to be a low-grade, high tonnage "Carlin" type open pit deposit. However geologic data in the late 1980s from the nearby Midas and Mule Canyon deposits suggested Fire Creek was more likely a deeper, higher-grade epithermal deposit.
Deep Drilling Program Finds High-Grade Gold
Klondex's journey from zero to 1.65 million ounces of indicated gold resource and 0.465 million ounces of inferred gold resource was achieved through the focused effort of a streamlined management team. The resource was discovered in a very cost effective manner, with total drilling and related costs of approximately $28.2 million through June 30, 2011. This puts Klondex's finding costs for its 1.65 million ounce indicated resource at approximately $17.14 per ounce. This finding cost is very attractive relative to other gold exploration costs and in light of current gold prices in the range of US $1,700-1,800 per ounce. Accordingly, Klondex believes its exploration activity has created substantial long-term value for Klondex shareholders.
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Aerial View of Klondex Mines' Fire Creek Property - From the South
Click For Larger Image
A selection of high-grade intercepts have been plotted on the photo. The gold and silver grades and actual widths are reviewed in a table you can access by clicking here. Old pit workings can be seen in the middle of the photo, with access roads for surface drilling program surrounding. The main entry road is in the foreground. Fire Creek runs diagonally across the bottom left portion of the photo. |
Klondex Takes its Development Underground in April 2011
In addition to continuing its productive surface exploration programs at Fire Creek, Klondex commenced underground development of Fire Creek with the driving of a 1,113 meter (3,650 foot) decline to efficiently access underground mineralization. The underground program has a two-fold objective of exploration and in-fill drilling as well as "bulk sampling" for metallurgical testing of material from underground. By going underground, Klondex will substantially shorten the length of drill holes, reducing both the cost and time required for exploration activity. Through in-fill drilling Klondex aims to better define its mineral resource.
The underground program will also enable Klondex to pursue bulk sampling which involves the extraction and processing of up to 120,000 short tons of mineralized material, limited to no more than 36,600 tons per year. Klondex filed for permits in March 2007 for designation as a "Small Scale Facility" as defined by Nevada regulations for milling and metallurgical testing under a bulk sampling exemption. The Company received its U.S. Bureau of Land Management approvals in December 2009, its Nevada state approval effective March 1, 2011 and commenced its underground decline on April 27, 2011.
Bulk Sampling Opportunity
In its bulk sampling efforts, Klondex plans to target blocks mineralization that has assayed at average grades of one ounce of gold per ton. At current gold prices of $1,700-$1,800 per ounce, these grades would create a very attractive opportunity.
It is believed that the bulk-sampling program has the potential to make an important contribution to support the ongoing operations of the company, including further exploration and the pursuit of full-scale mining permits. Site preparation and tunneling of the initial decline are expected to take approximately six-eight months, at which point Klondex should be in a position to begin to take the first bulk sample by year-end 2011.
In early April 2011, Klondex secured US $20 million in funding for its underground program through a gold-backed debt facility, of which it has closed upon the first tranche of $10 million.
Fire Creek Exploration History:
Gold was first produced at Fire Creek from a 2,000-ton leach pad test conducted by Klondex in 1981. Sixty-seven ounces of gold were recovered over a thirty days with a recovery rate of 80%. Having proven the leach-ability of the ore without crushing or agglomeration, a joint leasing and production agreement was signed with Minex Resources from Riverton, WY. Though undercapitalized, they managed to produce a total of about 1,000 ounces at $300 per ounce before equipment problems and a declining gold price forced them to abandon their plans in late 1983.
When Klondex undertook the search for gold in Nevada thirty years ago, its organizing concept was to grow as a strategic land bank and its motivating force was the work of Dr. Ralph Roberts who pioneered the concept of sub-microscopic gold deposits. His most famous paper was published in 1960 and entitled "Alignment of Mining Districts in North-Central Nevada." It was the catalyst for all subsequent development in the parallel Carlin and Battle Mountain Trends and the evolution of the 'Heap-leach' method of gold extraction. All the great deposits being worked by Newmont, Barrick, Anglo and Placer-Dome were realized as a result of his geological interpretation.
The next joint venture partner was Alma-American, a unit of Coors Brewing Company. They conducted an aggressive exploration and development drilling program with aerial and electro-magnetic surveys. They dropped the project after six months, even with encouraging results, because Klondex refused to renegotiate the terms of the production and royalty schedule in the lease agreement. Klondex's strong position has been vindicated by the position in which it now finds itself.
In 1988, Klondex entered into a lease agreement with Aurenco Partners to drill and eventually mine the property. Aurenco Partners was formed specifically for the project by Black Beauty Resources and Covenanter Mining from Evansville, IN. Under the terms of the lease, Klondex received an advance minimum royalty of $10,000 per month and all advance royalty payments were to have been recoverable by the lessee out of net smelter royalty production (NSR). As of April 30th, 1999 a total of $1,215,000 had been paid to Klondex.
After a great amount of exploration and test drilling, Aurenco expanded the original Klondex acreage of 2,155 acres with an additional 4,995 acres, bringing the total land package to 7,150 acres. The program was undertaken to establish the parameters of the ore body and to enable their management to make an informed production decision when market conditions turned favorable.
No drilling below 500 feet was undertaken on Klondex ground where the Company had the right to participate up to a 25% working interest below that depth by contributing its share of production costs. Alternatively Klondex could have had elected to take a 6% NSR interest. As a result, the property remained unexplored at depth where all the great deposits in Nevada have shown improving grade below 1,000 feet.
The joint-venture agreement with Aurenco was terminated in 1999 due to adverse conditions in the gold market. The project and all improvements reverted to Klondex.
Since that time Klondex has self-funded all development of the Fire Creek property and today the Fire Creek land position has been expanded to 11,208 acres, equivalent to 17.5 square miles, as of 12/31/10.
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Projects 
Fire Creek Road
Kern, Balagna, Eastman, Sibthorpe
