Mr. Paul Huet reports
KLONDEX REPORTS SECOND QUARTER 2015 CASH INCREASE OF $13.1 MILLION; NET INCOME OF $4.8 MILLION ($0.04 PER SHARE); SELLS RECORD 34,189 GEOS
Klondex Mines Ltd. has released its operational and financial results for the second quarter of 2015. This release should be read in conjunction with the company's second quarter 2015 unaudited financial statements and related management's discussion and analysis (MD&A), which are available on its website and on SEDAR. All dollar amounts included in this press release are expressed in thousands of Canadian dollars unless otherwise noted.
Quarterly highlights
- Health, safety and environmental:
- No lost-time accidents;
- Received two permits critical to long-term growth plans: the water pollution control permit and the tailings expansion permit;
- Operating cash flows and liquidity:
- Cash balance increased from the end of the first quarter of 2015 by $13.1-million (23.9 per cent) to $68-million;
- Generated $23.1-million in operating cash flows;
- Ounces sold:
- A record 34,189 gold equivalent ounces (GEOs) sold, consisting of 26,768 gold ounces and 543,251 silver ounces (a record);
- The company now anticipates that full-year 2015 GEOs produced will total approximately 125,000 to 130,000 ounces, an increase of 5,000 GEOs from its estimate at the beginning of the year;
- Revenues:
- A record $51-million of revenue;
- Average realized selling prices per gold and silver ounce of $1,492 ($1,213 (U.S.)) and $20.37 ($16.56 (U.S.)), respectively;
- Performance measures:
- Significant margins from quarterly realized metal prices and improvement in unit costs over prior-year period;
-
Operations:
- Produced 26,552 ounces of gold and 472,473 ounces of silver;
- Higher average daily ore tons milled (approximately 693 tons per day) and higher average silver mill head grades (eight ounces per ton) than the first quarter of 2015;
- Average gold mill head grades (0.45 ounce per ton) slightly lower than the first quarter of 2015;
- Exploration results:
- Continued to encounter high gold grades in both new and existing veins of mineralized material at the Fire Creek project and Midas mine.
Paul Huet, president and chief executive officer, said: "Our team efforts in the second quarter resulted in record gold equivalent ounces sold and a reduction of our all-in sustaining costs per gold ounce sold from the first quarter. Additionally, our collective efforts working with the regulators obtained two environmental permits necessary for our long-term growth. Lastly, I am excited to announce that we have increased our 2015 capital expenditure guidance by $10-million (U.S.) to build upon the exploration successes of the first half of the year."
2015 full-year outlook
As a result of its record second quarter 2015 GEOs sold, the company now anticipates that its full-year 2015 GEOs produced will total approximately 125,000 to 130,000 ounces, an increase of 5,000 GEOs from its estimate at the beginning of the year. The company anticipates that the additional ounces produced will primarily come from Midas, which has higher-cost GEOs, and is revising its estimated full-year production cash costs per GEO sold to $575 (U.S.) to $625 (U.S.) (up from $550 (U.S.) to $600 (U.S.)). The company is revising its all-in sustaining cash costs per gold ounce sold to $750 (U.S.) to $800 (U.S.) (down from $800 (U.S.) to $850 (U.S.)) due to increased first-half actual and estimated full-year silver revenues. As a result of its exploration successes during the first half of 2015, the company has elected to increase its annual capital additions total by approximately $10-million (U.S.) (between both sites) to $43-million (U.S.), as it has increased the scope of its development and drilling programs. The company is using cash for the exploration and development of its mines that may otherwise be used to further reduce its debt. The company currently believes that this approach allows it to create the most near- and long-term value while maintaining its annual total cash flows. The company's annual estimates are summarized in the accompanying table and presented with results for the six months ended June 30, 2015.
2015 FULL-YEAR GUIDANCE
Six months
ended
June 30, 2015 Low High
Gold equivalent ounces produced
(ounces) 65,167 125,000 130,000
Production cash costs per GEO sold
(U.S.$/ounce) $ 646 $ 575 $ 625
All-in sustaining costs per gold
ounce sold (U.S.$/ounce) $ 695 $ 750 $ 800
Capital additions (U.S.$ 000s) $ 23,084 $ 43,000
(1) Gold equivalent ounces produced is calculated using the actual average
realized selling prices for the six months ended June 30, 2015.
