TORONTO (miningweekly.com) – Nevada narrow-vein gold miner Klondex Mines reported after market close on Tuesday that its maiden net profit of C$4.4-million, or C$0.04 a share, demonstrated its transformation from junior explorer to gold producer.

For the three months ended June 30, TSX-listed Klondex reported revenue of C$36.4-million and for the first half of the year, revenue was C$39.07-million. The company did not recognise revenue last year.

The company sold 25 725 oz of gold equivalent, consisting of 20 293 oz of gold and 343 025 oz of silver. In the six-month period, Klondex sold 27 573 oz of gold equivalent.

Production costs were $730/oz of gold equivalent.

In February Klondex closed the C$83-million acquisition of the Midas mine from a Newmont subsidiary and immediately started drilling and blasting the underground stopes, revealing high-grade gold and silver veins in an area along strike from the existing workings.

The Midas deal not only secured a long-term milling solution for Klondex but also lifted its long-range free cash flow and margins, adding a producing property to its asset portfolio with the potential to increase throughput, recoveries and mine life.

The deal closed February 11 and the company started recording sales from Midas soon thereafter.

Despite Klondex not having made a formal production decision at its flagship Fire Creek deposit, owing to it still being in the bulk-sampling phase, the ore extracted from Fire Creek under the bulk sample permit was processed through the Midas mill, generating the first revenue from the project.

“Our strong second-quarter results reflect Klondex’s continuing transformation into a low-cost producer of gold and silver in north-central Nevada. On a sequential basis, our recovered ounces increased while production costs decreased. We anticipate that production costs will continue to improve as we increase output from Fire Creek and further [improve the efficiency of] operations at Midas,” president and CEO Paul Huet said.

After quarter end, Klondex improved its financial position by closing bought-deal financing for gross proceeds of C$16.1-million. The net proceeds from the offering would be used mainly to help accelerate exploration and development at the Midas mine and the Fire Creek project.

“After a busy first half of 2014, we believe we have the right team, the right assets and the financial strength to continue to strive towards generating long-term value for shareholders,” Huet stated.

Klondex is hoping to produce between 70 000 oz and 100 000 oz of gold equivalent this year.

The Midas mine and milling facility is located about 200 km from Fire Creek. Klondex had previously said it planned to prepare its own mine plan for Midas and split the mill's capacity equally between the two mines.