Klondex (KLNDF, Financial) excited its stakeholders with an impressive 21% return in the fiscal year 2014. The mining major, strategically acquired and smoothly integrated the operations of the Midas Mine, and mill into its significant operations. This key acquisition of the mill alleviated its greatest risk at Klondex i.e. milling the Fire Creek material.
Smart operational moves
Through the planned integration of the operations at the Midas and Free Creek, Klondex saved significantly with $32 million per year of approximate savings for the Fire Creek material alone. The acquisition also enabled Klondex to monetize the bulk sample of Fire Creek.
The well executed integration of the key operations at the Free Creek and Midas Mine is believed to deliver solid top line growth for the company and generate superior shareholder returns.
During the fiscal year 2014, Klondex recovered nearly 108,000 gold equivalent ounces surpassing its earlier forecast by about 25%. It recorded production cost of CAD$679 Canadian dollars or nearly US$585 on a gold equivalent basis. On leveraging silver as a byproduct, Klondex registered a production cost of CAD$526 or US$454.
In the year, Klondex alleviated two of the greatest risks it encountered at Midas. The first is the continuing mine life risk, which Klondex seeks to continue to ease, and, regularly execute drilling with the continued addition of dollars on year-over-year basis.
The focused efforts of the management at Klondex to recover the gold and silver equivalents production at lowered costs, along with continually simplifying the mining operations and accelerating the drilling process by pumping in significant dollars continuously on year-over-year basis.
The second risk was the tails dam storage capacity. Klondex enhanced the mineral resources linked to the mine life in an extremely short time period. Until August 2014, Klondex enhanced the calculated and designated resource by 37% to account 527,000 ounces at a grade of 0.47 gold equivalent ounce per ton or higher.
Better times ahead
Klondex is significantly discovering the operations near the mine including the hugely capable West Zone, the Midas trend, the Rico coupled with the South Zone on the Queen and the SR.
The calculated discovery of the mining resources at improved grades is estimated to significantly benefit Klondex in expanding its mining base, and, to generate enhanced shareholder value.
The strategic decision of Klondex to Discover and later drift into the West Zone Veins mainly into the Hei Wu and the Karen Veins have enabled it to enhance the calculated and specified mineral resources by approximately 47%.
The recent mineral resource information at the Fire Creek enhanced the calculated and specified deposits from 297 to 421,000 gold equivalent ounces at an average grade of 1.1 ounces per ton gold equipment.
The uniquely discovered mineral resources at the Klondex mines particularly the Fire Creek is estimated to exceptionally position the mining major, moving ahead.
For the fiscal year 2015, Klondex has plans to grow its Fire Creek footprint by about 1000 foot laterally to the North and 1450 feet to the South, while developing levels between the Joyce, Vonnie, and Karen giving us added working pace.
Klondex Mines has over 160 miles of tunnels at Midas since 15 years. Therefore, Fire Creek is believed to expand and deliver improved ounces for the company and deliver significant free cash flows.
The solid growth of Klondex at Fire Creek is believed to hugely benefit the mining production and generate superior top line growth for the company, simultaneously benefiting the investors.
Klondex has comprehensive mine plants at $900 gold, at $1000 gold, and $1100 gold. According to the existing economic conditions, the mining major plans to quickly implement the corrective procedures to significantly benefit the key stakeholders.
The consensus estimate among eight analysts surveyed by Reuters covering Klondex Mines Ltd. suggests a “strong buy” to the stock, upgraded on March 23, 2015 from the previous buy rating to the stock.
Conclusion
Overall, the investors are advised to invest into the Klondex Mines Ltd. looking at the superior profit margin of 15.04%. Also, the company has a robust balance sheet with total cash of significant $41.94 million against total debt of $44.65 million only, allowing Klondex to invest into future mining growth.
