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Klondex Mines encouraged by previous drilling results on Rice Lake Mine

The company will follow up on the “very encouraging” drill results from previous owner San Gold Corporation

A drillbit going into the ground
San Gold conducted a 15 hole program, totaling 6,485 ft, targeting the down-dip extension of the 91 vein.

Previous drill studies show the potential for high grade discoveries at Klondex Mines Ltd’s (TSE:KDX; NYSE:KLDX) newly acquired Rice Lake Mine, Canada chief executive Paul Huet told investors.

The company will follow up on the “very encouraging” drill results from previous owner San Gold Corporation, taken in the fourth quarter of 2014, with its own drill program later this year.

San Gold conducted a 15 hole program, totaling 6,485 ft, targeting the down-dip extension of the 91 vein.

It identified the potential for a new vein in the footwall of the 91 vein and an additional mineralized structure was intersected in the hanging wall of the 91 vein, Klondex said.

In terms of work currently being done on the site, refurbishing the track and the shaft is on budget and on schedule, the company said, with a notice to restart mining and milling operations approved by the Director of Manitoba Mineral Resources last month.

“We continue to expect to be in a position to announce a production decision in the second half of this year,” Huet said.

Broker Dundee rates shares a 'buy' high risk, targeting $3.75.

"Since the company’s acquisition of Rice Lake in January 2016, Klondex has been completing refurbishment activities required to recommence production," it said.

"The company reported that 100% of the guides have been replaced in the main shaft, track repair on the 2600 level is 55% complete, and the new underground shop and gear storage cut-outs are 80% complete."

Management has previously indicated capex of around $7mln will be incurred at Rice Lake in 2016, added analyst Josh Wolfson.

"We currently forecast initial production in 1Q17, with average annual production of 57.7 koz at TCC of $792/oz over a 5.5 year reserve life," he added.

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TSX:KDX
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