Klondex Mines Ltd. (TSX:KDX) (NYSE American:KLDX)
("Klondex", the "Company", "we", "our", or "us") is pleased to
announce its operational and financial results for the fourth
quarter and full-year 2017. This press release should be read in
conjunction with our 2017 Annual Report on Form 10-K, which
includes our Consolidated Financial Statements and related
Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A"), which is available on our
website (www.klondexmines.com), on SEDAR (www.sedar.com), and on
EDGAR (www.sec.gov). All dollar amounts included in this press
release are expressed in thousands of United States dollars, unless
otherwise noted, and are based on our MD&A and our Consolidated
Financial Statements, which were prepared in accordance with
Generally Accepted Accounting Principles ("GAAP") in the United
States. References to "Notes" refers to the notes contained in the
Consolidated Financial Statements.
Fourth Quarter 2017 Highlights
- Safety - No lost-time injuries
occurred at the Company's Nevada properties during the quarter. As
of December 31, 2017, the Company operated 1,903 days (~5.2
years) at Fire Creek, 1,182 days (~3.2 years) at Midas, 53 days
(~0.1 years) at True North, and 454 days (~1.2 years) at Hollister
and Aurora, without a lost-time injury. During the fourth quarter
of 2017, one lost-time injury occurred at True North. Prior to
this, True North had operated for nearly two years without a
lost-time injury.
- Consolidated operating performance -
Mined a total of 55,893 gold equivalent ounces (“GEOs”), with
production of 47,619 GEO's.
- Nevada performance - Total GEOs mined in Nevada were 45,483,
with production of 38,453 GEOs.
- Canada performance - At the True North mine, the Company mined
and produced 10,120 and 8,906 GEOs respectively from underground
operations. The Company also milled 7,547 tons from the True North
tailings, producing an additional 263 GEOs. Processing of tailings
was limited during winter weather conditions.
- Ounces sold - The Company sold 49,676 GEOs, consisting of
47,073 gold ounces and 199,373 silver ounces. Revenue was $63.3
million from average realized selling prices per gold and silver
ounce of $1,274 and $16.63, respectively.
- Financial Results - Net loss for the quarter was $7.7 million
or $0.04 per share (basic and diluted). Fourth quarter net loss was
negatively impacted by $8.9 million for income tax expense related
to changes in the United States federal tax laws. Excluding the
impact of the tax law changes, the Company’s adjusted net income(1)
for the quarter was $1.2 million or $0.01 per share (basic and
diluted).
Full-Year 2017 Highlights
- Consolidated operating performance -
Mined a total of 222,233 GEOs, with production of 189,456 GEO's, an
increase of 17% from 161,289 GEOs produced during 2016. Fire Creek
and Midas production was in-line with guidance. Total GEOs produced
by the Company were less than the lower end of the most recent
guidance range due to results from Hollister and True North.
- Nevada performance - Total GEOs mined
in Nevada were 190,409, with production of 161,536 GEOs. Production
cash costs per GEO sold(1) in Nevada was $692. The Company began
processing Hollister ore at the Midas mill at the end of the third
quarter with process optimization ongoing. Mined ounces at
Hollister were in-line with expectations. Produced ounces from
Hollister ore were less than the guidance range as a result of the
decision to defer processing of the majority of the ore while metal
recovery optimization continues.
- Canada performance - At the True North
mine, the Company mined and produced 28,208 and 24,636 GEOs
respectively from underground operations. The Company also
milled 80,848 tons from the True North tailings, producing an
additional 3,285 GEOs. The True North production shortfall compared
to guidance was primarily due to lower than forecasted mining
grades.
- Ounces sold - The Company sold 190,865
GEOs, consisting of 177,402 gold ounces and 984,176 silver ounces.
Revenue was $240.7 million from average realized selling prices per
gold and silver ounce of $1,261 and $17.26, respectively.
- Financial Results - Net loss for the
year was $23.7 million or $0.13 per share (basic and diluted). Net
loss for 2017 was negatively impacted by $8.9 million for income
tax expense related to changes in the United States federal tax
laws. Excluding the impact of the tax law changes, the Company’s
adjusted net loss(1) for 2017 was $14.8 million or $0.08 per share
(basic and diluted).
- Cash flows and liquidity - Ending cash
balance was $23.7 million after $26.4 million of operating cash
flows, $66.4 million used in investing activities, and $15.7
million provided by financing activities. Ending working capital
was $37.4 million with total liquidity of $42.4 million. As
previously announced, subsequent to year end, the Company increased
its revolving credit facilities to $45.0 million.
(1) |
This is a non-GAAP measure; refer to the Non-GAAP
performance measures section of this Press Release for additional
detail |
|
|
Mr. Paul Huet, President and CEO, commented,
“Klondex has had a history of setting operating targets and
achieving them. The Company produced more ounces and generated more
revenue during 2017 than any year in the organization’s history.
However, we did not deliver on our stated objectives and we
understand that is not acceptable. We have learned from the
challenges in 2017 and are moving forward. The Company is in an
enviable position by owning outstanding assets in one of the best
mining jurisdictions of the world. Our vast land package has also
demonstrated incredible near-mine exploration potential. We are
confident in our plans and are determined to deliver on our stated
operating and cash flow objectives for 2018. Production guidance
for 2018 is in-line with total production achieved during 2017,
including a renewed emphasis on cash generation.”
