Klondex Mines (TSE:KDX) (OTCQX:KLNDF) has reported results from its first full year of production at its Nevada gold mines, amassing profits of over $18 million and revenue of some $122 million during 2014.
The Canadian company, which transformed itself from an insolvent business to a producer with two underground assets in just two years, said net income for the year was $18.3 million, or 16 cents per share, compared to a net loss of $14.1 million, or 21 cents per share, in 2013.
Revenue climbed to $121.7 million from nil in the previous year, as the company acquired the operating Midas mine in Nevada in February 2014, and started generating revenue from a bulk sampling program at its Fire Creek asset only last year.
Klondex, which reports in Canadian currency, also said fourth quarter revenue of $44.6 million increased 17 percent from the third quarter due to 16 percent growth in gold equivalent ounces sold and a 1.3 percent rise in the average realized price.
The Nevada-focused gold miner recovered 30,460 gold equivalent ounces in the fourth quarter, and 107,861 ounces during all of 2014. It said production costs for the latest three month period were US$603 per gold equivalent ounce sold, and US$585 an ounce for the full year.
The company's average realized price for gold in 2014 was US$1,264 an ounce, and US$1,234 an ounce in the fourth quarter.
Klondex has come a long way over the past year, making important advances to its Midas property since acquisition, including a significant increase in mineral resources and grades, as well as a substantial reduction in dilution.
The precious metals producer says its production is coming from what it believes to be two of the highest grade mines in North America. Klondex is also undertaking a bulk sampling program at its Fire Creek project, and is looking to develop the asset to a full production scenario.
This should be easy enough, since the 1,200 tonne per day Midas mine and mill is located just 112 miles away from Fire Creek, and is already processing the material from Fire Creek's bulk sampling efforts.
"The year was highlighted by the acquisition of the Midas mine and mill, transforming the company into a multi-asset producer," said chief executive officer Paul Huet, who managed Midas under different ownership earlier in his career.
"We were able to take advantage of the many synergies between Fire Creek and Midas to become one of the lowest cost gold producers with a company-wide production cost per gold ounce sold on a by-product basis of US$454 in 2014."
After recovering nearly 108,000 ounces of gold equivalent in its inaugural year of production, the company is looking to increase this to between 120,000 and 125,000 ounces in 2015.
The CEO said Klondex has begun the year with newly published reserve plans for both Midas and Fire Creek, which will generate free cash flow and profitability "for years to come". The company spent a total of $30.8 million in capital expenses in 2014, mainly for exploration and development at both of its Nevada sites.
"We are dedicated to ongoing resource development with a view to deliver sustainable production and organic growth," said Huet. "We will build on the foundations we established in 2014 as we benefit from continuing cost reductions and productivity improvements."
Klondex's Fire Creek project has a gold mineral reserve grade of 1.28 ounces per ton extending over a 3.8 year mine plan, which confirms the asset as a low cost gold project, flexible to metal prices, and with an undiscounted cash flow of $83.6 million.
If one assumes the same plan, and a US$1,200 gold price, Fire Creek's cash flow increases by 39 percent to US$115.9 million. Even at the calculated US$1,000 gold price, the free cash flow provides the funding to invest in the project's continued growth.
Meanwhile, at Midas, the new mineral reserve plan, which allots a 2.8 year reserve, allows even more time to define already discovered veins and to discover new structures at the site. Klondex has plans to release a pre-feasibility study for Midas in the first quarter of this year.
The company --- which ended 2014 with a cash balance of $52.8 million and working capital of $56 million --- is guiding for all-in sustaining costs of US$800 to US$850 per gold equivalent ounce in 2015, and production costs of US$550 to US$600 an ounce.
Its 2015 budget for exploration is about $15 million per site, for a total of $30 million, which includes surface drilling, and underground exploration and development.