SOURCE: Klondex Mines Ltd.

Klondex Mines Ltd.

November 03, 2016 19:30 ET

Klondex Reports Third Quarter 2016 Results; Records Record Quarterly Revenues of $53.0 million

On Track to Achieve Full Year Production and Cost Guidance

VANCOUVER, BC--(Marketwired - November 03, 2016) - Klondex Mines Ltd. (TSX: KDX) (NYSE MKT: KLDX) ("Klondex", the "Company", "we", "our", or "us") is pleased to announce its operational and financial results for the third quarter of 2016 as well as recent developments. This press release should be read in conjunction with our third quarter 2016 interim financial statements and related management's discussion & analysis ("MD&A"), which are available on our website (www.klondexmines.com), on SEDAR (www.sedar.com), and on EDGAR (www.sec.gov). All dollar amounts included in this press release are expressed in thousands of United States dollars, unless otherwise noted, and are based on our financial statements and MD&A, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. References to "Notes" refers to the notes contained in the third quarter 2016 interim financial statements. "Nevada Operations" collectively refers to our Fire Creek and Midas mines.

Third Quarter 2016 Highlights

  • Health, Safety, and Environmental - No lost-time injuries or environmental citations at Fire Creek, Midas or True North.
  • True North - Positive production decision and first gold sold, now have three producing mines.
  • Cash Flows and Liquidity - Strengthened financial position and liquidity. Following a CDN$129.5 million equity offering, cash balance of $131.1 million, working capital of $119.9 million (ratio of 4.1:1), and total liquidity of $144.9 million when including the Revolver availability. On October 3, 2016, remitted $80.0 million payment to complete Hollister Acquisition.
  • Ounces Sold and Financial Results - Sold 41,553 gold equivalent ounces ("GEOs"), consisting of 36,648 gold ounces and 362,500 silver ounces. Revenue of $53.0 million from average selling prices per gold and silver ounce of $1,276 and $17.26, respectively. Net income of $7.2 million (or $0.05 per share - basic).
  • Nevada Operations and Performance Measures - Produced 35,324 GEOs and continued trend of increasing GEO grades milled at Nevada Operations. Nevada Operations operating metrics were: 761 ore tons milled per day at an average GEO mill head grade of 0.55 oz/ton. Cost metrics are as follows:
          
   Production cash costs per gold equivalent ounce sold  All-in sustaining costs per gold ounce sold  All-in costs per gold ounce sold (excluding True North)
Non-IFRS Measure - Nevada Operations(1)  $671  $1,155  $1,206
 
(1) See Non-IFRS Performance Measures in this Press Release.
 
  • Mineral Reserves and Resources - Updated Mineral Reserve and Mineral Resource estimates for Fire Creek, Midas, and True North.
  • Capital Expenditures - Spent $8.9 million at Fire Creek, $8.0 million at Midas, $3.8 million at True North, and $0.1 million at corporate for total capital spending of $20.8 million.

Recent Developments

  • Hollister Acquisition and Private Placement - On October 3, 2016, completed the acquisition of the Hollister and Aurora projects, located in Nevada, USA. Synergies with our Nevada Operations and significant future operational and exploration potential.
  • True North Technical Report - On October 27, 2016, we filed a Technical Report for True North and reported a Mineral Reserve in the tailings of ~32,400 Au oz consisting of 1,170k tons at an average grade of 0.028 Au opt. This is in addition to the Mineral Reserve and Mineral Resource of the True North gold mine announced on September 12, 2016.
  • Secured Revolving Facility - On October 27, 2016, we amended our Revolver to increase its capacity by $10.0 million to $35.0 million, further strengthening our financial position and liquidity.

Mr. Paul Huet, President and CEO commented, "We continue to deliver on our commitments as our third quarter operating and financial results were in line with our plans. Due to the planned development activities conducted throughout the year, we are well positioned to achieve our full year production and cost guidance." Mr. Huet continued, "We also achieved a milestone in the third quarter by placing our third mine into production. True North has become an important asset in our portfolio and we are excited about its future contributions to our profitability."

