TORONTO (miningweekly.com) – Nevada-focused gold exploration and development company Klondex Mines on Thursday reported gold assay results from surface drilling that suggested possible extensions to the current high-grade mineral resource model at its flagship Fire Creek project.

The TSX-listed firm said that while four reverse circulation (RC) holes where drilled as part of the Fire Creek hydrology study, RC chips were logged, and samples were collected on 5 ft intervals for assaying.

Three of the four holes intercepted mineralisation outside of the current mineral resource model that was in line with the underground workings. These intercepts included grades from the surface drilling range from 16.3 g/t of gold, to 5.1 g/t of gold.

“These intercepts continue to support our view that the Fire Creek project is significantly underexplored. The 2014 drill programme is designed to follow up on new discoveries as well as extend the strike length and vertical extent of the current known mineralisation, as we continue to unlock value at Fire Creek.

“Based on my personal experience, in these styles of mineral deposits, RC drill holes dilute and underestimate the grades. We expect that additional core drilling in these areas will clarify grades and widths,” Klondex GM Mike Doolin said.

Klondex had earlier this year reported bonanza grades at the Vonnie and Joyce deposits on the Fire Creek property, recording sample sizes of up to 22 396 g/t of gold.

In August, Klondex started sending ore in 1 000 t lots from underground development activities to gold major Newmont for toll processing, which was providing the company with a convenient way to determine the ore’s metallurgical properties, but also to monetise it, providing much needed development capital.

Most recently, Klondex had agreed to acquire Newmont’s Midas underground operation and mill complex, in Nevada, for more than $83-million, providing the company with a mill that would help to de-risk the Fire Creek project further.

The deal would bring together two excellent epithermal deposits with a high-quality central mill.

The purchase price comprised about $55-million in cash, subject to customary adjustments, and replacing Newmont surety arrangements with Nevada and federal regulatory authorities totaling about $28-million.

Klondex planned to finance part of the $83-million acquisition through a $35-million financing package with royalty and stream company Franco-Nevada. The package comprised a prepaid gold purchase arrangement and a 2.5% net smelter royalty (NSR) on the Fire Creek and Midas properties.