Klondex Mines upbeat about Nevada project, sees lots of potential

19th March 2013 By: Henry Lazenby - Creamer Media Deputy Editor: North America

TORONTO (miningweekly.com) – Nevada gold explorer Klondex Mines sees the possibility of a potentially greater future resource at its flagship Fire Creek gold project, in Nevada, once bulk sampling gets underway in the second half of the year.

The company, which also had a recent management shakeup and announced the discovery of a new mineralised zone in January, was preparing for an initial 120 000 t trial-mining campaign. 

But, the company's turnaround story began in June last year, when the board saw the appointment of seven new directors and in September, the appointment of CEO Paul Huet to lead the company’s transition from gold explorer to project developer.

Huet, who has extensive operational management experience in Nevada and is a narrow-vein gold mining specialist, is credited with building and permitting Great Basin Gold's Hollister mine and managing gold major Newmont Mining's Midas mine.

Huet told Mining Weekly Online on Monday that his first duty after appointment was to implement a comprehensive company turnaround strategy. He said there was only about $1.8-million cash left in the bank and the company had a capital burn rate of about $760 000 a month.

Under his leadership, the company removed a contractor from the mine site and now owned 100% of the machinery for the project. The company in January also closed a $30-million financing, comprising $23-million in equity and $7-million in debt, to pay off the $10.9-million in project-secured debt to free up project-development cash.

He pointed out the company’s main financiers were now equity holders, and the company’s debt were not secured against the project anymore, which removed some of the project risk. The Fire Creek project is now fully funded to trial production.

Klondex was currently busy proving up the main resource, with core drills active underground. Huet said the company also had a new contractor on site to excavate the secondary egress, which was one of the last requirements the company had to satisfy to start the trial mining phase.

“We are currently negotiating a toll-milling agreement, which we would use for the first couple of years of production, while we study the various metrics of the ore and potential on-site processing techniques,” Huet said by telephone from Thunder Bay, Ontario.


Meanwhile, the company in January reported the discovery of new gold mineralisation about 165 m west of the A-Vein mineralisation that formed part of Fire Creek's Main zone. Huet said the company made the discovery while it was completing a geotechnical drill hole for the design of its vent raise and reported an interval of 123.9 g/t gold over 1.5 m.

The company also encountered visible gold in three locations, including the left rib of the nearby drift; in a drill hole at the base of the access ramp; and in the geotechnical hole about 6 m above the access ramp.

Huet said the company had not yet followed up with exploration drilling. The plan was to do this once the trial mining, and cash flow got under way. “There is a tremendous opportunity to grow the resource, although it is not easy to secure money for drilling these days,” he noted.

When asked to speculate on how much gold could lie within the deposit, he pointed to the deposit having many similarities to its neighbours, which set the stage for much more mineralisation to be discovered.

Further, he said Fire Creek's current indicated and inferred resource of 2.1-million ounces of gold had been delineated on just 8%, or just under 1.9 km2, of Fire Creek's land claim.

Huet noted the company was about 80% complete, with a campaign to completely re-log the cores from about 73 000 m of drilling, to settle some investor scepticism about the resource. To this end, the company planned to release a resource update in June, which, for the company, would be one of the significant catalysts to production.

Following the resource update, the company planned to start work on a preliminary economic assessment.

The company was also working on constructing a rapid infiltration basin (RIB), part of a water management system that allows it to return treated water back into the earth. The company last week received a temporary water discharge permit from the Nevada Department of Environmental Protection. The 180-day permit would assist Klondex in managing the underground water treatment system.

“The six-month temporary discharge permit gives us ample time to complete our long-term water management solution: a RIB system designed to handle up to 3 000 g/min (11 350 l) water. We are making good progress in the application process to permit the RIB and expect the RIB to be permitted, constructed and operational in 2013,” Huet said.

He pointed out, however, the company would only use about 10% of the  permit's allowed discharge volume.


Klondex in February again strengthened the board with the appointment of veteran gold mining executive and co-founder of midtier gold miner Iamgold, Larry Phillips, as chairperson of the board effective April 1.

This appointment demonstrated the continuing commitment to enhance Klondex’s board with mining professionals possessing strategic planning, management, financial and technical expertise, the company said.

“Larry’s significant gold mining experience and achievements make his decision to join us an important step forward for Klondex. His experience in acquiring, developing and bringing gold mines into full-scale production should prove invaluable as we evolve Klondex from exploration to initial production and beyond. I also look forward to his mentorship in my role as CEO,” Huet said.