2016 Full Year Outlook

Nevada Operations

We maintain our targeted total annual production costs and GEO production guidance, which is expected to be weighted approximately 45%-50% in the first-half of 2016 and 50%-55% in the second-half of 2016. While we maintain our annual total Nevada Operations guidance, our production cash cost per GEO range was decreased by $50 at Fire Creek and was increased by $50 at Midas. Our 2016 GEO production and grades are expected to progressively increase from the first half of the year to the second half of the year following the completion of planned first-half development and silling activities. GEO grades milled at our Nevada Operations were 0.44 oz/ton, 0.52 oz/ton, and 0.55 oz/ton during the first, second, and third quarters of 2016, respectively.

The following table outlines our annual guidance compared to actual results and presents all-in costs per gold ounce sold exclusive of True North, which was acquired during the first quarter of 2016 (after the release of our full-year guidance):

             
   Fire Creek  Midas  Total  Actual
2016 Guidance (Nevada Operations)  Low  High  Low  High  Low  High  Nine months ended September 30, 2016
Gold equivalent ounces produced(1)   97,000   100,000   48,000   50,000   145,000   150,000   106,901
Production cash costs per GEO sold(1)(2)  $400  $450  $900  $950  $600  $650  $649
All-in sustaining costs per gold ounce sold(2)                  $850  $900  $1,067
All-in costs per gold ounce sold, excluding True North(2)                  $1,025  $1,075  $1,163
Capital expenditures on mineral properties, plant and equipment, excluding True North  $34,700  $36,700  $20,300  $23,300  $55,000  $60,000  $45,514
 
(1) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the projected average realized gold price per ounce by the projected average realized silver price per ounce expected to be received by us in 2016.
(2) See Non-IFRS Performance Measures section in this Press Release.
 

True North

We expect to produce gold ounces during the second half of 2016 from a combination of processing gold in tailings and mining. The following table outlines our annual guidance and is compared to actual results:

       
   Total  Actual
2016 Guidance (True North)  Low  High  Nine months ended September 30, 2016
Gold ounces produced   8,000   12,000   1,752
Capital expenditures on mineral properties, plant and equipment  $14,000  $16,000  $11,708
          

Hollister Project

The following table outlines our fourth quarter projections for Hollister capital spending:

       
   Total  Actual
2016 Guidance (Hollister Project)  Low  High  Nine months ended September 30, 2016
Capital expenditures on mineral properties, plant and equipment  $7,500  $9,500  $-
          

Consolidated Financial Results of Operations

      
  Three months ended
September 30,
 Nine months ended
September 30,
  2016  2015  2016  2015
Revenues $ 53,005    $ 38,436    $ 136,484    $ 118,002  
Cost of sales               
 Production costs  27,828     21,029     71,750     63,366  
 Depreciation and depletion  7,127     7,628     19,885     22,442  
Gross profit  18,050     9,779     44,849     32,194  
 General and administrative expenses  4,840     3,454     11,429     9,252  
 Loss on equipment disposal  109     -     109     351  
Income from operations  13,101     6,325     33,311     22,591  
 (Loss) gain on gold supply agreement derivative, net  (113 )   (66 )   (1,948 )   229  
 Finance charges, net  (1,305 )   (2,120 )   (3,886 )   (6,405 )
 Foreign currency gain (loss), net  370     5,945     (1,837 )   12,207  
 Business acquisition costs  (819 )   -     (1,846 )   -  
 Provision for legal settlement  -     -     (2,250 )   -  
 Other, net  (813 )   -     (694 )   -  
Income before tax  10,421     7,952     20,850     26,490  
 Income tax expense  3,207     3,836     7,594     10,347  
Net income $ 7,214    $ 4,116    $ 13,256    $ 16,143  
 Net income per share $ 0.05    $ 0.03    $ 0.09    $ 0.12  
                 

When compared to the prior year quarter, third quarter 2016 Revenues were higher from selling an additional 8,714 gold ounces at a $140 higher average realized price, partially offset by a decrease in silver sales due to low silver grades. Production costs and Depreciation and depletion increased from the prior period due primarily to an increase in ounces sold. General and administrative expenses increased in 2016 due to increased staff levels at the corporate office, severance payments, and costs associated with our deferred share unit plan. Finance charges were primarily related to the gold purchase agreement, finance leases, and the promissory note pursuant to the True North acquisition. Business acquisition costs related to the True North and Hollister/Aurora acquisitions.

