Operations

Overview

View Klondex Mines Fire Creek Project in a larger map
View Klondex Mines Fire Creek Project in a larger map

Fire Creek is Klondex Mines' flagship property in north central Nevada, situated at the cross-section of the Northern Nevada Rift and the Battle Mountain Trend. Similar to the Midas Mine and Hollister Mine in the NNR, Fire Creek is also a high-grade epithermal gold deposit. After re-logging the core, a process initiated in January 2013 and the addition of both underground and surface drilling and the data from drifting along the Joyce and Vonnie structures, an updated NI 43-101 mineral resource estimate was issued in September 2013. The new resource estimate consisted of Measured and Indicated resources totaling 295,900 ounces of gold at 44.7 g/t (1.304 opt) Au and Inferred resources of 421,400 ounces of gold at 19.2 g/t (0.560 opt) Au at Fire Creek, applying a 7 g/t Au cut off. Fire Creek's updated resource is detailed in the table below. (Click here to view the September 2013 resource estimate on it's 100% controlled Fire Creek Project.)

Fire Creek Project - Measured, Indicated and Inferred Mineral Resource as of September 2013
Gold Cut-off GPT Classification Metric Tonnes Grade GPT Oz. Gold
7.0 Measured 7,000 237.7 57,200
7.0 Indicated 198,000 37.4 238,700
7.0 Inferred 683,000 19.2 421,400
Sourced from the technical report entitled "Klondex Mines Ltd: Technical Report Fire Creek Exploration Project Lander County Nevada", dated October 31, 2013 with an effective date of September 16, 2013, prepared by Practical Mining LLC; Michele White (CPG 11252), Mark Odell (Nevada PE 13708 and SME 2402150) and Karl Swanson (SME 443076 and AusIMM 304871) are considered Independent Qualified Persons as defined by Canadian National Instrument 43-101.

Fire Creek Drill Rig Click to Enlarge

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

Aerial View of Klondex Mines' Fire Creek Property - From the South
Aerial View of Klondex Mines' Fire Creek Property - From the South Click to Enlarge

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. 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.

Fire Creek Exploration History

Fire Creek Road
Fire Creek Road

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.

Kern, Eastwood, Sibthorpe
Kern, Eastwood, Sibthorpe

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.

Fire Creek - View of Shoshone Range from NW Corner of Block 1
Fire Creek - View of Shoshone Range from NW Corner of Block 1
Main Zone
Looking South
Main Zone Looking South

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.