June 17, 2011
- Klondex to Host Shareholder Conference Call on Tuesday, June 21st at 11:00 a.m. ET - Call Details Provided on Page 5 Below -
Dear Klondex Shareholders,
On June 13, 2011, a dissident hedge fund-led group controlling just 8.1%
of the outstanding shares of Klondex Mines Ltd. (TSX: KDX) launched a
proxy contest to elect their own slate of six directors and take control
of the Company. The dissident group is attempting to marginalize you
and take control of the Klondex Board of Directors while offering ZERO
premium for control.
To protect your investment in Klondex, it is important to vote your WHITE proxy and discard the yellow proxy.
For questions or assistance, please call Georgeson at 1-866-676-3009.
Klondex has put in place an experienced board of directors to represent
the interests of all shareholders. Their backgrounds are setout
and in the management information circular
sent to you by Klondex. YOUR
BOARD OF DIRECTORS RECOMMENDS THAT YOU USE THE WHITE PROXY TO VOTE FOR A
BOARD THAT HAS DELIVERED THE FOLLOWING SHARE PRICE PERFORMANCE AND THE
ACCOMPLISHMENTS LISTED THEREAFTER:
Klondex Share Price Performance
Klondex’s shares have substantially outperformed several indices over the past year:
YOUR VOTE IS IMPORTANT. VOTE ONLY THE MANAGEMENT WHITE FORM OF PROXY.
PLEASE DISREGARD THE YELLOW PROXY.
For questions or assistance, please call Georgeson, 1-866-676-3009.
However, following the start of the dissident group’s campaign on Monday, June 13th KDX’s share price has declined 10.1%.
Klondex’s strong share price performance is in stark contrast to that of companies in which the proposed dissident group’s board has been associated
as described in the dissident circular. A chart of this comparison over
the 12-month period ending Friday, June 10, 2011 appears below.
Recent Klondex Mines Achievements
Throughout, Klondex has held issued shares to just 36.7 million and diluted shares to 43.3 million.
- Commenced exploration decline into Main Zone — have completed over 800 ft. to date.
- Completed 2009 & 2010 surface exploration programs with 48,000 ft. of Core/RC drilling.
- Secured “Letter to Proceed” from the U.S. Bureau of Land Management.
- Built highly experienced, seven-person team to manage Nevada operations, supported by 12
expert consultants in several areas of specialty.
- Completed C$9 million equity offering.
- Secured all required permits to execute underground exploration and bulk sampling.
- Closed US$20 million gold loan financing with initial US$10 million funding.
- Contracted Small Mine Development (SMD), with a team of over 35 highly specialized miners,
engineers, geologists, etc., to drive the underground decline.
- Launched 59,000 ft. Surface Drilling Program for 2011.
- Completed bulk of Fire Creek surface work and drainage ponds.
- Conducted active investor marketing program over the past 18 months in Canada, U.S., Europe &
Asia which substantially expanded Klondex awareness and valuation.
Dissident Group’s Plans/Motives are Highly Suspect
THE DISSIDENT GROUP HAS NOT STATED THEIR PLANS FOR THE COMPANY. Their
ownership stake clearly suggests they see substantial value in the
Company and in our accomplishments. However, we know at least one member
of the group is staunchly opposed to our underground initiative.
Additionally, their group has, on several occasions over the past two
years, brought potential merger/combination transactions to our
attention — but on terms or at valuations that were not favorable to
Klondex shareholders, and/or with companies in which they had an
ownership stake. Their silence on their future plans for Klondex, and
their insistence on seeking 100% control, while offering ZERO takeover
premium, raises serious questions regarding their intentions should they
gain control of your Company.
TO TRANSFER LEADERSHIP TO A NEW BOARD THAT HAS NOT DISCLOSED ITS VISION,
PLAN OR GOALS IS A HIGH RISK PROPOSITION. INCUMBENT MANAGEMENT IS BEST
POSITIONED TO UNLOCK SHAREHOLDER VALUE AS DEMONSTRATED BY OUR CLEAR
PROGRESS. WE HAVE GRAVE CONCERNS ABOUT THE TRUE AGENDA OF THE DISSIDENT
WE BELIEVE KLONDEX’S TANGIBLE EXPLORATION AND DEVELOPMENT
ACCOMPLISHMENTS ARE WHAT MATTERS MOST TO OUR SHAREHOLDERS AND ARE WHAT
WILL CREATE THE GREATEST VALUE FOR SHAREHOLDERS. It is on our record of
achievement that we believe our Board and management team should be
Underground Program Making Solid Progress
After several years of substantial effort and preparation, in April 2011
we commenced our underground exploration and bulk sampling program at
Fire Creek, our gold property in North Central Nevada. As of the date
hereof, our crews have completed 824 feet of underground drifts. This
includes 632 feet of our 3,650-foot underground decline to access Main
The decline will enable Klondex to commence exploration in-fill drilling
from underground stations before the end of August 2011 and to initiate
bulk sampling for metallurgical testing by year-end 2011. Photos of our
progress at Fire Creek are available on our website
The Fire Creek underground program is the culmination of a broad effort
put forth by Klondex’s Board of Directors, management team and
consultants and coincides with significant progress we have made across a
range of exploration, development and corporate initiatives.