Liquidity and Capital Resources

      
  Three months ended
September 30,
 Nine months ended
September 30,
  2016  2015  Change  2016  2015  Change
Net cash provided by operating activities $ 16,576    $ 13,399    $ 3,177    $ 44,539    $ 36,662    $ 7,877  
Net cash used in investing activities  (20,760 )   (9,728 )   (11,032 )   (75,056 )   (23,809 )   (51,247 )
Net cash provided by financing activities  98,410     2,665     95,745     101,719     3,298     98,421  
Effect of foreign exchange on cash balances  38     (543 )   581     842     (1,348 )   2,190  
 Net increase in cash  94,264     5,793     88,471     72,044     14,803     57,241  
 Cash, beginning of period  36,877     54,498         59,097     45,488      
 Cash, end of period $ 131,141    $ 60,291        $ 131,141    $ 60,291      
                      

We generated $16.6 million of net operating cash flows and were provided $98.4 million from financing cash flows due to the CDN$129.5 million equity offering and the exercise of share options and warrants; cash used in investing activities totaled $20.8 million. We maintained our strong financial position and as of September 30, 2016, had total liquidity of $144.9 million, consisting of $119.9 million in working capital and $25.0 million of borrowing availability under our Revolver. On October 3, 2016, we remitted $80.0 million cash to complete the Hollister Acquisition and on October 27, 2016, we increased our Revolver borrowing capacity by $10.0 million to $35.0 million.

Third Quarter and Year To Date 2016 Summary Operational Results

          
   Three months ended
September 30,
     
   2016  2015      
Mine operations  Fire Creek   Midas   Nevada Total   True North   Total  Nevada Total(1)   Change  
Ore tons milled   26,122    43,934    70,056    31,748    101,804   70,997    30,807  
Average gold equivalent mill head grade (oz/ton)(2)   0.98    0.28    0.55    0.06        0.48       
Average gold mill head grade (oz/ton)   0.97    0.18    0.48    0.06        0.39       
Average silver mill head grade (oz/ton)   0.66    7.59    5.00    -        6.65       
Average gold recovery rate (%)   93.4 %  93.4 %  93.3 %  88.7 %      94.1 %     
Average silver recovery rate (%)   87.2 %  87.2 %  87.3 %  - %      94.0 %     
Gold equivalent produced (oz)(2)   23,858    11,445    35,324    1,752    37,070   32,076    4,994  
Gold produced (oz)   23,654    7,523    31,177    1,752    32,929   26,300    6,629  
Silver produced (oz)   15,023    291,031    306,054    -    306,054   443,576    (137,522 )
Gold equivalent sold (oz)(2)(3)(4)   27,500    13,036    40,560    1,000    41,553   33,853    7,700  
Gold sold (oz)(3)   27,254    8,394    35,648    1,000    36,648   27,934    8,714  
Silver sold (oz)   18,100    344,400    362,500    -    362,500   454,611    (92,111 )
Revenues and realized prices                                   
Gold revenue (000s)  $34,653   $10,750   $45,403   $1,344   $46,747  $31,715   $15,032  
Silver revenue (000s)   312    5,946    6,258    -    6,258   6,721   $(463 )
 Total revenues (000s)  $34,965   $16,696   $51,661    1,344    53,005  $38,436   $14,569  
Average realized gold price ($/oz)  $1,271   $1,281   $1,274   $1,344   $1,276  $1,135   $141  
Average realized silver price ($/oz)  $17.24   $17.26   $17.26   $-   $17.26  $14.78   $2.48  
Non-IFRS Measures                                   
Production cash costs per GEO sold(4)  $499   $1,035   $671   $615   $670  $621   $49  
All-in sustaining costs per gold ounce sold(4)            $1,155    n/a   $1,140  $858   $282  
All-in costs per gold ounce sold (Nevada Total)(4)                      $1,206  $1,096   $110  
All-in costs per gold ounce sold (including True North)(4)                      $1,275   n/a    n/a  
                            
(1) During the 2015, production was only from Nevada Operations.  
(2) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the average realized gold price per ounce by the average realized silver price per ounce received by us in the respective period and match the ratios used to determine the production cash costs per GEO sold. Refer to the Non-IFRS Performance Measures section of this Press Release for additional detail.  
(3) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.  
(4) This is a non-IFRS measure; refer to the Non-IFRS Performance Measures section of this Press Release for additional detail.  
  