2018 Full-Year Outlook
The Company expects to produce between 186,000 and
202,000 GEOs during 2018 at an expected production cash cost per
GEO sold of $675 to $725. Total production is not expected to be
equally distributed by quarter during the year as higher levels of
production are expected during the second and third quarters due to
the processing of tailings. It is anticipated that production could
vary 5,000 to 10,000 GEOs between the highest and lowest producing
quarters. Production from the Fire Creek and Midas mines are
expected to be consistent with 2017 results. Hollister mine
production is expected to increase during the year as the benefit
of processing the stock pile from 2017 is realized. In addition,
Klondex has begun processing historical Hollister tailings at the
Aurora mill and expects to realize incremental production from that
operation during 2018. Production from the True North mine in
Canada will decrease as mining operations have been suspended and
most of the GEOs produced will come from the processing of
tailings. Total all-in sustaining costs (AISC) are projected to be
between $940 and $990 per gold ounce sold for 2018.
Total 2018 capital expenditures are expected to be
$48 to $56 million, including $16 to $18 million of capital to be
spent on the construction of a new tailings facility for the Midas
mill. Total capital expenditures guidance consists of $36 to $42
million of sustaining and $12 to $14 million of non-sustaining
capital. The majority of the capital is expected to be spent at
Fire Creek as the Company continues underground expansion in the
form of primary access development. Total exploration expense is
planned to be $10 to $12 million and is expected to be spent on
district and near mine exploration.
Below are tables summarizing key 2018 operating
guidance metrics.
|
|
Gold Equivalent Ounces
Produced(1) |
|
Production Cash Costs per Gold Equivalent Ounce
Sold(1) |
|
Capital Expenditures (thousands) |
2018 full year
outlook |
|
Low |
|
High |
|
Low |
|
High |
|
Low |
|
High |
Midas |
|
35,000 |
|
|
40,000 |
|
|
$ |
850 |
|
|
$ |
900 |
|
|
4,000 |
|
|
5,000 |
|
Midas Mill |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
16,000 |
|
|
18,000 |
|
Fire Creek |
|
100,000 |
|
|
105,000 |
|
|
450 |
|
|
500 |
|
|
23,000 |
|
|
25,000 |
|
Hollister |
|
37,000 |
|
|
40,000 |
|
|
920 |
|
|
970 |
|
|
5,000 |
|
|
7,000 |
|
Aurora |
|
4,000 |
|
|
5,000 |
|
|
550 |
|
|
600 |
|
|
200 |
|
|
500 |
|
Nevada
Total |
|
176,000 |
|
|
190,000 |
|
|
645 |
|
|
695 |
|
|
48,200 |
|
|
55,500 |
|
True North |
|
10,000 |
|
|
12,000 |
|
|
1,130 |
|
|
1,180 |
|
|
— |
|
|
— |
|
|
|
186,000 |
|
|
202,000 |
|
|
$ |
675 |
|
|
$ |
725 |
|
|
$ |
48,200 |
|
|
$ |
55,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Low |
|
High |
|
|
|
|
|
|
|
|
Corporate general and
administrative (thousands)(2) |
|
$ |
18,000 |
|
|
$ |
19,000 |
|
|
|
|
|
|
|
|
|
All-in sustaining costs
per gold ounce sold(1)(2) |
|
$ |
940 |
|
|
$ |
990 |
|
|
|
|
|
|
|
|
|
Exploration
(thousands) |
|
$ |
10,000 |
|
|
$ |
12,000 |
|
|
|
|
|
|
|
|
|
(1) This is a non-GAAP measure; refer to the Non-GAAP
performance measures section of this Press Release for additional
detail. |
(2) Includes share based compensation of approximately
$4 million, a non-cash item. |
Klondex has not reconciled forward-looking 2018
full year non-GAAP performance measures contained in this press
release to their most directly comparable GAAP measures, as
permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such
reconciliations would require unreasonable efforts at this time to
estimate and quantify, with a reasonable degree of certainty,
various necessary GAAP components, including for example those
related to future production costs, realized sales prices and the
timing of such sales, timing and amounts of capital expenditures,
metal recoveries, and corporate general and administrative amounts
and timing, or others that may arise during the year. These
components and other factors could materially impact the amount of
the future directly comparable GAAP measures, which may differ
significantly from their non-GAAP counterparts.
Consolidated Financial Results of
Operations
|
|
Three months ended December 31, |
|
Years ended December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenues |
|
$ |
63,296 |
|
$ |
56,100 |
|
$ |
240,651 |
|
$ |
198,175 |
Cost of
sales |
|
|
|
|
|
|
|
|
Production costs |
|
40,276 |
|
35,708 |
|
134,311 |
|
106,389 |
Depreciation and depletion |
|
14,505 |
|
9,128 |
|
47,778 |
|
28,242 |
Write-down of production inventories |
|
12,457 |
|
2,869 |
|
24,766 |
|
2,869 |
|
|
(3,942) |
|
8,395 |
|
33,796 |
|
60,675 |
Other operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative |
|
3,448 |
|
4,368 |
|
19,401 |
|
15,804 |
Exploration |
|
3,153 |
|
4,502 |
|
8,246 |
|
12,765 |
Development and projects costs |
|
— |
|
3,423 |
|
11,674 |
|
8,953 |
Asset
retirement and accretion |
|
(3,015) |
|
1,898 |
|
(1,872) |
|
2,653 |
Business
acquisition costs |
|
— |
|
383 |
|
— |
|
2,253 |
Provision
for legal settlement |
|
— |
|
751 |
|
— |
|
3,000 |
Loss on
equipment disposal |
|
9 |
|
17 |
|
352 |
|
126 |
(Loss) income
from operations |
|
(7,537) |
|
(6,947) |
|
(4,005) |
|
15,121 |
Other income
(expense) |
|
|
|
|
|
|
|
|
(Loss)
gain on derivatives, net |
|
(483) |
|
7,932 |
|
(1,182) |
|
(7,646) |
Interest
expense, net |
|
(832) |
|
(1,390) |
|
(4,117) |
|
(5,339) |
Foreign
currency (loss) gain, net |
|
155 |
|
2,873 |
|
(8,601) |
|
651 |
Loss on
debt extinguishment |
|
(288) |
|
(519) |
|
(288) |
|
(519) |
Interest
income and other (expense), net |
|
85 |
|
(301) |
|
125 |
|
(244) |
Income (loss)
before tax |
|
(8,900) |
|
1,648 |
|
(18,068) |
|
2,024 |
Income
tax benefit (expense) |
|
1,163 |
|
530 |
|
(5,596) |
|
(3,724) |
Net (loss)
income |
|
$ |
(7,737) |
|
$ |
2,178 |
|
$ |
(23,664) |
|
$ |
(1,700) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income per share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.04) |
|
$ |
0.02 |
|
$ |
(0.13) |
|
$ |
(0.01) |
Diluted |
|
$ |
(0.04) |
|
$ |
0.02 |
|
$ |
(0.13) |
|
$ |
(0.01) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth quarter 2017
Fourth quarter revenues increased due to the
increase in the total number of gold ounces sold and the higher
average realized gold price. Incremental production from Hollister
and True North increased revenues during the fourth quarter of
2017. General and administrative costs for the fourth quarter of
2017 decreased as compared to the fourth quarter of 2016 due to
cost reduction efforts. Development and project costs decreased
during the fourth quarter of 2017 as compared to the same period of
2016 as a result of the reduction of expenses incurred for
rehabilitating drifts and ramps at Hollister. The Company incurred
a foreign currency gain of $0.2 million during the fourth quarter
of 2017 compared to a foreign currency gain of $2.9 million for the
same period of 2016.
