KLONDEX MINES LTD. T.KDX

BMO Presentation

[insideoutside]

Paul sounded very low energy as if he has aged 25-30 yrs in the last 12mo.  Mining is difficult, even more so when you make a terrible aquisition like TN. 

Overall not a lot of new info.   Hollister recovery at 80% is still poor.  Unbelievably they expect no improvement until "mid year".  I can only conclude they still have no handle on this issue.  They originally promised to have the mill optimized in Q2 of 2017.  I can only expect more capital destruction as they grasp for a solution to effectively handle FC and Hollister ore with the same plant.  Ultimately the answer might be an additional mill but no one wants to discuss that when the treasury is in bad shape.

Second, the shift of focus to FC open pit deeply concerns me. It is likely FC underground was high graded in 2017 in a failed attempt to meet guidance. And Hollister drill results are probably below expectations. So far the open pit economics look very marginal. And they have no experience operating an open pit mine.  A partner will extract a pound of flesh since Huet is negociating from a position of weakness rather than strength. Makes me wonder if this will turn into another write off like TN..  Once again the poor financial situation they have gotten themselves into will limit their future options. 

I expect a rerating of the stock when financials are released in March to account for balance sheet weakness exasperated by the forward selling (hedging) program which has gone largely unnoticed by the market, but will soon bite them in the a$$ now that Gold is above 1300.

I anticipate a new weekly average share price of 1.00USD 1.30 CAD beginning right after earnings gap down and would consider a long postion if it drops an additional 10-20% (ie 0.80 to 0.90 USD) but only as a swing trade.  Postion traders with a buy on dip and hold long term strategy will continue to get hit by a train and left for dead.

On a positive note, Paul was more honest than past calls admiting poor life of mine,and too much previous emphasis on production growth.  Humility was the appropriate response after such a horrible year.

IO.

[Highwave]

Many misleading statements in your post...   Huet came clean but it doesnt make the situation any better. Fire Creek is not going to be like True North.  It produced 100,000 oz last year.  Guidance is for the same in 2018.  If you look thru 2017 FC never hit the higher grades they had in 2P.  The revision was closer to actual production.  In the call there are

[Highwave]

I meant new heap leach program at FC.  Was pissed reading that previous post.  Typed to fast.

[insideoutside]

Not my intention to mislead anyone here my friend, I have no position in Klodex.   I speculate FC was high graded in 2017 because they have guided for lower production for both FC and Midas for 2018 and also did not publish grade estimate.  Grades are dropping and Hollister is supposed to make up for the slack.  Yet they still don't know how to economically extract the

[Highwave]

Given their production in 2017 i believe those contracts are complete as well. That gives you an idea of average gold price will be in Q4 2017. From a non factual point of view it has been my experience that bad things usually happen in 3's. We already had our 3 with TN mine closure, Midas Mill processing Hollister ore and FC 2P downgrade. Any good news with some value buying from some deep

[insideoutside]

The quarterly indicates the contracts can be written out as far as 12months.  For all we know they may have written many more since the end of Q2.  It is a quick way for them to generate cash, however it comes at enormous expense when the price of gold rises and they have to close out the contracts.  Almost all producers has discontinued hedging programs since the gold crash

[Highwave]

More fear mongering from you. We know what they wrote in Q3 since it is in the quarterly. We will find out Q4. If they did do assnother collar i bet it will be at a higher price. Going forward they should be unhedged. The Gold price is a coiled spring.

[insideoutside]

No fear just facts.  As I mentioned the Gold Collar should have no material impact, but the forward trades are a huge overhang.  Below is the statement from the Q3 2017 10Q.   278K of gold hedged.  That is all of the production for five quarters Q4 17 until the end of 2018 which will be sold between 1268 and 1285 resulting in 10's of millions of impairments with gold

[Highwave]

The fact is those forwards already happened in FY 2017. Go away shorty. It looks like the gold collar took its place for Q1.