Fire Creek Development History
Technical Report Update
- Klondex-led exploration began at Fire Creek in 2004
- NI 43-101 resource update — September 2006
- Underground program announced and permitting commenced — March 2007
- NI 43-101 resource update — March 2009
- Initiated underground decline — April 2011
- Initiated 2011 Surface Drilling Program — June 2011
- NI 43-101 resource update — expected in June 2011
In May 2011, we commenced work on an updated NI 43-101 compliant
technical report. The report, which will incorporate results from our
2009 and 2010 exploration programs into our March 2009 technical report,
is intended to bring our filings into compliance with National
Instrument 43-101. The report is being prepared by Vancouver, BC-based
TTM Resources Inc. with the assistance of our geological team, including
Richard Kern, M.Sc. P. Geo. Mr. Kern is a Klondex Board member and the
Qualified Person responsible for Klondex’s exploration drilling results
and other technical information. Klondex has provided all the
exploration assays and source data to TTM and plans to file an updated
technical report by the end of this month.
Fire Creek Underground Program Strategy & Benefits
Klondex embarked on its underground program in March 2007, after
identifying this option as the most efficient and cost effective path to
the attainment of Company objectives. After careful comparison of
alternative approaches, it was determined that the estimated costs to
“prove up” our Fire Creek resource for full-scale development through a
deep drilling program from the surface were roughly the same as those
required to pursue an underground program to achieve many of the same
objectives. An underground program offered the additional advantage of
placing us in position to initiate bulk sampling of high-grade
mineralization within the Main Zone. The underground program allows us
Klondex is Committed to Continued Corporate Improvement:
- Conduct in-fill drilling at depth via shorter, more cost effective drill holes;
- Prove grade, continuity and geometry of gold identified in the known zones;
- Collect samples of “fresh” mineralized material for metallurgical testing to verify gold recoveries;
- Construct portal and underground workings at a
scale that will support efficient transition to steady state operations
and reduce future capital costs to construct the mine;
- Provide a tangible demonstration of the
underground mine operations to government regulators to support mine
permitting and mitigate stakeholder concerns;
- Provide revenues from sale of gold from the
mill testing of the underground mineralized material which will be used
to reduce costs of programs underway; and,
- Provide important pilot scale information to
support mine planning, and mine start-up and commissioning to mitigate
We are aware of the governance issues raised and our goal is to correct
them. The past year has made unusual demands on directors’ and officers’
time and attention due to Klondex’s efforts to complete the required
financings for its underground program, including regulatory approvals
and permits, due diligence conducted by various groups, and review of
various financing options presented to the Company. We intend to rectify
these issues promptly and the February 2011 appointment of Robin Goad
as an independent director and member of the audit committee is such an
In summary, we believe the underground program delivers far more value
to Klondex shareholders than a surface exploration program. The coming
twelve months promise to be our most productive yet, with the release of
our updated technical report, a very active surface exploration
program, progress in driving our underground decline, and the planned
initiation of bulk sampling and underground exploration drilling.
We have assembled a world-class team of employees and industry-leading
consultants to direct and execute our strategy, and we are very pleased
with the progress our team is achieving.
OUR RECORD STANDS FOR ITSELF AND OUR PLAN IS POISED TO CREATE SUBSTANTIAL VALUE FOR SHAREHOLDERS.
We thank you for your confidence in our vision, and we encourage you to
contact us should you have any questions. We are eager to speak with any
and all investors to answer any questions you may have at this time.
Shareholder Conference Call & Webcast
We will host a shareholder conference call and webcast on Tuesday, June
21st at 11:00 a.m. ET. We will review our vision and progress in more
detail, and we will answer shareholder questions. We urge you to
participate in this call.
This is an extremely important time for your company, and we urge you to participate in the
|Date & Time:
||Tuesday, June 21st at 11:00 a.m. ET
|Conference Call Number:
|Webcast and Replay Link:
||402-977-9140 or 800 633 8284, code 21528625; through June 30
conference call and to VOTE THE WHITE Proxy in support of the Klondex Board and plan.
With sincere regards,
William J. Solloway
Chairman and CEO
Klondex Mines Ltd.
President and COO
Klondex Mines Ltd.
Klondex Mines Ltd.
Jaffoni & Collins
The information in this release may contain forward-looking information under applicable securities laws. This
forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause
actual results to differ materially from those implied by the forward-looking information. Factors that may cause
actual results to vary materially include, but are not limited to, inaccurate assumptions concerning the exploration for
and development of mineral deposits, currency fluctuations, unanticipated operational or technical difficulties, changes
in laws or regulations, the risks of obtaining necessary licenses and permits, changes in general economic conditions or
conditions in the financial markets and the inability to raise additional financing. Readers are cautioned not to place
undue reliance on this forward-looking information. The Company does not assume the obligation to revise or update
this forward-looking information after the date of this release or to revise such information to reflect the occurrence of
future unanticipated events, except as may be required under applicable securities laws.
Please direct all proxy inquiries to:
Questions and Further Assistance
If you have any questions or require assistance in completing or returning
your WHITE proxy form, please contact our proxy solicitation agent at:
North American Toll Free Number: 1-866-676-3009
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