For quite some time, gold has not shown much of an uptrend. For the past year, the gold market has entered into a sluggish face resulting in gold being sold off. However, gold is still one of the best risk-hedging commodities. Over the past decades whenever markets have taken an adverse move, gold has provided to be a safe haven for investors facilitating them to preserve their fund pool.
The current lull in the gold price is also seen as a part of a cyclical movement of the commodity market where the noble metal is currently traveling through its trough phase. On the other hand, considering the current rates at which gold is being traded it is quite attractive for buyers to fill up their gold stacks as it stands oversold. Let us take a look at a company who is going all out to churn out gold in Nevada.
Gold mining in Nevada
Klondex Mines (KDX, Financial), known for its high grade gold mining and extraction function, is now the new name in Nevada and has already caught the eyes of commodity analysts.
The Klondex Management has been busy throughout 2014 acquiring a mill, commencing production and drilling to update current resource estimates. The goal at Klondex is to be cash flow positive by the end of 2014, which sets the mood on the shop floor quite positive and an optimistic outlook about the company in the near future.
Klondex has produced 40,000 ounces year to date, from the Midas Mine and bulk sampling from Fire Creek. Klondex took over Midas Mills towards the beginning of this year from its previous owners Newmont (NEM, Financial) in a bid to step up its presence in the gold production market. The Midas Mill is located 100 kilometers north of the high grade Fire Creek project. The synergies and distance viability between the two projects have helped Klondex deliver strong operating numbers this year, and added colors to their books of business which makes the outlook of the company more optimistic and attractive.
The assay reports from the Fire Creek project deck gives out a few details worth taking a look at, from the investors’ point of view. They are likely to expand in size along strike and up and down dip. A total of 124 infill and exploration holes have been drilled at the project so far this year. Though these details do set the mood on a positive note seeing the stepped up exploration initiatives of the company, however, the sweet spot from the investors’ perspective would be an update on the quantity of mineral resources out before the end of the year.
Let us take a quick look at the drilling highlights to ensure that we take position in the company in the right direction:
• 157.8 g/t (4.6 opt) Au over 3.55 m (11.4 ft) – FCU-0199 — Karen Vein
• 85.7 g/t (2.5 opt) Au over 4.68 m (15.0 ft) — FCU-0209 — Karen Vein
• 1,474.6 g/t (43.0 opt) Au over 0.62 m (2.0 ft) – FCU-0043 — Joyce Vein
• 367.6 g/t (10.7 opt) Au over 1.87 m (6.0 ft) — FCU-0086 — Joyce Vein
• 1,404.6/t (41.1 opt) Au over 0.53 m (1.7 ft) – FCU-0011 — Vonnie Vein
• 174.9 g/t (5.1 opt) Au over 1.00 m (3.2 ft) – FCU-0160 — Hui Wu Vein
The future outlook
Brent Kristof, chief operator of Klondex, said, “We are encouraged by these high grade drill intercepts and the results of additional infill and exploration drilling at Fire Creek. All vein structures remain open along strike and up and down dip. Given this, Klondex continues to look to expand the life of the Fire Creek Project through its drilling programs. We intend to continue delineating the veins and increasing the quality of the mineral resource. We are excited to update our technical report later this year. The new mineral resource will add more data from the West Zone, including the Karen, Hui Wu and Honeyrunner, as well as the new drilling on Joyce and Vonnie.”
Going by the current performance of Klondex shares it looks quite poised this year, starting out at $1.50 and then reaching a peak of $2.20 before stabilizing at $1.80. This dip is attributed to the wave of market correction that is happening across all gold equities through September and October, and has got nothing to do in particular with the performance of the company.
The Klondex management continues its endeavor towards generating profit numbers and free cash flow for shareholders. The upside potential for the stock price should result from continued strength in the production lineup with guidance of 75,000 to 85,000 ounces this year and the ability to generate free cash flow. 2015 production guidance is yet to be framed and issued. Another important catalyst towards the value addition in the book of business for Klondex will be the release of mineral resource output update for the fourth quarter which, if positive, will add to the life of the mine and the interest of the investors.
The bottom line
Klondex seems to be on an exceptional growth trajectory; with enhanced gold-mining potential the company looks slated to improve both its top and bottom line considerably within the upcoming year. Investors should not be worried much, and might hold to their current positions as the company has enormous production capabilities which could drive the stock price on the exchange. It would be best to stay tuned, and eagerly wait for the 2015 production guidance to be released which will add more information to investors’ kitty on the future prospects of the company.