          
   Nine months ended
September 30,
     
   2016  2015      
Mine operations  Fire Creek   Midas   Nevada Total   True North   Total  Nevada Total(1)   Change  
Ore tons milled   92,832    137,173    230,005    31,748    261,753   191,721    70,032  
Average gold equivalent mill head grade (oz/ton)(2)   0.86    0.26    0.50    0.06        0.54       
Average gold mill head grade (oz/ton)   0.85    0.15    0.43    0.06        0.44       
Average silver mill head grade (oz/ton)   0.76    8.24    5.22    -        7.13       
Average gold recovery rate (%)   93.6 %  94.1 %  93.7 %  88.7 %      94.2 %     
Average silver recovery rate (%)   87.4 %  87.7 %  87.7 %  - %      92.9 %     
Gold equivalent produced (oz)(2)   74,480    32,357    106,901    1,752    108,634   97,269    11,365  
Gold produced (oz)   73,673    19,287    92,960    1,752    94,712   80,077    14,635  
Silver produced (oz)   61,864    990,672    1,052,536    -    1,052,536   1,270,504    (217,968 )
Gold equivalent sold (oz)(2)(3)(4)   72,644    36,916    109,629    1,000    110,610   99,461    11,149  
Gold sold (oz)(3)   71,688    23,423    95,111    1,000    96,111   81,837    14,274  
Silver sold (oz)   73,351    1,022,739    1,096,090    -    1,096,090   1,302,419    (206,329 )
Revenues and realized prices                                   
Gold revenue (000s)  $88,235   $29,008   $117,243   $1,344   $118,587  $97,098   $21,489  
Silver revenue (000s)   1,177    16,720    17,897    -    17,897   20,904   $(3,007 )
 Total revenues (000s)  $89,412   $45,728   $135,140    1,344    136,484  $118,002   $18,482  
Average realized gold price ($/oz)  $1,231   $1,238   $1,233   $1,344   $1,234  $1,186   $48  
Average realized silver price ($/oz)  $16.05   $16.35   $16.33   $-   $16.33  $16.05   $0.28  
Non-IFRS Measures                                   
Production cash costs per GEO sold(4)  $458   $1,025   $649   $615   $649  $637   $12  
All-in sustaining costs per gold ounce sold(4)            $1,067    n/a   $1,062  $750   $312  
All-in costs per gold ounce sold (Nevada Total)(4)                      $1,163  $1,046   $117  
All-in costs per gold ounce sold (including True North)(4)                      $1,272   n/a    n/a  
   
(1) During the 2015, production was only from Nevada Operations.  
(2) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the average realized gold price per ounce by the average realized silver price per ounce received by us in the respective period and match the ratios used to determine the production cash costs per GEO sold. Refer to the Non-IFRS Performance Measures section of this Press Release for additional detail.  
(3) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.  
(4) This is a non-IFRS measure; refer to the Non-IFRS Performance Measures section of this Press Release for additional detail.  
  

Our 2016 annual operating plan for our Nevada Operations encompasses higher GEO grades and production during the second half of the year. During the third quarter of 2016, our Nevada mines produced 35,324 GEOs, bringing our year to date consolidated GEO production to 106,901 GEOs, which is approximately 73% of our annual guidance's midpoint range. At our Nevada Operations, the 70,056 ore tons milled (average of 761 tons per day) represented a decrease of 186 tons per day from the prior quarter as we focused mining efforts on ore development to access additional faces in the fourth quarter. Our fourth quarter plan entails increasing both the GEO grades by mining in higher grade areas and the average daily milling rate at the Midas mill. At True North, we reported our first gold sales from the re-processing of existing tailings and during the fourth quarter will begin running ore through the mill.

