Klondex reduces underground operations at True North mine
Wednesday, Jan 10, 2018
Klondex Mines Ltd. has announced a change in operations in Canada, which includes the immediate reduction of underground mining operations and workforce at its True North mine in Manitoba, Canada.

Following an extensive review of recent operational performance at True North, the Company has decided to limit underground mining to areas already developed. Once these areas are depleted, underground mining will be suspended. The decision was largely based on the site’s inability to achieve planned operating and cash flow metrics in 2017. Preliminary full-year 2017 gold ounce production from True North is estimated to be approximately 24,000 – 27,000 ounces, which is less than the 35,000 – 45,000 ounce range of the Company’s guidance.

The mine will be placed on care and maintenance status after the developed areas are mined to review strategic options and to provide optionality at higher metal prices. The Company will continue to process tailings, as contained in its reserve estimate, through the mill for the foreseeable future in order to maximize cash flow and offset expected care and maintenance costs.  Going forward, Klondex projects annual site free cash flow of $2 to $4 million at current metal price levels assuming a processing rate of approximately 1,400 tpd from tailings grading 0.035 Au/opt (1.20 Au/gpt) from April through October, weather dependent. The average tailings grade processed in 2017 was approximately 0.05 Au/opt (1.71 Au/gpt). Additional information regarding True North and Ogama-Rockland will be discussed at the Company’s February 7, 2018 Investor Day in Toronto.

The Company is encouraged by certain positive operational improvements made and additional understanding of the vein structures and mining methods gained during the past year. This information will help Klondex better define future alternatives.  Infrastructure has been identified that needs upgrading such as the chutes, automating the loading pocket and the need to advance development. At the True North mine, the Company had a successful drilling campaign in 2017 and expects to release a new resource estimate in Q1 2018. In addition, the Ogama-Rockland property, recently acquired through the Bison Gold Resources acquisition, is approximately 30 kilometers from the mine and has an inferred resource of 337,000 gold equivalent ounces. As we move forward, we will assess the potential of processing ore from both the True North mine and the Ogama-Rockland property through the True North mill to improve the economics for our properties in the region.

Mr. Paul Huet, President and CEO commented, “Klondex is committed to creating shareholder value.  Following the True North acquisition, the Company implemented an aggressive plan to start up production. We have extensively evaluated our progress to date and have determined that it is in the best interest of the Company and our shareholders to revise our plans for the True North mine.” Mr. Huet continued, “We regret the implications these actions will have on our workforce and other stakeholders but must ensure the long-term sustainability of the Company. True North and the recently acquired Bison Gold Resource properties continue to be valuable assets and we are taking the necessary steps to build the foundation for their long-term success within the Klondex portfolio.”

Executive Management Change

Klondex announced that John Seaberg, former Senior Vice President, Strategic Relations, has left the Company.

Mr. Huet commented, "John has been an important part in the development and growth of the Company. On behalf of everyone at Klondex, I thank John for his contributions, and wish him the best in his new endeavors.”

For more information, please visit: https://www.klondexmines.com/

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