As the result of the Tax Cuts and Jobs Act of 2017
("TCJA") enacted by the US government, the federal US corporate tax
rate has been substantially reduced effective January 1, 2018. In
respect of its US operations, Klondex recorded an adjustment to its
deferred tax assets and liabilities at December 31, 2017 at the new
federal rate of 21% (35% in 2017). This change resulted in the
recognition of a one-time, non-cash deferred income tax expense of
$10.5 million in the fourth quarter of 2017. The new tax
legislation also made Alternative Minimum Tax ("AMT") credits
refundable. As a result, the Company recorded an income tax
receivable for the balance of AMT credits of $1.6 million. The net
effect of the changes in US tax laws resulted in an increase in tax
expense of $8.9 million, which directly reduced net (loss) income
for the fourth quarter and full-year 2017 by that amount. Excluding
the impact of the tax law changes, the Company’s adjusted net
income(1) for the quarter was $1.2 million or $0.01 per share
(basic and diluted).
Full-year 2017
Revenues increased in 2017 due to increases in the
number of gold ounces sold from higher ounces produced at Fire
Creek and due to production commencing at True North at the end of
2016 and during 2017 for Hollister. These volumes were also
positively impacted by the increase in average realized gold
prices. General and administrative costs increased during 2017 as
compared to 2016 due to higher compensation and benefit costs from
increased staff levels at the corporate office and professional
fees, both of which are due to Company growth. Development and
project costs increased during 2017 as compared to 2016, primarily
driven by expenses incurred at Hollister for rehabilitating drifts
and ramps. This increase was partially offset by the decrease in
project costs at True North in 2017. The reduction of business
acquisition costs from 2017 to 2016 was a result of expenses
incurred for the acquisition of True North, and Hollister and
Aurora in 2016. The Company incurred a foreign currency loss of
$8.6 million during 2017, compared to a foreign currency gain of
$0.6 million for 2016. As previously mentioned, the Company
recognized an $8.9 million income tax expense as a result of
applying the changes in US income tax laws in 2017. Excluding the
impact of the tax law changes, the Company’s adjusted net loss(1)
for 2017 was $14.8 million or $0.08 per share (basic and
diluted).
(1) This is a non-GAAP measure; refer to the Non-GAAP performance
measures section of this Press Release for additional detail. |
Liquidity and Capital
Resources
|
|
Three months ended December 31, |
|
Years ended December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net (loss) income |
|
$ |
(7,737) |
|
$ |
2,178 |
|
$ |
(23,664) |
|
$ |
(1,700) |
Net non-cash
adjustments |
|
17,199 |
|
8,042 |
|
64,004 |
|
36,003 |
Net change in non-cash
working capital |
|
(8,477) |
|
7,198 |
|
(13,905) |
|
10,967 |
Net cash
provided by operating activities |
|
985 |
|
17,418 |
|
26,435 |
|
45,270 |
Net cash
used in investing activities |
|
(11,025) |
|
(98,821) |
|
(66,431) |
|
(159,693) |
Net cash
provided by financing activities |
|
13,144 |
|
161 |
|
15,744 |
|
104,608 |
Effect of
foreign exchange on cash balances |
|
(37) |
|
(2,263) |
|
290 |
|
(1,646) |
Net
increase (decrease) in cash |
|
3,067 |
|
(83,505) |
|
(23,962) |
|
(11,461) |
Cash,
beginning of period |
|
20,607 |
|
131,141 |
|
47,636 |
|
59,097 |
Cash, end
of period |
|
$ |
23,674 |
|
$ |
47,636 |
|
$ |
23,674 |
|
$ |
47,636 |
|
Working capital and liquidity
During the fourth quarter, the Company utilized its
revolving credit facility to repay its gold loan to Franco-Nevada,
ahead of schedule. Repaying the gold loan improved working capital
by replacing current debt with non-current debt and will improve
2018 quarterly cash flow as it frees up 2,000 gold ounces per
quarter. Additionally, the Company's gold supply agreement expired
on February 28, 2018. This agreement provided the option for
Waterton to purchase gold produced from the Fire Creek Mine.
Historically, the realized purchase price under this agreement has
been at a discount to market price, which negatively impacted
Klondex’s cash flow.
As of December 31, 2017, the Company had total
liquidity of $42.4 million, consisting of $37.4 million in working
capital and $5.0 million of borrowing availability under the
Revolver. The Company held metal inventory valued at approximately
$35.9 million at the end of the year.
