Klondex Mines working through some challenges

Klondex Mines Ltd. [KDX-TSX, KLDX-NYSE AMERICAN] shares were lower Friday February 2 after the company announced preliminary operating results that failed to match the lower end of Klondex’s previous production forecasts.

The company also cancelled an investor day conference, scheduled for February 7, 2018, because Klondex President and CEO Paul Huet is recovering from pneumonia and is restricted from travelling. An alternate date will be determined in the near future, the company said in a press release.

Klondex Mines is a junior gold and silver mining company with a focus in safe and environmentally responsible jurisdictions. The company has 100% interest in four producing mineral properties: the Fire Creek Mine, the Midas Mine and ore facility, the Hollister Mine, all of which are located in Nevada. The company also holds a 100% stake in the True North Mine and mill in Manitoba.

During 2017, the company produced 189,500 gold equivalent ounces, an increase of 17% from 161,289 ounces in 2016, but below the recently revised guidance of between 196,000 to 212,000 ounces. The production shortfall was largely due to an intentional deferral in processing ore at the Hollister mine to maximize recoveries. The company said it decided to defer the processing of the majority of the mined Hollister ore as it continues to optimize recoveries at the Midas mill for this ore.  Stockpiled material at the end of 2017 contained approximately 15,000 gold equivalent ounces.

“In addition, the expected production results were not achieved at True North as a result of aggressive expectations and operational issues,” the company said.

The True North mien produced 27,919 gold equivalent ounces in 2017, a number that failed to meet the low end of previous guidance. The company attributed the shortfall to mining of lower than forecast grades from the True North and Cohiba mines.

The True North Mine has been placed on care and maintenance, allowing the company to review strategic options and provide optionality at higher metal prices. Tailings reprocessing is planned to continue there during the warmer months.

Meanwhile, Klondex has released its 2018 guidance saying it is forecasting consolidated production of 186,000-202,000 ounces at an all-in sustaining cost of between US $940 and US $990 an ounce.

Commenting on these results, Huet said integrating the company’s two recently developed assets, Hollister and True North, simultaneously proved to be more challenging than the company had anticipated.

“The processing of Hollister ore through the Midas mill was delayed during the year as we work to improve ore recoveries, which resulted in production delays and stockpile accumulation,” he said. “In addition, we were not able to deliver on our plans at True North and had to make a difficult decision there, placing mining operations on care and maintenance.”

On Friday Klondex shares fell 8.57% or $0.24 to $2.56. The shares traded in a 52-week range of $7.73 and $2.10.