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| UPCOMING EVENTS |
Mar. 7-10 - Toronto PDAC Investor Exchange
Booth #2835
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Jan 20, 2010: News: High-Grade Gold Veins Discovered East of Main Zone in Klondex's 2009 E... (more...)
Jan 07, 2010: News: Klondex to Review High-Grade Nevada Gold Exploration Program at Vancou... (more...)
Dec 17, 2009: News: Klondex Secures BLM Permits for Confirmation Program at Fire Creek (more...)
Apr 3, 2009: Updated 43-101 Resource Report (more...)
Lander County
Nevada
Updated: 20-Jan-10
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Fire Creek | Maggie Creek | Hot Springs Point | Reef
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 Reserve of over 500,000 ounces of gold. Fire Creek's updated resource is detailed in the table below (click here to link to Klondex's 43-101 Resource Update):
Fire Creek Project - Indicated and Inferred Resource
Gold Cut-off |
Classification |
Metric |
Grade |
Oz. Gold* |
Grade - GPT |
|
Tonnes |
GPT |
|
8.0 |
Indicated |
2,408,299 |
16.42 |
1,271,392 |
8.0 |
Inferred |
1,074,308 |
13.57 |
468,856 |
|
|
|
|
|
5.0 |
Indicated |
5,043,033 |
10.11 |
1,639,822 |
5.0 |
Inferred |
1,833,423 |
8.63 |
508,799 |
|
|
|
|
|
2.0 |
Indicated |
14,056,610 |
4.67 |
2,111,002 |
2.0 |
Inferred |
8,877,720 |
3.74 |
1,068,488 |
* Gold equivalent with silver at 60:1
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 five-year journey from zero to 2.1 million ounces * of gold equivalent 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 US $19.7 million as of March 31, 2009. This puts Klondex's finding costs for its 2.1 million ounces * at approximately US $9.19 per ounce. This finding cost is very attractive relative to industry costs and in light of gold prices of US $900 per ounce and higher it represents substantial value creation for Klondex shareholders.
* Combines indicated and inferred resources with 5.0 gram per tonne cutoff.
Klondex Plans to Take its Development Underground in 2009
In addition to continuing its productive surface exploration programs, in 2007 Klondex filed for permits to expand it Fire Creek exploration strategy to add an underground program to its productive surface exploration efforts. Klondex plans to commence the underground development of Fire Creek with the driving of a 5,000-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.
Bulk Sampling Opportunity
The second and perhaps more important near-term objective of the underground program is the pursuit of bulk sampling. Klondex filed 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. Klondex anticipates receiving the permits necessary to commence work on an underground program during 2009.
In its bulk sampling efforts, Klondex plans to target bonanza grade ore blocks averaging more than one ounce of gold per ton, enabling the company to produce 35,000-40,000 or more ounces of gold per year. At current gold prices of $900 and higher, these grades would create a very attractive profit opportunity, generating gross annual gold production approaching $40 million or more.
It is believed that profits from the bulk-sampling program could potentially support all of the operations of the company while also building a cash reserve for further exploration and the pursuit of full-scale mining permits. Site preparation and tunneling of the initial decline are expected to take ten months, at which point the company would be in a position to begin to take the first bulk sample. A review of the underground program follows:
Phase 1 Program: Resource Confirmation
Klondex's underground program planning has been broken into two phases. The first phase, anticipated to take approximately ten months and to cost approximately US $15 million, consists of surface preparation; an archeological site study; electrical and pond infrastructure for the underground program; corporate overhead; a 5,000 foot decline from the surface to the level of the resource; 20,000 feet of core drilling from underground stations; additional induced polarization (IP) geophysical work to evaluate for additional drilling targets and an additional 20,000 feet of core drilling from the surface. Also during Phase 1, work would be commenced to seek full production permits including the start of a "feasibility study."
Phase 2 Program: Resource Development
The Phase 2 program is anticipated to take 15-months at a cost of approximately US $19 million and will commence following the completion of Phase 1. The program will focus on bulk sampling which allows for the extraction and processing of ore, as well as further underground development and definition drilling of the deposit. Additionally, during Phase 2 Klondex anticipates that it will be able to complete and submit the feasibility study and related permit applications. The program will also fund surface exploration; corporate overhead and a comparable amount of underground drilling and mine development as is anticipated in Phase 1.
Klondex has been conducting a range of dialogues with potential financial and industry partners in an effort to secure capital for the underground program on suitable terms. The current capital markets are challenged, making straight equity financing difficult given the dilution the company's current market valuation would require. Klondex is actively reviewing all possible options - including debt-oriented funding - with both financial and industry targets. Recent interest in the Company, including an unsolicited takeover bid, have helped to focus investors and industry personnel on the Fire Creek opportunity, and should help the Company in securing project funding on the best possible terms.
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 @ $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 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 10,715 acres.
Page updated June 2009
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