Subsequent to year-end 2017, to further liquidate
the metal inventory, the Company has signed an ore purchase
agreement to sell Hollister ore that would otherwise remain in
stockpiles. The opportunity provides additional cash flow of
approximately $6 million.
Fourth Quarter 2017 and Year to Date
Summary Operational Results
|
Three months ended December 31,
2017 |
Mine
operations |
Fire Creek |
|
Midas |
|
Hollister |
|
Aurora |
|
Nevada Total |
|
True North |
|
Total |
Ore tons mined |
28,162 |
|
|
37,454 |
|
|
20,440 |
|
|
9,563 |
|
|
95,619 |
|
|
89,706 |
|
|
185,325 |
|
Average gold equivalent
mined head grade (oz/ton)(1) |
0.76 |
|
|
0.36 |
|
|
0.44 |
|
|
0.17 |
|
|
0.48 |
|
|
0.12 |
|
|
0.3 |
|
Gold equivalent mined
(oz)(1) |
21,292 |
|
|
13,514 |
|
|
9,021 |
|
|
1,652 |
|
|
45,483 |
|
|
10,415 |
|
|
55,893 |
|
Gold mined (oz)(1) |
21,072 |
|
|
10,615 |
|
|
8,143 |
|
|
1,453 |
|
|
41,283 |
|
|
10,415 |
|
|
51,698 |
|
Silver mined
(oz)(1) |
16,825 |
|
|
222,098 |
|
|
67,182 |
|
|
15,198 |
|
|
321,303 |
|
|
— |
|
|
321,303 |
|
Ore tons milled |
32,522 |
|
|
35,583 |
|
|
21,046 |
|
|
9,563 |
|
|
98,714 |
|
|
88,624 |
|
|
187,338 |
|
Average gold equivalent
mill head grade (oz/ton)(1) |
0.73 |
|
|
0.34 |
|
|
0.41 |
|
|
0.17 |
|
|
0.46 |
|
|
0.11 |
|
|
0.3 |
|
Average gold mill head
grade (oz/ton) |
0.72 |
|
|
0.28 |
|
|
0.37 |
|
|
0.15 |
|
|
0.43 |
|
|
0.11 |
|
|
0.28 |
|
Average silver mill
head grade (oz/ton)(2) |
0.53 |
|
|
4.46 |
|
|
3.33 |
|
|
1.59 |
|
|
2.65 |
|
|
— |
|
|
1.39 |
|
Average gold recovery
rate (%) |
90.2 |
% |
|
89.7 |
% |
|
70.5 |
% |
|
63.5 |
% |
|
85.6 |
% |
|
92.0 |
% |
|
86.9 |
% |
Average silver recovery
rate (%)(2) |
72.6 |
% |
|
74.3 |
% |
|
53.9 |
% |
|
31.9 |
% |
|
66.3 |
% |
|
— |
% |
|
66.6 |
% |
Gold equivalent
produced (oz)(1) |
21,180 |
|
|
10,371 |
|
|
5,914 |
|
|
985 |
|
|
38,453 |
|
|
9,169 |
|
|
47,619 |
|
Gold produced (oz) |
21,016 |
|
|
8,831 |
|
|
5,420 |
|
|
922 |
|
|
36,189 |
|
|
9,159 |
|
|
45,348 |
|
Silver produced
(oz) |
12,566 |
|
|
117,982 |
|
|
37,777 |
|
|
4,854 |
|
|
173,179 |
|
|
750 |
|
|
173,929 |
|
Gold equivalent sold
(oz)(1) |
25,420 |
|
|
10,512 |
|
|
4,752 |
|
|
— |
|
|
40,686 |
|
|
8,993 |
|
|
49,676 |
|
Gold sold (oz) |
25,200 |
|
|
8,652 |
|
|
4,238 |
|
|
— |
|
|
38,090 |
|
|
8,983 |
|
|
47,073 |
|
Silver sold (oz) |
16,816 |
|
|
142,461 |
|
|
39,346 |
|
|
— |
|
|
198,623 |
|
|
750 |
|
|
199,373 |
|
Revenues and
realized prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold revenue
(000s) |
$ |
32,085 |
|
|
$ |
11,019 |
|
|
$ |
5,389 |
|
|
$ |
— |
|
|
$ |
48,493 |
|
|
$ |
11,487 |
|
|
$ |
59,980 |
|
Silver revenue
(000s) |
280 |
|
|
2,369 |
|
|
654 |
|
|
— |
|
|
3,303 |
|
|
13 |
|
|
3,316 |
|
Total
revenues (000s) |
$ |
32,365 |
|
|
$ |
13,388 |
|
|
$ |
6,043 |
|
|
$ |
— |
|
|
$ |
51,796 |
|
|
$ |
11,500 |
|
|
$ |
63,296 |
|
Average realized gold
price ($/oz) |
$ |
1,273 |
|
|
$ |
1,274 |
|
|
$ |
1,272 |
|
|
$ |
— |
|
|
$ |
1,273 |
|
|
$ |
1,279 |
|
|
$ |
1,274 |
|
Average realized silver
price ($/oz) |
$ |
16.65 |
|
|
$ |
16.63 |
|
|
$ |
16.62 |
|
|
$ |
— |
|
|
$ |
16.63 |
|
|
$ |
17.33 |
|
|
$ |
16.63 |
|
Non-GAAP
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Production cash costs
per GEO sold(2)(3) |
$ |
566 |
|
|
$ |
1,069 |
|
|
$ |
2,518 |
|
|
$ |
— |
|
|
$ |
924 |
|
|
$ |
1,428 |
|
|
$ |
1,015 |
|
(1) Gold equivalent ounces ("GEO") and grades
are computed as the applicable gold ounces/grade plus the silver
ounces/grade divided by a GEO ratio. GEO ratios are computed by
dividing the average realized gold price per ounce by the average
realized silver price per ounce received by the Company in the
respective period. Mined ounces are calculated using tons hauled to
surface multiplied by the assays from production sampling. |
(2) The Company does not track this silver
statistic at True North due to silver being immaterial to that
operation. |
(3) This is a non-GAAP measure; refer to the Non-GAAP
performance measures section of this Press Release for additional
detail. |
|
|
|
Year ended December 31, 2017 |
Mine
operations |
Fire Creek |
|
Midas |
|
Hollister |
|
Aurora |
|
Nevada Total |
|
True North |
|
Total |
Ore tons mined |
123,754 |
|
|
156,927 |
|
|
66,453 |
|
|
9,563 |
|
|
356,697 |
|
|
309,343 |
|
|
666,040 |
|
Average gold equivalent
mined head grade (oz/ton)(1) |
0.90 |
|
|
0.33 |
|
|
0.38 |
|
|
0.17 |
|
|
