Interesting Brian Quast of BMO Capital Markets said in a research note that he values the open-pit resource on an in-situ basis at $17 million, which represents a 5% increase in the company’s corporate net present value.
“We do not expect Fire Creek to become an open pit any time in the near future, as a new mill would need to be built, and additional permits will need to be secured, processes that require time and capital,” the analyst commented in his note to clients. “In the long term, the addition of open pit resources has the potential to extend Fire Creek’s mine life, which we currently model at ~ four years.”
Barry Allan, an analyst at Laurentian Bank Securities, said the new resource “adds little to no value to NAV at this point.”
“Klondex are encouraged by the resource since [it] remains open along strike (laterally), and there is an expectation substantially more mineralization can be added that would extend the mine life further,” Allan writes in a research note. “As currently being operated, though, (as a high-grade underground mine), the resource will not have an impact on operations over the shorter-term since the material is: 1) too low-grade to be transported to the Midas mill and/or 2) open-pit mining would negatively impact the existing underground mine.”
Klondex will release a reserve and resource update for all of its assets in the first quarter of 2018. The company has 100% interests in four producing properties: the Fire Creek underground mine; the Midas mine and mill; and the Hollister mine — all of which are in Nevada. In addition, it owns the True North mine and mill in Manitoba.
Its other asset is the Aurora mine and mill in Nevada.
The company expects to produce between 213,000 and 230,000 gold-equivalent ounces in 2017, at cash costs of US$675 to US$700 per GEO.
BMO’s Quast has a price target on the stock of $3.75 per share, while Laurentian Bank’s Allan has a target price of $5.80 per share.
Over the last year Klondex has traded in a wide range, between a low of $3.40 per share (November 2017) and a high of $7.73 per share (February 2017).
The junior has 180 million shares outstanding for a market cap of $612.5 million.