Fire Creek and Midas's third quarter 2016 ounces sold were in-line with management expectations and included the sale of 40,560 GEOs, consisting of 35,648 gold ounces and 362,500 silver ounces. Due to the sale of an additional 7,714 gold ounces at a $139 higher average realized price, gold revenue at our Nevada Operations increased $13.7 million during the third quarter of 2016 compared to the same period of 2015, while silver revenue decreased due to lower grades which were offset by higher realized prices. True North recorded its first revenue from the sale of 1,000 gold ounces at $1,344 per ounce, bringing consolidated sales to 41,553 GEOs totaling $53.0 million in revenue.

We continued to generate significant cash margins on a consolidated basis as our third quarter production cash costs per GEO sold of $670 remained well below current gold price levels.

Webcast and Conference Call

Klondex will report its third quarter 2016 financial results after market close on Thursday, November 3, 2016. A conference call and webcast will be held the following morning on Friday, November 4, 2016 at 10:30 am ET/7:30 am PT. The conference call telephone numbers are listed below:

Canada & USA Toll Free Dial In: 1-800-319-4610
Toronto: +1 1-416-915-3239
International: +1-604-638-5340

Callers should dial in 5 to 10 minutes prior to the scheduled start time and ask to join the Klondex call. The webcast will be available on the Company's website or by clicking: http://services.choruscall.ca/links/klondex20161104.html.

About Klondex Mines Ltd. (www.klondexmines.com)

Klondex is a well-capitalized, junior-tier gold and silver mining company focused on exploration, development, and production in a safe, environmentally responsible, and cost-effective manner. The Company has 100% interests in three producing mineral properties: the Fire Creek Mine and the Midas Mine and ore milling facility, both of which are located in the state of Nevada, USA, and the True North Gold Mine (formerly the Rice Lake Mine) and mill in Manitoba, Canada. The Company also has 100% interests in two recently acquired projects, the Hollister mine and the Aurora mine and ore milling facility (formerly known as Esmeralda), also located in Nevada, USA.

Cautionary Note Regarding Technical Information and Forward-looking Information

This news release contains certain information that may constitute forward-looking information or forward-looking statements under applicable Canadian and U.S. securities legislation (collectively, "forward looking information"), including but not limited to information about current expectations on the timing and success of exploration and development activities, the timing and success of mining operations, the Company's ability to produce and sell gold and silver, the Company's achievement of the full-year projections for ounce production, metal grades and production costs, the Company's ability to meet annual operations estimates, the ability to maintain average daily milling rates, the Company's capital addition expenditures, the Company's intention and ability to monetize mineralized material, the results of economic studies regarding the Company's mineral projects, the Company's financial conditions, the successful execution and project development at all of the Company's mines and projects, and related permitting the completion of the Hollister acquisition, and the completion of the equity private placement. This forward-looking information entails various risks and uncertainties that are based on current expectations, and actual results may differ materially from those contained in such information. These uncertainties and risks include, but are not limited to, the strength of the global economy; the price of gold and silver; operational, funding and liquidity risks; the degree to which mineral resource estimates are reflective of actual mineral resources; the degree to which factors which would make a mineral deposit commercially viable are present; the risks and hazards associated with underground operations; and the ability of Klondex to fund its substantial capital requirements and operations. Risks and uncertainties about the Company's business are more fully discussed in the Company's disclosure materials filed with the securities regulatory authorities in Canada and United States available at www.sedar.com and www.sec.gov, respectively. Readers are urged to read these materials. Klondex assumes no obligation to update any forward-looking information or to update the reasons why actual results could differ from such information unless required by law.

Technical Information

Scientific and technical information in this press release has been reviewed and approved by Brian Morris, a "qualified person" within the meaning of NI 43-101.