0.53 |
|
|
0.10 |
|
|
0.33 |
|
Gold equivalent mined
(ounces)(1) |
111,125 |
|
|
52,116 |
|
|
25,464 |
|
|
1,652 |
|
|
190,409 |
|
|
31,824 |
|
|
222,233 |
|
Gold mined
(ounces)(1) |
109,955 |
|
|
38,247 |
|
|
23,335 |
|
|
1,453 |
|
|
172,990 |
|
|
31,824 |
|
|
204,814 |
|
Silver mined
(ounces)(1) |
85,994 |
|
|
1,009,639 |
|
|
162,469 |
|
|
15,198 |
|
|
1,273,300 |
|
|
— |
|
|
1,273,300 |
|
Ore tons milled |
134,152 |
|
|
157,363 |
|
|
28,870 |
|
|
9,563 |
|
|
329,948 |
|
|
297,826 |
|
|
627,774 |
|
Average gold equivalent
mill head grade (oz/ton)(1) |
0.88 |
|
|
0.32 |
|
|
0.37 |
|
|
0.17 |
|
|
0.55 |
|
|
0.10 |
|
|
0.33 |
|
Average gold mill head
grade (oz/ton) |
0.87 |
|
|
0.24 |
|
|
0.33 |
|
|
0.15 |
|
|
0.50 |
|
|
0.10 |
|
|
0.31 |
|
Average silver mill
head grade (oz/ton)(2) |
0.66 |
|
|
6.05 |
|
|
2.95 |
|
|
1.59 |
|
|
3.46 |
|
|
— |
|
|
1.82 |
|
Average gold recovery
rate (%) |
91.7 |
% |
|
90.8 |
% |
|
71.0 |
% |
|
63.5 |
% |
|
90.1 |
% |
|
93.0 |
% |
|
90.5 |
% |
Average silver recovery
rate (%)(2) |
82.1 |
% |
|
81.9 |
% |
|
55.5 |
% |
|
31.9 |
% |
|
79.3 |
% |
|
— |
% |
|
79.6 |
% |
Gold equivalent
produced (ounces)(1) |
108,126 |
|
|
45,062 |
|
|
7,371 |
|
|
986 |
|
|
161,536 |
|
|
27,919 |
|
|
189,456 |
|
Gold produced
(ounces) |
107,143 |
|
|
34,343 |
|
|
6,751 |
|
|
922 |
|
|
149,159 |
|
|
27,877 |
|
|
177,036 |
|
Silver produced
(ounces) |
72,283 |
|
|
780,316 |
|
|
47,305 |
|
|
4,854 |
|
|
904,758 |
|
|
3,174 |
|
|
907,932 |
|
Gold equivalent sold
(ounces)(1) |
112,455 |
|
|
47,298 |
|
|
5,281 |
|
|
— |
|
|
165,016 |
|
|
25,850 |
|
|
190,865 |
|
Gold sold (ounces) |
111,430 |
|
|
35,456 |
|
|
4,710 |
|
|
— |
|
|
151,596 |
|
|
25,806 |
|
|
177,402 |
|
Silver sold
(ounces) |
75,345 |
|
|
862,093 |
|
|
43,564 |
|
|
— |
|
|
981,002 |
|
|
3,174 |
|
|
984,176 |
|
Revenues and
realized prices |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold revenue
(000s) |
$ |
140,500 |
|
|
$ |
44,657 |
|
|
$ |
5,995 |
|
|
$ |
— |
|
|
$ |
191,152 |
|
|
$ |
32,512 |
|
|
$ |
223,664 |
|
Silver revenue
(000s) |
1,292 |
|
|
14,913 |
|
|
727 |
|
|
— |
|
|
16,932 |
|
|
55 |
|
|
16,987 |
|
Total
revenues (000s) |
$ |
141,792 |
|
|
$ |
59,570 |
|
|
$ |
6,722 |
|
|
$ |
— |
|
|
$ |
208,084 |
|
|
$ |
32,567 |
|
|
$ |
240,651 |
|
Average realized gold
price ($/oz) |
$ |
1,261 |
|
|
$ |
1,260 |
|
|
$ |
1,273 |
|
|
$ |
— |
|
|
$ |
1,261 |
|
|
$ |
1,260 |
|
|
$ |
1,261 |
|
Average realized silver
price ($/oz) |
$ |
17.15 |
|
|
$ |
17.30 |
|
|
$ |
16.69 |
|
|
$ |
— |
|
|
$ |
17.26 |
|
|
$ |
17.33 |
|
|
$ |
17.26 |
|
Non-GAAP
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
Production cash costs
per GEO sold(2)(3) |
$ |
479 |
|
|
$ |
1,008 |
|
|
$ |
2,386 |
|
|
$ |
— |
|
|
$ |
692 |
|
|
$ |
1,504 |
|
|
$ |
802 |
|
(1) Gold equivalent ounces ("GEO") and grades
are computed as the applicable gold ounces/grade plus the silver
ounces/grade divided by a GEO ratio. GEO ratios are computed by
dividing the average realized gold price per ounce by the average
realized silver price per ounce received by the Company in the
respective period. Mined ounces are calculated using tons hauled to
surface multiplied by the assays from production sampling. |
(2) The Company does not track this silver
statistic at True North due to silver being immaterial to that
operation. |
(3) This is a non-GAAP measure; refer to the Non-GAAP
performance measures section of this Press Release for additional
detail. |
Nevada operations
During 2017, the Company's Nevada operations milled
329,948 ore tons at an average milled head grade of 0.55 GEOs per
ton during 2017. Nevada operations produced 161,536 GEOs, an
increase of 7% from 151,007 GEOs produced during 2016. Core
operations at Fire Creek and Midas performed in line with
expectations. Total GEOs produced were less than the lower end of
the most recent guidance range primarily due to results from
Hollister, which produced 7,371 GEOs compared to the low end of the
guidance range of 21,000 GEOs. The Company mined 25,464 GEOs from
Hollister and deferred the processing of a majority of the mined
Hollister ounces as it continued to optimize recoveries at the
Midas mill for this ore. The majority of stockpiles at the end of
2017 were from Hollister. New modifications to the Midas mill are
underway and recoveries for the Hollister ore are approximately 80%
with additional improvements expected.
