Klondex Mines (TSE:KDX) (OTCQX: KLNDF) has reported metallurgical sampling results from last month at its Fire Creek deposit in Nevada as the gold explorer and developer transitions into initial production later this year.
The Nevada-focused company reported the metallurgical sampling program yielded 682 tons of mineralized material at an average grade of 73.8 grams per tonne (g/t) gold during the month of May, with sampling expected to continue throughout the year in its effort to gain a better understanding of the mineralogy that hosts the Joyce and Vonnie structures.
Klondex told investors Wednesday that current sampling is within a high grade zone of the Joyce structure, and as a result, the company will ship the material collected in May for direct smelting rather than processing it through a conventional milling facility. Shipping to Jerritt Canyon will begin later this year as planned, it added.
"This is a pivotal year for Klondex as we transition from an exploration and development company into initial production via bulk sampling. Any cash flow received from metallurgical and bulk sampling will be used for future development and core drilling as we continue to expand our understanding of the deposit," said president and CEO Paul Huet in the release.
"With excellent dilution management and geological controls, the grades from exploration sampling in the 5370 crosscut are exceeding our expectations."
Klondex is now in the process of finalizing terms with a third party for the direct smelting of the high grade materials from the Joyce structure, with shipment of the first lot expected before the end of June.
The company is also in the process of completing the vent raise access, after which the company plans to move into its bulk sampling program. "The vent raise access is progressing well. The top access is complete and the bottom drift is in place," Huet said in the statement.
At the end of last month, the TSX-listed gold development company announced the discovery of mineralization in the new West Zone at its Fire Creek project, saying that significant mineralization was intercepted in five exploratory drill holes. All five holes drilled to test for an extension of the vent-raise access discovery returned mineralization, with one hole reporting a gold intercept of 67.4 g/t gold over 0.3 metres.
The new zone supported the company's thesis that the exploration upside at Fire Creek extends well-beyond the current mineral resource borders.
The property is situated at the intersection of the Battle Mountain trend and Northern Nevada Rift, which also hosts the Midas and Hollister narrow-vein epithermal gold deposits. Aside from being surrounded by major producers, it is also proximate to power, transportation, infrastructure and a milling facility in the heart of the U.S. state's gold trend.
An initial bulk sampling program from the property is scheduled for the third quarter, with the aim of extracting approximately 10,000 tons of material in the remainder of 2013. Targets for next year are to be announced with the completion of an updated mineral resource estimate - expected in June.
Shares of Klondex picked up by one penny in early deals, to trade at $1.17 in Toronto.
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