Non-IFRS Performance Measures

We have included the non-IFRS measures "Production cash costs per gold equivalent ounce sold", "All‐in sustaining costs per gold ounce sold", and "All-in costs per gold ounce sold" in this press release (collectively, the "Non-IFRS Measures"). These Non-IFRS Measures are used internally to assess our operating and economic performance and to provide key performance information to management. We believe that these Non-IFRS Measures, in addition to conventional measures prepared in accordance with IFRS, provide investors with an improved ability to evaluate our performance and ability to generate cash flows required to fund our business. These Non-IFRS Measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These Non-IFRS Measures do not have any standardized meaning prescribed under IFRS, and therefore may not be comparable to or consistent with measures used by other issuers or with amounts presented in our financial statements.

Our primary business is gold production and our future development and current operations primarily focus on maximizing returns from such gold production. As a result, our Non-IFRS Measures are calculated and disclosed on a per gold ounce basis.

Production Cash Costs per Gold Equivalent Ounce Sold

Production cash costs per gold equivalent ounce sold presents our cash costs associated with the production of gold equivalent ounces and, as such, non-cash depreciation and depletion charges are excluded. Production cash costs per gold equivalent ounce sold is calculated on a per gold equivalent ounce sold basis, and includes all direct and indirect operating costs related to the physical activities of producing gold, including mining, processing, third-party refining expenses, on-site administrative and support costs, and royalties (State of Nevada net proceeds and other such taxes are excluded). Gold equivalent ounces are computed as the number of silver ounces required to generate the revenue derived from the sale of one gold ounce, using average realized selling prices (table in thousands, except ounces sold and per ounce amounts):

       
   Three months ended
September 30, 2016
 Three months ended
September 30, 2015
   Fire Creek  Midas  Nevada Total  True North  Total  Fire Creek  Midas  Nevada Total(1)
Average realized price per gold ounce sold  $1,271  $1,281  $1,274  $1,344  $1,276  $1,130  $1,158  $1,135
Average realized price per silver ounce sold  $17.24  $17.26  $17.26  $-  $17.26  $15.17  $14.77  $14.78
 Silver ounces equivalent to revenue from one gold ounce   73.8   74.2   73.8   -   73.9   74.5   78.4   76.8
Silver ounces sold   18,100   344,400   362,500   -   362,500   13,248   441,363   454,611
 GEOs from silver ounces sold   246   4,642   4,912   -   4,905   178   5,630   5,919
Gold ounces sold(2)   27,254   8,394   35,648   1,000   36,648   22,203   5,731   27,934
 Gold equivalent ounces   27,500   13,036   40,560   1,000   41,553   22,381   11,361   33,853
Production costs  $13,716  $13,497  $27,213  $615  $27,828  $10,124  $10,905  $21,029
 Production cash costs per GEO sold  $499  $1,035  $671  $615  $670  $452  $960  $621
                                 
                         
   Nine months ended
September 30, 2016
 Nine months ended
September 30, 2015
   Fire Creek  Midas  Nevada Total  True North  Total  Fire Creek  Midas  Nevada Total(1)
Average realized price per gold ounce sold  $1,231  $1,238  $1,233  $1,344  $1,234  $1,178  $1,208  $1,186
Average realized price per silver ounce sold  $16.05  $16.35  $16.33  $-  $16.33  $16.52  $16.03  $16.05
 Silver ounces equivalent to revenue from one gold ounce   76.7   75.8   75.5   -   75.6   71.3   75.4   73.9
Silver ounces sold   73,351   1,022,739   1,096,090   -   1,096,090   58,218   1,244,201   1,302,419
 GEO from silver ounces sold   956   13,493   14,518   -   14,499   817   16,501   17,624
Gold ounces sold(2)   71,688   23,423   95,111   1,000   96,111   58,743   23,094   81,837
 Gold equivalent ounces   72,644   36,916   109,629   1,000   110,610   59,560   39,595   99,461
Production costs  $33,285  $37,850  $71,135  $615  $71,750  $28,316  $35,050  $63,366
 Production cash costs per GEO sold  $458  $1,025  $649  $615  $649  $475  $885  $637
 
(1) During the 2015, production was only from Nevada Operations.
(2) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.
 