Canada operations
During 2017, at True North, the Company milled
216,978 ore tons, from mining operations, at an average milled head
grade of 0.12 gold ounces per ton, producing 24,636 GEOs. The
Company also processed 80,848 tons from the True North Tailings at
an average grade of 0.04 gold ounces per ton, producing an
additional 3,285 gold ounces. Total production for the year was
approximately 7,000 GEOs short of the low end of the revised
guidance. This shortfall was due to mining lower than forecasted
grades from the True North mine. The lower mined grades are
attributed to delays in waste development which postponed mining
planned stopes in the 711/713 areas of the True North mine,
excessive dilution from a hanging wall failure and negative model
grade reconciliation.
Subsequent to the reporting period, on January 9,
2018, the Company announced that following an extensive review of
the operational performance at True North, management decided to
place the mine under care and maintenance to review strategic
options and to provide optionality at higher metal prices. This
decision was largely based on the site's inability to achieve
planned operating and cash flow targets in 2017 and to refocus
resources on the Nevada assets. Klondex will continue to process
tailings through the mill for the near future in order to maximize
cash flow and offset expected care and maintenance costs.
Webcast and Conference Call
The Company will conduct a conference call and webcast on
Thursday, March 15, 2018 at 7:30am PDT/10:30am EDT.
Dial-In Numbers: United States and Canada Toll
Free: +1 800-319-4610 Toronto: +1 416-915-3239 International: +1
604-638-5340
Conference call participants should dial in 5 to 10 minutes
prior to the scheduled start time and ask to join the Klondex call.
A simultaneous webcast and presentation to accompany the conference
call will be available through the Investor Relations section of
the Company’s website or by accessing:
http://services.choruscall.ca/links/klondex20180315.html.
About Klondex Mines Ltd.
(www.klondexmines.com)
Klondex is a junior-tier gold and silver mining
company focused on exploration, development, and production in a
safe, environmentally responsible, and cost-effective manner. The
Company has 100% interests in three producing mineral properties:
the Fire Creek Mine, the Midas Mine and ore milling facility, and
the Hollister Mine, all of which are located in the state of
Nevada, USA. The Company also has a 100% interest in the True North
Mine and mill in Manitoba, Canada and the Aurora Mine and ore
milling facility, located in Nevada, USA. The Company is
currently reprocessing tailings at its True North and Aurora
milling facilities.
Cautionary Note Regarding Forward-looking
Information
This news release contains certain information that
may constitute forward-looking information or forward-looking
statements under applicable Canadian and United States securities
legislation (collectively, “forward-looking information”),
including but not limited to the future exploration, development
and production plans of Klondex. This forward-looking information
entails various risks and uncertainties that are based on current
expectations, and actual results may differ materially from those
contained in such information. These uncertainties and risks
include, but are not limited to, the strength of the global
economy; the price of gold; operational, funding and liquidity
risks; the degree to which mineral resource estimates are
reflective of actual mineral resources; the degree to which mineral
reserve estimates are reflective of actual mineral reserves; the
degree to which factors which would make a mineral deposit
commercially viable are present; the risks and hazards associated
with underground operations; and the ability of Klondex to fund its
substantial capital requirements and operations. Risks and
uncertainties about the Company’s business are more fully discussed
in the Company’s disclosure materials filed with the securities
regulatory authorities in Canada and United States available at
www.sedar.com and www.sec.gov, respectively. Readers are urged to
read these materials. Klondex assumes no obligation to update any
forward-looking information or to update the reasons why actual
results could differ from such information unless required by
law.
Non-GAAP performance measures
We have included the non-GAAP measures "Adjusted
net (loss) income", "Production cash costs per gold equivalent
ounce sold", "All-in sustaining costs per gold ounce sold", and
"All-in costs per gold ounce sold" in this press release
(collectively, the "Non-GAAP Measures"). These Non-GAAP
Measures are used internally to assess our operating and economic
performance and to provide key performance information to
management. We believe that these Non-GAAP Measures, in addition to
measures prepared in accordance with GAAP, provide investors with
an improved ability to evaluate our performance and ability to
generate cash flows required to fund and sustain our business.
These Non-GAAP Measures are intended to provide additional
information and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
GAAP. These Non-GAAP Measures do not have any standardized meaning
prescribed under GAAP, and therefore may not be comparable to or
consistent with measures used by other issuers or with amounts
presented in our financial statements.
