Loading ...RA: A company we have talked about since we’ve been doing the interviews is Klondex Mines Ltd. (KDX:TSX; KLDX:NYSE.MKT). Success really depends on the people running these companies. It was a game changer when Paul Huet, CEO of Klondex, came on the scene three years ago.
Klondex recently completed an acquisition and the market got jittery. It bought the Rice Lake mine out of bankruptcy for around $30M from a controversial name, San Gold Corp. (SGR:TSX.V). There is still some $20+M of mobile mining fleet at the mine site and the mill was on care and maintenance. I think the real problem with San Gold was that it was trying to grow this asset beyond the natural mining rate. The trouble is if a company upsizes the mill and the underground operation can’t keep up, it is forced to mine lower grades to get the tonnage and that is a losing proposition. Klondex is looking at turning it into perhaps a 50,000 ounce (50 Koz) producer, maybe 70 Koz. That is much more economic.
TGR: We did see a little bit of a selloff when the acquisition came. Is there going to be some kind of a catalyst in 2016 that will prove to investors that this was a good decision?
RA: Klondex is going to re-evaluate the mine plan. In nine months or so we should have a better understanding of how it will operate. We may have other catalysts before that related to Fire Creek and Midas exploration results. That is why I’m pretty confident this thing is going to be a very good performer for us this year.