TORONTO (miningweekly.com) – Nevada-focused narrow-vein gold miner Klondex Mines on Monday reported that it had started initial drilling at its Fire Creek project on the Karen vein, located 45.7 m west of the main decline, and parallel to the Joyce vein and Vonnie vein, which COO Brent Kristof said supported the theory that Fire Creek is under drilled.

The Karen vein was is one of the western veins initially discovered last year during development work on the secondary egress.

Vancouver-based Klondex said that it had drilled nine holes to the west of the decline to define and extend the Karen vein and test for additional paralleling structures in this zone.

To date, 25 m of exploration development had been completed along strike of the Karen vein, and the weighted average gold grade of samples from the Karen vein was 74.9 g/t, with an average width of half-a-metre. This information was derived from face samples ranging from 4.6 g/t to 176.5 g/t.

“This is very encouraging news for Fire Creek because it is further evidence of the asset's considerable potential and a classic example of how additional mineralisation is typically discovered during underground development in these epithermal vein systems.

“At this stage, we do not know how many ounces will result but are encouraged by the fact that a mineralised vein is visible on the north and south faces. We will continue to extend the drift along strike while our drills define the vertical extensions,” Kristof said.

He added that the Karen vein had the potential to add to its current mineral resource estimate. “We are in the process of planning an infill-drilling programme around the Karen vein designed to extend the vein both along strike, north and south, and up and down dip. We expect that by year-end we will have an updated mineral resource estimate for Fire Creek that will include more of this western zone.”

FEASIBLE PLANS

Klondex last week reported results of a preliminary economic assessment (PEA) for Fire Creek, which pointed to “immediate positive cash flows” from the asset, along with exploration upside.

The PEA, prepared by Practical Mining, assumed an average gold price of $1 250/oz and $18/oz for silver, and estimated the project to hold an after-tax net present value at a 5% discount rate of $141.5-million, and $128.3-million at a discount rate of 10%.

Over the five-year life of the mine, the project was estimated to produce 280 000 oz of gold and 139 000 oz of silver. Capital costs for the life of the mine were pinned at $49.6-million with a payback period of six months, while all-in sustaining costs, including silver by-product, were estimated at $636/oz.

The report was based on an average gold price of $1 250/oz, and a silver price of $18/oz.

The PEA was based on the company’s National Instrument 43-101-compliant resource estimate as of the end of last year, comprising measured and indicated resources totalling 295 900 oz of gold grading 44.7 g/t, and inferred resources of 421 400 oz of gold grading 19.2 g/t, all at a cutoff grade of 7 g/t gold.

The gold miner, which recently acquired the nearby Midas mine and mill, said the mined material from Fire Creek would be shipped to the Midas mill for processing, and then be blended with the Midas material before processing started.

Klondex started operating the Midas mill in February, and immediately began processing a blend of the Fire Creek and Midas ores at a rate averaging 25 t/h. At the end of the first quarter, more than 7 800 t of Fire Creek ore was processed with gold and silver recoveries calculated at 96% and 95% respectively. Currently, the mill is being operated at half of its capacity.

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.

Klondex expects to produce between 70 000 oz and 100 000 oz of gold this year.