Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Production Cap Lifted At Fire Creek Project As Klondex Receives WPCP From Nevada Authorities

|Includes: Klondex Mines Ltd. (KLDX)

Klondex Mines (TSE:KDX) (OTCQX:KNDF) has received a Water Pollution Control Permit (WPCP), lifting a 120,000 tonnage cap on operations.

Klondex remains on track to deliver 120,000-125,000 ounces AuEq in 2015.

The Nevada Division of Environmental Protection (NDEP), Bureau of Mining Regulation and Reclamation has issued a Notice of Decision, removing all tonnage restrictions. Klondex expects the final permit by the end of June.

Upon approval of an environmental assessment (NASDAQ:EA), which the company expects to receive this year, Klondex will be able to enhance its mine support facilities at Fire Creek, planning to build a new waste rock storage facility and additional water management ponds.

Klondex is on track to complete the EA, in accordance with a requirement from the Bureau of Land Management within the second half of 2015. The BLM Battle Mountain District has confirmed that an EA level of National Environmental Policy Act (OTC:NEPA) analysis is needed before Fire Creek operations can be expanded to allow full production after reviewing the Plan of Operations and related baseline environmental studies.

"This news represents a milestone for the Fire Creek Project. I would like to recognize the efforts of the regulators and our environmental Manager, Lucy Hill, through this process. Together, they have completed a very detailed, thorough review in a timely manner. Klondex's environmental team continues to demonstrate some of our industry's best standards. Environmental stewardship is a key focus to our company's objectives," said Klondex's vice president of business development, Mike Doolin.

Klondex, whose production is coming from two of the highest grade precious metals mines in North America, has transformed itself into a respected producer in just over a year. It started recognizing revenue for the first time in early 2014, soon after acquiring the producing Midas mine from Newmont Mining.

Klondex's integrated operations, Midas and Fire Creek, are located just 112 miles apart. The company is well-capitalized to complete its planned US$30 million exploration and development programs at Fire Creek and Midas, and US$3 million for the Midas mill and tailings facility.

Since January 2015, the Canadian gold producer has drilled 40 underground core holes at Midas, totalling about 7,600 meters, to expand high grade shoots near the existing infrastructure.

Phase II of the 2015 drill program at Midas calls for following up on newly identified mineralized zones, as well as conducting additional step-out drilling to delineate the margins of high-grade mineralization at targets close to the mine.

In May, Klondex showed Fire Creek's potential to continue building the resource and mine life, as assays from 19 core holes drilled in 2015 targeting the Hui Wui Vein and the Joyce Vein, delivered impressive gold intercepts, which are not included in the current mineral reserves.

The drill results from Fire Creek and Midas will be used to update the mineral resources by September:

"Klondex Mines Ltd. released development drill results from Fire Creek. . .a weighted average grade of 2.3 oz/t (78.2 g/t) gold and 1.7 oz/t (57.0 g/t) silver over an average width of 1.1m. These results compare favorably to the overall resource grade (Measured and Indicated plus Inferred) of Fire Creek. . .importantly, these drill results were from areas outside the current reserves and partially outside the current resource, suggesting that. . .resource are likely to grow. . .we expect a steady stream of drill results from both Fire Creek and Midas, which should benefit the company's share price," said M Partners analyst Derek MacPherson.

At Midas, Klondex said its mined and milled total grew 147% compared to the first quarter of 2014, with total gold equivalent ounces (NASDAQ:GEOS) recovered and sold rising 103%. Fire Creek saw a 165% increase in mined and milled, while GEOs soared 639%. The increase can be attributed to the acquisition and integration of the Midas Mine and Mill into Klondex operations within the first quarter, 2014.

Even if the gold price were to fall as low as US$940 an ounce, Klondex should see a positive return on operations, given that it has targeted production costs per GEO of $688-750 (US$550- $600) and all-in sustaining costs per gold ounce of $1,000-1,063 (US$800 - $850).