Mr. Paul Huet reports

KLONDEX REPORTS Q3 PRODUCTION COST OF US$439 PER OUNCE SOLD WITH BY-PRODUCT CREDIT

Klondex Mines Ltd. has filed its management discussion and analysis (MD&A), and its unaudited condensed consolidated interim financial statements, for the three and nine months ended Sept. 30, 2014, which are available on the company's website and are posted on SEDAR. The financial statements were prepared in accordance with international financial reporting standards (IFRS). Unless otherwise stated, all currency amounts included in this release are expressed in Canadian dollars.

Third quarter 2014 financial highlights:

• Production costs for the third quarter per gold equivalent ounce sold were $613 ($563 U.S.)); year to date, costs were $676 ($617 (U.S.)); third quarter production costs per gold ounce sold on a byproduct basis were $478 ($439 (U.S.); year to date, costs were $510 ($465 (U.S.)).
• Cash balance as of Sept. 30, 2014, was $43.2-million.
• Working capital (current assets minus current liabilities) as of Sept. 30, 2014, was $48.2-million.
• Revenue for the third quarter was $38.0-million from the sale of 28,162 gold equivalent ounces, which consisted of 23,166 gold ounces and 315,504 silver ounces, at an average realized price of $1,374 ($1,262 (U.S.)) and $19.62 ($18.02 (U.S.)), respectively.
• Revenue year to date was $77.1-million from the sale of 58,174 gold equivalent ounces, which consisted of 46,828 gold ounces and 716,582 silver ounces, at an average realized price of $1,398 ($1,276 (U.S.)) and $20.97 ($19.13 (U.S.)), respectively.
• Net income for the third quarter totalled $7.2-million or six cents per share, which is an improvement from second quarter net income of $4.4-million or four cents per share.
• Cash flow for the third quarter provided by operating activities was $16.2-million; year to date, cash flow was $27.8-million.
• Capital expenditures for the third quarter were $8.9-million; year to date, capital expenditures were $20.3-million, principally for the rapid infiltration basin and ramp expansion at Fire Creek, and exploration and development at both sites.
• Gold equivalent ounces recovered in the third quarter were 39,109, which consisted of 33,339 gold ounces and 364,435 silver ounces; year to date, gold equivalent ounces recovered were 77,401, which consisted of 63,977 gold ounces and 847,825 silver ounces.

Updated operational targets:

• Based on operational results of the nine months ending Sept. 30, 2014, Klondex is increasing its target to recover at least 95,000 gold equivalent ounces and sell at least 85,000 gold equivalent ounces in 2014, compared with its earlier production target of 70,000 to 85,000 gold equivalent ounces;
• Prepare and release an updated mineral resource estimate for Fire Creek in the fourth quarter;
• File the Midas technical report in the fourth quarter for the updated mineral resource estimate released on Sept. 30, 2014; complete a prefeasibility in the first quarter of 2015.

Paul Huet, Klondex president and chief executive officer, commented:

"The third quarter operational results continue to transform Klondex from a development company into a profitable low-cost precious metals producer. The strength of our first three quarters of production allows us to increase our targeted production to 95,000 gold equivalent ounces recovered. I am very grateful for the dedicated efforts of the Midas and Fire Creek teams as they continue to produce exceptional operational results. We anticipate that even within the current volatile gold price environment, Klondex will continue to generate positive cash flows from operations, further strengthening our balance sheet.

"In my opinion, the updated Midas mineral resource estimate is the most significant accomplishment for Klondex within the quarter. The updated resource includes measured and indicated gold equivalent ounces of 526,000 at a grade of 0.47 gold equivalent ounce per ton (858,000 tons), and inferred gold equivalent ounces of 286,000 at 0.33 gold equivalent ounce per ton (1,117,000 tons). This is game changing for Klondex."

    UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME (LOSS)

                               Three months ended         Nine months ended 
                                         Sept. 30,                 Sept. 30,
                                  2014       2013         2014         2013 

Revenues                   $38,012,787  $       -  $77,083,745  $         -
Cost of sales                                                               
Production costs            17,254,621          -   37,652,263            - 
Depreciation and                                                          
depletion                    7,974,402          -   14,900,176            - 
                           ------------ ---------- ------------ ------------
Gross profit                12,783,764          -   24,531,306            - 
General and administrative                                                  
expenses                     2,976,545    987,572    7,379,974    2,762,671 
                           ------------ ---------- ------------ ------------
Income (loss) from                                                          
operations                   9,807,219   (987,572)  17,151,332   (2,762,671)
Business acquisition costs           -          -   (2,257,018)           - 
Gain on change in fair                                                      
value of derivative            442,514          -    2,034,305            - 
Finance charges             (2,751,340)         -   (6,987,316)           - 
Foreign currency gain        4,243,667          -    5,255,983            - 
                           ------------ ---------- ------------ ------------
Income (loss) before tax    11,742,060   (987,572)  15,197,286   (2,762,671)
Income tax expense          (4,517,000)         -   (5,943,000)           - 
                           ------------ ---------- ------------ ------------
Net income (loss)          $ 7,225,060  $(987,572) $ 9,254,286  $(2,762,671)
                           ============ ========== ============ ============
Net income (loss) per                                                       
share                                                                      
Basic                      $      0.06  $   (0.02) $      0.08  $     (0.04)
Diluted                    $      0.06  $   (0.02) $      0.08  $     (0.04)

Revenue

During the three and nine months ended Sept. 30, 2014, Klondex's revenue was $38.0-million and $77.1-million, respectively, from the sale of 23,166 gold ounces and 315,504 silver ounces, and 46,828 gold ounces and 716,582 silver ounces, respectively. The revenue increased 4 per cent during the third quarter from the second quarter due to a 9-per-cent increase in gold equivalent ounces sold, offset by a 5-per-cent decrease in the average price per gold equivalent ounce.

