Concerned Shareholders of Klondex Mines Limited

June 23, 2011 13:57 ET

Klondex Concerned Shareholders Reiterate Serious Corporate Governance Concerns: Klondex Shareholders Deserve An Independent Board and a Better Plan

TORONTO, ONTARIO--(Marketwire - June 23, 2011) - The Concerned Shareholders of Klondex Mines Ltd. ("Klondex" or the "Company") remain confident that Klondex requires a new board to address serious corporate governance shortfalls and create shareholder value. The Concerned Shareholders were pleased to see that many of its governance concerns were echoed in the Institutional Shareholder Services ("ISS") and Glass Lewis & Co., LLC ("GL") reports issued on June 21, 2011 and June 22, 2011, respectively.

ISS acknowledges that:

"…in light of Klondex's governance structure, ISS would have likely recommended that shareholders withhold votes from (i) Solloway and Wilson for serving as insiders on the Compensation Committee, for having a non-majority independent board, and for failure to have an independent nominating committee; (ii) Kern for serving as an affiliated outsider on a non-majority independent board and for failure to have an independent nominating committee; and (iii) Shorr for failure to attend at least 75 percent of the total meetings scheduled during FY2010."

ISS also noted in its report that:

"Compared to its peers, Klondex's governance structure is less shareholder friendly given that a significant majority of the peers have a majority independent board, independent compensation committees, and nominating and corporate governance committees."*

GL acknowledges that:

"...we share the Dissident's concerns about the Company's corporate governance practices... Four of the six directors are either affiliated with the Company or are insiders. We believe this raises concerns about the objectivity and independence of the board and its ability to perform its proper oversight role."*

GL also noted in its report that:

"In our view, shareholders could benefit from the fresh, independent perspectives of new unaffiliated board members, with particular reference to critical board functions, such as executive compensation and audit oversight."*

Klondex shareholders deserve better from our Company's board. A major overhaul of the board is necessary in the face of the blatant corporate governance shortfalls and lack of technical expertise prevalent on the board. The Concerned Shareholders' sole aim is to implement a board with the requisite corporate governance and technical expertise to steward Klondex to the next level and maximize shareholder value in the long run.

A Better Plan for Shareholders:

The Concerned Shareholders have put forward a detailed plan for the Company, which includes:

  • An overhaul of corporate governance policies and reviews of related party transactions and company expenses;
  • A significant reduction in the current equity compensation plan to limit the amount of options awarded by the Company to 10% from the current 15% of the issued and outstanding share capital;
  • Completion of the underground ramp;
  • Aggressive infill drilling and upgrading of the resource classifications;
  • Completing metallurgical test work;
  • Re-logging existing drill holes to enhance geological and geotechnical understanding, including fracture patterns and ground conditions;
  • Developing a credible geological and resource model; and
  • Initiation and completion of independent preliminary economic assessment, pre-feasibility and feasibility studies.

This is a far more sophisticated plan than what the current Klondex board has presented to shareholders. Our plan will create value for shareholders by addressing known and widely stated reasons for the Company's depressed valuation. A full description of the forward work plan and path to feasibility study can be found in the Concerned Shareholders press release dated June 20, 2011 and filed on SEDAR at www.sedar.com.

Shareholders Call to Action:

The Concerned Shareholders held an Investor Conference Call detailing their concerns on June 15, 2011. The number to access the Investor Conference Call replay is Canada & USA Toll Free: 1-800-319-6413 or 1-604-638-9010. The passcode for the replay is 4832. A replay of the call is also available at https://services.choruscall.com/links/klondex110615.html.

Shareholders are asked to vote their YELLOW form of proxy today FOR the Concerned Shareholders nominees to enable them to maximize shareholder value, strengthen corporate governance and enhance Klondex's technical and financial expertise.

*Permission to quote from the ISS and GL reports was neither sought nor obtained.

It is important that shareholders vote their YELLOWproxy before the proxy deadline at 11:00 a.m. (Toronto time) on June 28, 2011. Shareholders who require assistance voting their YELLOWproxy should contact Kingsdale Shareholder Services Inc. at 1-866-879-7649 or email contactus@kingsdaleshareholder.com.

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