Klondex Mines (TSE:KDX) (OTCQX:KLNDF) has announced some outstanding high grade channel sampling results from its Fire Creek gold project in Nevada, which remains on track for initial production starting later this year.
The gold development company, through channel sampling as part of additional exploration drifting and metallurgical sampling on the Vonnie vein, returned results as high as 22,396 grams per tonne (g/t) of gold 74 feet north of the 5400 cross cut. It also returned 20,231 g/t gold 63 feet north of the 5400 cross cut, and 15,891 g/t gold 69 feet north.
Shares of Klondex picked up 1.85 per cent on Thursday, to $1.10 as of 10:15am ET.
The high grade mineralization was found during a program that was designed to follow up on a surface drill intercept that returned 2,910 g/t gold over 1.5 metres last September. Klondex says it is testing the Vonnie vein after each exploration round.
"We are very encouraged by these results. With our team's substantial expertise in narrow vein systems, we expect to be able to minimize dilution while maximizing grade. We anticipate that these grades will allow us to be more selective in our mining process," said president and CEO Paul Huet in the statement Thursday.
The company is working hard at having the next new producing asset in Nevada, with Klondex having the advantage of grade on its side, according to Huet, who made the assurance to investors at the company's annual general meeting last week.
The Fire Creek project 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. The company is planning to start initial production from bulk sampling later this year, with an updated resource from drilling due this summer, to be followed by a new and comprehensive mine plan.
"The Fire Creek project is an amazing asset. We have the advantage of grade. It's a high class, simple asset that demonstrates some of the best grades you're going to see in the world," said Huet, who came on board at Klondex late last year, making his appearance at the meeting his first presentation to investors.
Indeed, in May, the Nevada-focused company yielded 682 tons of mineralized material at an average grade of 73.8 grams per tonne (g/t) through a metallurgical sampling program, for some 1,400 contained gold ounces, part of the company's strategy to improve margins with its high grades.
"The material has been sent out to a direct smelter, as the grades are so high that putting it into a mill risks a potential loss in recoveries. It's a great opportunity to improve our margins and separate the high grades over 3 ounces that we have," Huet said at the meeting. "It's something we will do for as long as we encounter it to maximize our margins."
He explained that the nature of the deposit allows the mining of selective areas, but more importantly, 75 per cent of the indicated ounces at the deposit remain at a higher cut off grade, something Huet says is an advantage from any operator's standpoint, and one Klondex "will make sure to capitalize on".
Aside from being surrounded by major producers, the property is as expected also proximate to power, transportation, infrastructure and a milling facility in the heart of the U.S. state's gold trend. Apart from the Rapid Infiltration Basin permit, which has been submitted and is on track for the third quarter, most other major permitting is in place.
The company said Thursday sampling improves its understanding of the structures at the site, and helps identify targets for further drilling. Klondex's chief geologist, Steve McMillin, said in the statement that current drilling continues to confirm the continuity of mineralization as the company moves south along the ramp.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.