Cost of sales

Production costs for the three and nine months ended Sept. 30, 2014, were $17.3-million and $37.7-million, respectively. Production costs per gold equivalent ounce sold in the three and nine months ended Sept. 30, 2014, were $613 ($563 (U.S.)) and $676 ($617 (U.S.)), respectively. Production costs per gold ounce sold on a byproduct basis in the three and nine months ended Sept. 30, 2014, were $478 ($439 (U.S.)) and $510 ($465 (U.S.)), respectively. The production costs per gold equivalent ounce sold and the production costs per gold ounce sold on a byproduct basis in the third quarter were lower by 16 per cent and 13 per cent, respectively, compared with the second quarter of 2014. Depreciation and depletion costs in the three and nine months ended Sept. 30, 2014, were $8.0-million and $14.9-million, respectively.

Gross profit

Gross profit in the three and nine months ended Sept. 30, 2014, was $12.8-million and $24.5-million, respectively.

General and administrative expenses

General and administrative expenses for the three and nine months ended Sept. 30, 2014, were $3.0-million and $7.4-million, respectively (2013, $1.0-million and $2.8-million, respectively). During the third quarter, G&A expenses increased by $800,000, compared with the second quarter of 2014. The increase is principally related to non-cash share-based compensation expenses. The increase in G&A expenses over the prior year is due to the growth of the company as it has transformed from an exploration stage company to a production-stage company.

Business acquisition costs

Business acquisition costs for the nine months ended Sept. 30, 2014, of $2.3-million were related to the acquisition of the Midas mine and mill. There was no recorded business acquisition cost for the three months ended Sept. 30, 2014.

Gain on change in fair value of derivative

The company recorded a gain on the valuation of the derivative associated with a gold supply agreement with a third party in the three and nine months ended Sept. 30, 2014, of $400,000 and $2.0-million, respectively. The derivative is valued at each quarter-end. The reduction in the derivative value is principally related to gold ounces produced and offered under the gold supply agreement, and a decrease in the estimated forward gold spot price and in the estimated volatility of gold price over the remaining term of the gold supply agreement.

Finance charges

The finance charges for the three and nine months ended Sept. 30, 2014, were $2.8-million and $7.0-million, respectively. The finance charges are mainly related to the obligations under a gold purchase agreement and a senior secured facility agreement, each of which was entered into in connection with the acquisition of the Midas mine and mill in February, 2014. In 2013, the finance charges were capitalized into the Fire Creek evaluation and exploration assets.

Income tax expense

The income tax expense for the three and nine months ended Sept. 30, 2014, was $4.5-million (38.5 per cent) and $5.9-million (39.1 per cent), respectively. Income tax expense includes the state of Nevada net proceeds tax. The income tax expense reflects unbenefited losses in Canada.

Net income

Total net income for the three and nine months ended Sept. 30, 2014, was $7.2-million and $9.3-million, respectively, (2013, loss of $1.0-million and $2.8-million, respectively). The net income increase for the three and nine months ended Sept. 30, 2014, over the previous year is due to the recognition of revenue and profit from the Fire Creek project and Midas mine.

                                      Three months ended  Nine months ended 
                                          Sept. 30, 2014     Sept. 30, 2014 
Total                                                                       
Production costs                           $  17,254,621      $  37,652,263 
Gold equivalent ounces sold                       28,162             55,735 
Production costs per gold equivalent                                        
ounce sold                                 $         613      $         676 
Production costs per gold equivalent                                        
ounce sold (U.S. dollar)                   $         563      $         617 

                                      Three months ended  Nine months ended 
                                          Sept. 30, 2014     Sept. 30, 2014 
Total                                                                       
Production costs                           $  17,254,621      $  37,652,263 
Less silver credit                            (6,189,099)       (15,024,995)
Production costs after silver credit       $  11,065,522      $  22,627,268 
Gold ounces sold                                  23,166             44,389 
Production costs per gold equivalent                                        
ounce sold on a byproduct basis            $         478      $         510 
Production costs per gold equivalent                                        
ounce sold on a byproduct basis 
(U.S. dollar)                              $         439      $         465 

Third quarter 2014 results conference call

Management will host a conference call on Thursday, Nov. 13, 2014, at 10 a.m. ET (7 a.m. PT), to discuss third quarter results. Presenting on the call will be Paul Huet, president and chief executive officer, and Barry Dahl, chief financial officer.

The call can be accessed by dialling 1-800-319-4610 (North America, toll-free), 1-416-915-3227 (Toronto and international) and 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 Saturday, Nov. 22, 2014. The replay can be accessed by dialling toll-free from the U.S. and Canada 1-800-319-6413 or dialling international toll 1-604-638-9010 and entering passcode 3599, followed by the number sign.

We seek Safe Harbor.