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Klondex Mines Ltd. (KDX:TSX; KLDX:NYSE.MKT) released its second quarter operating results on July 18, reporting record production and sales. The company noted that it produced 66,629 gold equivalent ounces, a 94% increase from the first quarter, and sold 69,522 ounces, a 107% increase from Q1.
Mr. Paul Huet, Klondex’s president and CEO stated, “As expected, the operating results for the second quarter were the best in the company’s history. We processed all of the ore that was stockpiled at the Midas mill at the end of the first quarter plus we continued to execute our mine plans, mining an additional 53,248 gold equivalent ounces in the second quarter.”
Analyst Heiko Ihle of Rodman & Renshaw noted in a July 19 company update that the large quarterly increase was “mainly due to a significant increase of production from Fire Creek, which we attribute primarily from the processing of stockpiled ore. . .the company plans on processing Hollister ore through the Midas mill in 2H17, and therefore remains on track to meet 2017 guidance. We highlight that our model estimates 2017 production to reach 219,000 gold equivalent ounces, in-line with management’s 2017 production guidance.”
Ihle also stated that at Fire Creek, production “totaled 45,773 gold equivalent ounces, a 138% increase over 1Q17 production. We note that 1Q17 production at Fire Creek was negatively impacted by heavy snowfall that limited the amount of mined ore the firm was able to transport to its Midas mill.”
Rodman & Renshaw’s report reiterated the firm’s $6.25 per share target price. Klondex is currently trading at around $4.31.
Analyst Josh Wolfson of Eight Capital wrote in a July 19 report that “production results represent a material improvement from 1Q, and exceeded our expectations.” He noted that “corporate production nearly doubles QoQ, aided by Fire Creek stockpile processing,” which was 9% over Eight Capital’s estimate. “Overall, production results represent a material improvement and near doubling from 1Q realized production of just 34.5 koz, which was largely impacted by ore transportation logistics issues due to weather at Fire Creek, as well as by equipment issues at True North,” the report noted.
“While we believe ramp-up uncertainties remain at True North and Hollister, in our view 2Q results position the company favourably to achieve corporate full year production guidance,” Wolfson stated.
Eight Capital’s target price for Klondex is $5.25 per share.
PI Financial analyst Philip Ker, in a July 19 report, stated that “Klondex Mines provided a solid production beat for Q2/17 realizing 66,629 oz AuEq versus our target of 62,425 oz AuEq.”
“In our view, achieving guidance is hinged on Klondex’s two development assets Hollister and True North—both of which have achieved little to no production YTD. Hollister is in ramp-up mode with stockpiled ore. Both operations are anticipating increased tonnage output and head grades in the coming quarters in order to support their current guidance levels. Given the early stage of these operations, the ramp-up is a challenge but Klondex should still be able to adequately meet consolidated guidance of 210,000—225,000 oz AuEq.”
PI Financial maintains a target price of $5.05 for Klondex.
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