KLONDEX drill core. Photo: Klondex Mines

KLONDEX drill core. Photo: Klondex Mines

Plucky Klondex Squeezing Cash from Midas

Issue 99, September 2014

At its peak under Newmont Mining, the Midas gold mine and mill in Elko County, Nevada, processed 1,200 tonnes per day, employing 148 people.

When gold junior Klondex bought the mine off Newmont in February, daily throughput had declined by two thirds to 435 tonnes, but employee numbers had risen to 220 people.

Taking costs out of the business “wasn’t very difficult”, says Klondex president Paul Huet, who managed the mine for Newmont until 2007, before leading its buyout by Klondex this year for $55m in cash.

Klondex hired 67 of Newmont’s team, adding 43 of its own, halving the total headcount whilst increasing throughput to 500 tonnes per day. A quarter of the mine’s underground equipment was meanwhile shipped to Klondex’s Fire Creek project to the south, lowering the project’s start-up costs from $7m to $400,000.

The figures offer an insight into the margins being squeezed out of mines being cast-off by gold majors. Huet’s position mirrors that of Bill Beament in Western Australia, a former mine contractor who has bought a string of high grade gold mines off Newmont and Barrick in the last year for Northern Star Res., aggressively increasing margins.

“All I’ve ever done my whole career is operate mines and mills,” Huet says.

Klondex reported a maiden quarterly profit last month of $4.4m, lowering costs 19 per cent to $730 per ounce and generating operating cash flow of $14m on revenue of $36m.

The company is now investing in extending its total resource base of 1.2m gold ounces equivalent, continuing exploration at Midas, dropped by Newmont in 2012. Huet has budgeted $26m over 2 years to near-mine exploration, the property’s biggest drill programme in 10 years.

Drill results are pending.

“All I’ve ever done my whole career is operate mines and mills.”

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