Klondex Mines (TSE:KDX) (OTCQX: KLNDF), a Nevada gold exploration and development company that is nearing production, reported Thursday that its underground program at its Fire Creek project yielded 1,329 tonnes of mineralized material in July, at an average grade of 32.7 grams per tonne (g/t) gold.
The underground development program, which is targeting the Joyce and Vonnie structures within the main zone of the property, has over the last three months generated 3,249 tonnes of mineralized material, with an average grade of 75.4 g/t gold.
The agreement with Newmont is part of the gold development company's way to monetize its high grade material, with CEO Paul Huet highlighting at Klondex's annual shareholder meeting that these deals will be a "great opportunity to improve margins and separate the high grades over 3 ounces that [the company] has." Proceeds from the processing of this material will be used toward funding the company's own waste development ahead of the 2014 bulk sampling program, and for a second drill to follow up on recent discoveries ahead of targeted initial production later this year.
The underground development program at the Joyce and Vonnie veins is expected to continue throughout the rest of the year. In July, a total of 240 samples were taken from these areas, with gold grades ranging as high as 400 g/t over vein widths ranging from 0.1 to 0.7 metres.
"Through our underground development program, we continue to see very encouraging gold grades and are gaining an excellent understanding of the geology, structure and gold mineralization of the Fire Creek deposit," said Huet in a release Thursday.
"We've made tremendous progress over the past year as a direct result of our dedicated team, and I'm thankful for their devotion to Klondex and to advancing the Fire Creek project."
Initial production from bulk sampling at the project is due to start later this year. Being surrounded by major producers, the Fire Creek property is as expected also proximate to 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, most other major permitting is in place.
Shares of Klondex were unchanged on Thursday afternoon, steady at $1.46.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.