Our primary business is gold production and our
current and future operations, development, exploration, and
life-of-mine plans primarily focus on maximizing returns from such
gold production. As a result, our Non-GAAP Measures are
calculated and disclosed on a per gold or gold equivalent ounce
basis, except for adjusted net (loss) income.
Adjusted net (loss) income
The Company believes the use of adjusted net (loss)
income allows management, investors, and analysts to understand its
net (loss) income related to its primary business. For the fourth
quarter and full-year 2017, effects of the TCJA have been excluded
from net (loss) income. Net (loss) income is reconciled to adjusted
net (loss) income in the table below (in thousands, except per
share amounts):
|
|
Three months ended December 31,
2017 |
|
Year ended December 31, 2017 |
Net (loss) income |
|
$ |
(7,737) |
|
$ |
(23,664) |
Effect on
deferred tax balances of change in U.S. statutory rate |
|
10,500 |
|
10,500 |
Effect of
AMT credits |
|
(1,600) |
|
(1,600) |
Adjusted net (loss)
income |
|
$ |
1,163 |
|
$ |
(14,764) |
|
|
|
|
|
Net (loss) income per
share, basic and diluted |
|
$ |
(0.04) |
|
$ |
(0.13) |
Effect on
deferred tax balances of change in U.S. statutory rate |
|
0.06 |
|
0.06 |
Effect of
AMT credits |
|
(0.01) |
|
(0.01) |
Adjusted net (loss)
income per share, basic and diluted |
|
$ |
0.01 |
|
$ |
(0.08) |
|
Production cash costs per gold equivalent ounce
sold
Production cash costs per gold equivalent ounce
sold presents our cash costs associated with the production of gold
equivalent ounces and, as such, non-cash depreciation and depletion
charges are excluded. Production cash costs per gold equivalent
ounce sold is calculated on a per gold equivalent ounce sold basis,
and includes all direct and indirect operating costs related to the
physical activities of producing gold, including mining,
processing, third-party refining expenses, on-site administrative
and support costs, royalties, and cash portions of net realizable
value write-downs on production-related inventories (State of
Nevada net proceeds and other such taxes are excluded). We believe
that converting the benefits from selling silver ounces into gold
ounces is helpful to analysts and investors as it best represents
the way we operate, which is to maximize returns from gold
production. Gold equivalent ounces are computed using the number of
silver ounces required to generate the revenue derived from the
sale of one gold ounce, using average realized selling prices (in
thousands, except ounces sold and per ounce amounts):
|
|
|
|
|
|
|
Three months ended December 31,
2017 |
|
Year ended December 31, 2017 |
|
|
Nevada Total |
|
True North |
|
Total |
|
Nevada Total |
|
True North |
|
Total |
Average realized price
per gold ounce sold |
|
$ |
1,273 |
|
|
$ |
1,279 |
|
|
$ |
1,274 |
|
|
$ |
1,261 |
|
|
$ |
1,260 |
|
|
$ |
1,261 |
|
Average realized price
per silver ounce sold |
|
$ |
16.63 |
|
|
$ |
17.33 |
|
|
$ |
16.63 |
|
|
$ |
17.26 |
|
|
$ |
17.33 |
|
|
$ |
17.26 |
|
Silver
ounces equivalent to revenue from one gold ounce |
|
76.5 |
|
|
73.8 |
|
|
76.6 |
|
|
73.1 |
|
|
72.7 |
|
|
73.1 |
|
Silver ounces sold |
|
198,623 |
|
|
750 |
|
|
199,373 |
|
|
981,002 |
|
|
3,174 |
|
|
984,176 |
|
GEOs from
silver ounces sold |
|
2,596 |
|
|
10 |
|
|
2,603 |
|
|
13,420 |
|
|
44 |
|
|
13,463 |
|
Gold ounces sold |
|
38,090 |
|
|
8,983 |
|
|
47,073 |
|
|
151,596 |
|
|
25,806 |
|
|
177,402 |
|
Gold
equivalent ounces |
|
$ |
40,686 |
|
|
$ |
8,993 |
|
|
$ |
49,676 |
|
|
$ |
165,016 |
|
|
$ |
25,850 |
|
|
$ |
190,865 |
|
Production costs |
|
$ |
30,814 |
|
|
$ |
9,462 |
|
|
$ |
40,276 |
|
|
$ |
106,120 |
|
|
$ |
28,191 |
|
|
$ |
134,311 |
|
Add: Write-down of
production inventories (cash portion) |
|
6,771 |
|
|
3,377 |
|
|
10,148 |
|
|
8,025 |
|
|
10,683 |
|
|
18,708 |
|
|
|
$ |
37,585 |
|
|
$ |
12,839 |
|
|
$ |
50,424 |
|
|
$ |
114,145 |
|
|
$ |
38,874 |
|
|
$ |
153,019 |
|
Production cash costs per GEO sold |
|
$ |
924 |
|
|
$ |
1,428 |
|
|
$ |
1,015 |
|
|
$ |
692 |
|
|
$ |
1,504 |
|
|
$ |
802 |
|
(1) Nevada Total includes Fire Creek, Midas, and
Hollister. |
|
All-in sustaining costs per gold ounce sold
All-in sustaining cost ("AISC") amounts are
intended to provide additional information only and do not have any
standardized meaning prescribed by GAAP and should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. The measures are not
necessarily indicative of operating profit or cash flow from
operations as determined under GAAP.
Our calculation of AISC per gold ounce sold is
consistent with the June 2013 guidance released by the World Gold
Council, a non-regulatory, non-profit market development
organization for the gold industry. AISC per gold ounce sold
reflects the varying costs of producing gold over the life-cycle of
a mine or project, including costs required to discover and develop
new sources of production; therefore, capital amounts related to
expansion and growth projects are included.
