October 5, 2011
Vancouver, BC and Elko, NV - October 5, 2011 - Klondex Mines Ltd. (TSX: KDX) announced today that it has drawn-down U.S. $5 million from its gold-backed debt facility to fund continued exploration and development at its 100%-owned Fire Creek gold property in the Battle Mountain-Eureka Trend in Northern Nevada.
The funding was pursuant to a U.S. $20 million gold-backed debt facility bearing interest at 9% per annum secured by Klondex in April 2011. Today’s tranche follows the initial U.S. $10 million funding in April and leaves U.S. $5 million, conditioned on the achievement of development milestones, available under the facility. The loan is being provided by Waterton Global Value, L.P. (the “Lender”).
Klondex CEO, Blane Wilson, commented, “We have an extremely active exploration and development program moving forward at Fire Creek. Five drill rigs are now executing our surface exploration program, and our underground decline is progressing well under the very capable teams from Small Mines Development. We are fortunate to have put in place the gold loan structure earlier this year as it is allowing Klondex to fund its operations without disruption.”
Cheryl Brandon, portfolio manager at Waterton, stated, “We are pleased with the progress Klondex has made to date at its Fire Creek project. We look forward to continue working with management during the development of the underground mine to facilitate the bulk sample and fund further ongoing exploration drilling.”
Facility borrowings are to be repaid in monthly bullion installments from Klondex’s anticipated gold recovery at Fire Creek priced at a 20% discount to gold’s spot price. The Lender may also request payments be made in cash, and Klondex may prepay the Facility in whole or in part at its discretion. Klondex’s obligations are secured by a lien and a first priority security interest in all its properties and assets, including Fire Creek. Klondex paid a structuring fee of 1% of the aggregate amount of the Facility and a structuring fee of 1% of each drawdown.
In addition, the Lender had been granted an exclusive right to purchase all gold produced by Fire Creek for three years beginning one year prior to Facility’s maturity date. Pricing will be based on a 1% discount to a 30-day average gold price. As consideration for waiving certain operational conditions to the drawdown of this tranche, this right has been extended for an additional two years with no discount in pricing during this time.
With the funding of the second tranche, the Lender received an additional 300,000 four-year warrants to purchase KDX’s common shares at a strike price of $2.49 per share. The Lender is entitled to receive additional comparable warrant consideration should the third tranche be funded. All warrants are non-transferable.
About Klondex Mines Ltd. (www.klondexmines.com):
Klondex Mines is focused on the exploration and development of its 100% owned Fire Creek gold deposit in North Central Nevada. Fire Creek is a compelling gold mining prospect that is located near power, transportation, mining infrastructure and several milling facilities. Fire Creek’s updated mineral resource is reviewed in the table below. For more information on the mineral resource estimates, please refer to Klondex’s disclosure available at the SEDAR website and at Klondex’s website.
In addition to an active surface exploration program at Fire Creek, in April 2011 Klondex initiated an underground exploration and development program being pursued via an underground decline. The program is designed to enable more cost effective in-fill drilling of its existing resource from underground stations as well as to enable bulk sampling for metallurgical testing of up to 120,000 short tons of material (limited to 36,500 short tons per year). Bulk sampling is targeted to begin in Q1 2012.
Giving effect to warrants issued pursuant to the second tranche, Klondex had 37.0 million shares issued and outstanding and 43.8 million shares on a diluted basis as of October 5, 2011. Klondex’s cash position following the second tranche funding was approximately CDN $11.6 million.
Richard Kern (P.Geo), of Reno, Nevada, a qualified person as defined under National Instrument 43-101, has reviewed and approved the technical information contained in this press release.
On Behalf of Klondex Mines Ltd.Investor & Media Contact:
Blane W. Wilson
President & CEO
Jaffoni & CollinsKDX@jcir.com
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