Second quarter selected financial information
SELECTED FINANCIAL INFORMATION
Three months ended Six months ended
June 30, June 30,
2015 2014 2015 2014
Revenues $ 50,991 $ 36,444 $ 98,243 $ 39,071
Cost of sales
Production costs 25,429 18,723 52,289 20,398
Depreciation and depletion 8,709 6,649 18,298 6,926
Gross profit 16,853 11,072 27,656 11,747
General and administrative
expenses 3,717 2,173 7,159 4,403
Loss on asset classified as
held for sale 432 - 432 -
Income from operations 12,704 8,899 20,065 7,344
Net income $ 4,815 $ 4,441 $ 14,877 $ 2,029
Net income per share -- basic $ 0.04 $ 0.04 $ 0.12 $ 0.02
During the three and six months ended June 30, 2015, Fire Creek and Midas operated at planned levels, which resulted in 26,768 and 53,903 gold ounces sold, respectively, and 543,251 and 847,808 silver ounces sold, respectively. Revenues, production costs, and depreciation and depletion increased during the three and six months ended June 30, 2015, from the same periods of 2014 as the Midas acquisition was completed in February, 2014, after which the company began increasing production and ramped up operations at both Midas and Fire Creek.
Second quarter liquidity and capital resources
The company's cash balance increased from the end of the first quarter of 2015 by 23.9 per cent to $68-million as the company generated $23.1-million in operating cash flows, used $10.5-million in investing activities and received $1.1-million in financing activities.
The company's working capital increased $4.5-million (approximately 8 per cent) from Dec. 31, 2014, to June 30, 2015, while its working capital ratio decreased by 12.3 per cent. During the first six months of 2015, the company's $15.2-million increase in cash was partially offset by a $6-million increase in accounts payable and accrued liabilities and a $3-million increase in income taxes payable.
Second quarter summary operational results
SUMMARY OPERATIONAL RESULTS
Three
Three months ended June 30, 2015 months
ended
Fire June 30,
Mine operations Creek Midas Total 2014
Ore tons milled 19,631 43,428 63,059 46,047
Average gold mill head
grade (oz/ton) 1.00 0.20 0.45 0.38
Average silver mill head
grade (oz/ton) 1.31 11.03 8.00 7.38
Average gold recovery rate
(%) 94.5% 94.1% 94.4% 92.8%
Average silver recovery
rate (%) 93.0% 93.7% 93.6% 95.4%
Gold produced (ounces) 18,558 7,994 26,552 17,093
Silver produced (ounces) 23,852 448,621 472,473 325,018
Gold sold (ounces)(1) 18,457 8,311 26,768 20,293
Silver sold (ounces) 33,383 509,868 543,251 343,025
Gold equivalent sold
(ounces)(1) 18,925 15,183 34,189 25,603
Non-IFRS measures -- in
Canadian dollars
Production cash costs per
gold ounce sold on a
byproduct basis(1) $ 577 $ 446 $ 537 $ 550
Production cash costs per
GEO sold(1) $ 600 $ 927 $ 744 $ 731
All-in sustaining costs
per gold ounce sold(1) $ 732 $ 835
Non-IFRS measures -- in
U.S. dollars
Production cash costs per
gold ounce sold on a
byproduct basis(1) $ 469 $ 363 $ 437 $ 504
Production cash costs per
GEO sold(1) $ 488 $ 754 $ 605 $ 670
All-in sustaining costs
per gold ounce sold(1) $ 595 $ 766
(1) This is a non-IFRS (international financial reporting standards) measure.
Fire Creek's and Midas's second quarter 2015 results included the sale of an all-time high of 34,189 GEOs, consisting of 26,768 gold ounces and 543,251 silver ounces, as metal was produced according to the company's second quarter plan, which included reducing costs and increasing production levels compared with the first quarter of 2015.
Fire Creek continued to operate as planned during the second quarter of 2015, with an average daily milling rate of approximately 216 tons per day (232 tons per day in the first quarter of 2015), an average gold mill head grade of one ounce per ton (0.91 ounce per ton in the first quarter of 2015) and quarterly gold production of 18,558 ounces (17,897 gold ounces produced in the first quarter of 2015).
The second quarter 2015 results at Midas were stronger than anticipated, selling a record 15,183 GEOs due to the benefits of high silver grades and previously completed development activities in which additional mining faces were created. During the second quarter of 2015, quarterly production totalled 7,994 gold ounces and 448,621 silver ounces, with an average daily milling rate of approximately 477 tons per day (409 tons per day in the first quarter of 2015), an average gold mill head grade of 0.2 ounce per ton (0.26 ounce per ton in the first quarter of 2015) and an average silver mill head grade of 11.03 ounces per ton (10.09 ounces per ton in the first quarter of 2015).
Conference call
Management will host a conference call on Thursday, Aug. 13, 2015, at 10:30 a.m. ET/7:30 a.m. PT. The call can be accessed by dialling 1-800-319-4610 (North America toll-free), 1-416-915-3239 (Toronto and international) or 1-604-638-5340 (outside of Canada and the United States).
Registration is required for the call. Please dial in at least 10 minutes prior to the scheduled start time.
A replay will be available until 11:59 p.m. on Wednesday, Aug. 19, 2015. The replay can be accessed by dialling 1-855-669-9658 (toll-free from the United States and Canada) or 1-604-674-8052 (international toll) and entering passcode 3599 followed by the pound sign.
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