The drop in gold prices over the past three-and-a-half years has made it tough on miners, sending scores of companies to lower valuations. Gold staying low has some companies looking for cost synergies with other miners to combine forces, such as the "merger of equals" announcement this week between Alamos Gold (TSX:AGI) and AuRico Gold (TSX:AUQ) to create an intermediate gold producer.
One precious metal play that has not limped along over the past two years is Klondex Mines Ltd. (OTCQX:KLNDF) (TSX:KDX). US-listed shares of the Vancouver-based miner have risen from a low of 90 cents in April 2013 to $2.24 through Monday’s close.
Klondex owns and operates the Fire Creek Project, currently operating a bulk sampling program, and the producing Midas Mine and 1,200-TPD Mill in the north-central Nevada. In February 2014, Klondex acquired Midas, which has been in operation for 17 years. 2014 was the first year of production for Klondex, turning out 107,860 ounces of gold equivalent.
Investors will be looking for the next catalyst to push the stock price through resistance at $2.25. If that driver is staying on track with 2015 production guidance, then it came early Tuesday morning. Klondex reported its operational results for the first quarter, saying that tons mined and milled increased 147% (55,191 vs. 22,370) and 165% (57,664 vs. 21,727), respectively, over Q1 2014. Total gold equivalent ounces (GEO) recovered in the recent quarter were 32,542, compared to 16,052 in the first quarter last year, an increase of 103%. Total GEO sold totaled 31,703, a 639% improvement over 4,288 in last year’s quarter. Total GEO sold was comprised of 27,135 ounces of gold and 304,557 ounces of silver.
The results of the first quarter put Klondex on target to meet its goal of producing 120,000 – 125,000 GEO in 2015 via 102,000 gold ounces and 1.2 million silver ounces. From a cost point, Klondex is aiming for production costs per GEO of $550- $600 U.S. and all-in sustaining costs per GEO of $800 - $850 U.S.
After earning $18.3 million, or 16 cents per share, in 2014, the company also looks to be starting 2015 out profitably. Financial results for the first quarter will be delivered during the week of May 11, according to today’s release. In the meantime, we’ll see how investors react to the operational results and if the stock can push through to its highest level in more than three years.
