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Klondex Mines raises production guidance after sparkling quarter at its Nevada assets

The company produced more at a lower cost, with higher than anticipated grades at its Midas and Fire Creek assets
Nevada highway
The golden mile

Klondex Mines Ltd (TSE:KDX, NYSEMKT:KLDX) has raised its production guidance for the year after a strong quarter at it Nevada operations.

Full year consolidated production guidance has been increased to 213,000 - 230,000 gold equivalent ounces (GEOs) from 210,000 - 225,000 GEOs previously.

Additionally, Klondex has lowered its consolidated production cash costs per GEO sold to US$675 - US$700, down slightly from its original guidance of US$680 – US$710.

As a result of higher than budgeted metal prices and higher than expected production in Nevada, Klondex raised its capital expenditure guidance for 2017 to US$63 - US$71 million, while its district and near mine exploration expenditure is expected to be US$7-9 million, the majority of which will be spent at Fire Creek.

Shares rose 4.4% to C$3.80 on the results.

The gold and silver producer generated US$30mln of operating in cash flow, which was almost double the US$15.4mln in the same period of 2016.

Klondex sold 69,511 GEOs, comprised of 65,293 ounces of gold and 307,899 ounces of silver. Average realized selling prices for gold and silver respectively were US$1,249 and $17.10 per ounce.

Revenue hit a quarterly record of US$86.79mln, up 74% from US$49.99mln a year earlier. That fed through to net income of US$4.5mln, or 4 cents a share, versus a net loss the year before of US$4.5mln, or a loss of 3 cents a share.

The company ended the reporting period with cash of US$41.5mln after US$30mln of operating cash inflows and outlays of US$18mln in investing activities.

The quarter was a good one for Klondex's Nevada assets: Fire Creek, Midas and Hollister. The company mined 89,524 ore tons in the second quarter in Nevada at an average mined head grade of 0.52 GEOs per ton. 

Due to higher than anticipated grades at Midas and Fire Creek, it increased its full-year production guidance for Nevada to 172,000 - 185,000 GEOs and lowered its production cash costs per GEO to US$625 – US$650.

At Hollister, the company mined 15,162 ore tons in the second quarter at an average mined head grade of 0.47 GEOs per ton for a total of 7,064 GEOs, which were stockpiled at the end of the second quarter. Stockpiled ore is expected to be processed at the Midas mill in the second half of the year.

Mining rates and mined head grade are expected to increase in the second half of the year due to higher grades and as we complete development activities, increase cut-and-fill, long-hole mining rates.

"Our Q2 2017 operational and financial performance was the strongest in the company's history,” declared Paul Huet, president and chief executive offer of Klondex.

“Our core assets in Nevada continued to perform exceptionally well and, as a result, have allowed us to increase our consolidated production guidance for the year at slightly lower costs. Additionally, we have continued to maintain strong liquidity and a healthy balance sheet, ending the quarter with over $40 million in cash," Huet said.

"We have made significant progress ramping up Hollister and True North. At Hollister, we expect to begin processing stockpiled ore in the Midas mill in Q3. At True North, after a slower than expected ramp-up in the first half of the year, we are catching up on our waste development activities, which will give us access to significantly higher grade material in the second half of the year.

“We have also completed the installation of a new underground mobile maintenance shop providing greater equipment availability. We are well positioned to deliver on our consolidated operational guidance for the year," Huet concluded.

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