AISC per gold ounce includes all: (1) direct and
indirect operating cash costs related to the physical activities of
producing gold, including mining, processing, third-party refining
expenses, on-site administrative and support costs, royalties, and
cash portions of net realizable value write-downs on
production-related inventories (2) general and administrative
expenses, (3) asset retirement and accretion expenses, and (4)
sustaining capital expenditures, the total of which is reduced for
revenues earned from silver sales. Certain cash expenditures,
including State of Nevada net proceeds and other related taxes,
federal tax payments, and financing costs are excluded.
All-in costs per gold ounce sold
All-in costs per gold ounce sold includes
additional costs which reflect the varying costs of producing gold
over the life-cycle of a mine or project. We calculate our all-in
costs per gold ounce sold by beginning with the AISC total and
adding non-sustaining (growth) capital expenditures and exploration
and development expenditures.
AISC per gold ounce sold and all-in costs per gold
ounce sold are presented in the tables below (in thousands, except
ounces sold and per ounce amounts):
|
|
|
|
|
Three months ended December 31,
2017 |
|
|
Nevada Total(1) |
|
True North |
|
Corporate |
|
Total |
Production costs |
|
$ |
30,814 |
|
$ |
9,462 |
|
$ |
— |
|
$ |
40,276 |
Add: Write-down of
production inventories (cash portion) |
|
6,771 |
|
3,377 |
|
— |
|
10,148 |
|
|
37,585 |
|
12,839 |
|
— |
|
50,424 |
General and
administrative |
|
282 |
|
179 |
|
2,987 |
|
3,448 |
Asset retirement cost
assets and accretion |
|
(2,975) |
|
(40) |
|
— |
|
(3,015) |
Sustaining capital
expenditures |
|
3,756 |
|
2,520 |
|
(27) |
|
6,249 |
Less: silver
revenue |
|
(3,303) |
|
(13) |
|
— |
|
(3,316) |
All-in
sustaining costs |
|
35,345 |
|
15,485 |
|
2,960 |
|
53,790 |
|
|
|
|
|
|
|
|
|
Gold ounces sold |
|
38,090 |
|
8,983 |
|
— |
|
47,073 |
|
|
|
|
|
|
|
|
|
All-in sustaining costs
per gold ounce sold |
|
$ |
928 |
|
$ |
1,724 |
|
$ |
— |
|
$ |
1,143 |
|
|
|
|
|
|
|
|
|
All-in sustaining
costs |
|
35,345 |
|
15,485 |
|
2,960 |
|
53,790 |
Non-sustaining capital
expenditures |
|
2,907 |
|
279 |
|
292 |
|
3,478 |
Exploration |
|
3,040 |
|
113 |
|
— |
|
3,153 |
Development and
projects costs |
|
— |
|
— |
|
— |
|
— |
All-in costs |
|
$ |
41,292 |
|
$ |
15,877 |
|
$ |
3,252 |
|
$ |
60,421 |
|
|
|
|
|
|
|
|
|
Gold ounces sold |
|
38,090 |
|
8,983 |
|
— |
|
47,073 |
|
|
|
|
|
|
|
|
|
All-in costs per gold
ounce sold |
|
$ |
1,084 |
|
$ |
1,767 |
|
$ |
— |
|
$ |
1,284 |
(1) The
Nevada Total includes Fire Creek, Midas, Hollister, and
Aurora. |
|
|
|
|
Year ended December 31, 2017 |
|
|
Nevada Total(1) |
|
True North |
|
Corporate |
|
Total |
Production costs |
|
$ |
106,120 |
|
$ |
28,191 |
|
$ |
— |
|
$ |
134,311 |
Add: Write-down of
production inventories (cash portion) |
|
8,025 |
|
10,683 |
|
— |
|
18,708 |
|
|
114,145 |
|
38,874 |
|
— |
|
153,019 |
General and
administrative |
|
2,373 |
|
961 |
|
16,067 |
|
19,401 |
Asset retirement cost
assets and accretion |
|
(1,923) |
|
51 |
|
— |
|
(1,872) |
Capital
expenditures |
|
36,346 |
|
13,707 |
|
156 |
|
50,209 |
Less: silver
revenue |
|
(16,932) |
|
(55) |
|
— |
|
(16,987) |
All-in
sustaining costs |
|
134,009 |
|
53,538 |
|
16,223 |
|
203,770 |
|
|
|
|
|
|
|
|
|
Gold ounces sold |
|
151,596 |
|
25,806 |
|
— |
|
177,402 |
|
|
|
|
|
|
|
|
|
All-in sustaining costs
per gold ounce sold |
|
$ |
884 |
|
$ |
2,075 |
|
$ |
— |
|
$ |
1,149 |
|
|
|
|
|
|
|
|
|
All-in sustaining
costs |
|
134,009 |
|
53,538 |
|
16,223 |
|
203,770 |
Non-sustaining capital
expenditures |
|
14,167 |
|
765 |
|
492 |
|
15,424 |
Exploration |
|
8,007 |
|
239 |
|
— |
|
8,246 |
Development and
projects costs |
|
11,674 |
|
— |
|
— |
|
11,674 |
All-in costs |
|
$ |
167,857 |
|
$ |
54,542 |
|
$ |
16,715 |
|
$ |
239,114 |
|
|
|
|
|
|
|
|
|
Gold ounces sold |
|
151,596 |
|
25,806 |
|
— |
|
177,402 |
|
|
|
|
|
|
|
|
|
All-in costs per gold
ounce sold |
|
$ |
1,107 |
|
$ |
2,114 |
|
$ |
— |
|
$ |
1,348 |
(2) The
Nevada Total includes Fire Creek, Midas, Hollister, and
Aurora. |
Contact
Mike Beckstead
Director, Investor Relations
O: 775-284-5757
M: 406-290-4165
mbeckstead@klondexmines.com
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