All-in Sustaining Costs per Gold Ounce Sold

All-in sustaining costs per gold ounce sold presents the full cost of gold production from our current operations; therefore, capital amounts related to expansion and growth projects are excluded. Certain other cash expenditures, including State of Nevada net proceeds and other related taxes, federal tax payments, and financing costs are also excluded. Our calculation of all-in sustaining costs per gold ounce sold is consistent with the June 2013 guidance released by the World Gold Council, a non-regulatory, non-profit market development organization for the gold industry.

We calculate our all-in sustaining costs per gold ounce sold on a Nevada basis, as ore from both Fire Creek and Midas is processed at Midas, for True North, and for a consolidated total. All-in sustaining costs per gold ounce sold includes all: (1) direct and indirect operating cash costs related to the physical activities of producing gold, including mining, processing, third-party refining expenses, on-site administrative and support costs, and royalties, (2) general and administrative expenses, (3) decommissioning provision accretion, and (4) sustaining capital expenditures, the total of which is reduced for revenues earned from silver sales (table in thousands, except ounces sold and per ounce amounts):

          
   Three months ended
September 30,
  Nine months ended
September 30,
 
   2016   2015   2016   2015  
   Nevada Total(1)   True North  Total   Nevada Total(2)   Nevada Total(1)   True North  Total   Nevada Total(2)  
Production costs  $27,213   $615  $27,828   $21,029   $71,135   $615  $71,750   $63,366  
General and administrative expenses   4,840    -   4,840    3,454    11,429    -   11,429    9,252  
Decommissioning provision accretion   137    -   137    107    412    -   412    299  
Sustaining capital expenditures   15,230    -   15,230    6,112    36,390    -   36,390    9,396  
Less: Silver revenue   (6,258 )  -   (6,258 )  (6,721 )  (17,897 )  -   (17,897 )  (20,904 )
 All-in sustaining costs   41,162    615   41,777    23,981    101,469    615   102,084    61,409  
Gold ounces sold(2)   35,648    1,000   36,648    27,934    95,111    1,000   96,111    81,837  
 All-in sustaining costs per gold ounce sold  $1,155   $615  $1,140   $858   $1,067   $615  $1,062   $750  
   
(1) Nevada Total includes Corporate sustaining capital expenditures and all general and administrative costs.  
(2) During the 2015, production was only from Nevada Operations.  
(3) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.  
  

We define sustaining capital expenditures as those costs which are required to sustain current gold ounce production levels. As such, non-sustaining (growth) capital expenditures include amounts for exploration, development, and permitting activities related to long-term growth and expansion efforts outside of the existing mineral resource boundary. For a reconciliation of our sustaining and non-sustaining (growth) capital expenditures see the Investing Cash Flows part of the Financial Position, Liquidity, and Capital Resources section of the MD&A.

All-in Costs per Gold Ounce Sold

All-in costs per gold ounce sold includes additional costs which reflect the varying costs of producing gold over the life-cycle of a mine or project. We calculate our all-in costs per gold ounce sold by beginning with all-in sustaining costs and adding non-sustaining (growth) capital expenditures and other costs not related to current operations (table in thousands, except ounces sold and per ounce amounts):

       
   Three months ended
September 30,
 Nine months ended
September 30,
Nevada Total  2016  2015  2016  2015
All-in sustaining costs  $41,162  $23,981  $101,469  $61,409
Non-sustaining capital expenditures   1,828   6,631   9,124   24,233
  All-in costs   42,990   30,612   110,593   85,642
Gold ounces sold (Nevada)(1)   35,648   27,934   95,111   81,837
 All-in costs per gold ounce sold (Nevada)  $1,206  $1,096   1,163   1,046
                 
Total (with True North)                
All-in costs (Nevada total)   42,990   30,612   110,593   85,642
Non-sustaining capital expenditures (True North)   3,754   -   11,708   -
  All-in costs   46,744   30,612   122,301   85,642
Gold ounces sold(1)   36,648   27,934   96,111   81,837
 All-in costs per gold ounce sold  $1,275  $1,096  $1,272  $1,046
 
(1) Includes ounces sold (if any) under the Gold Supply Agreement and ounces delivered under the Gold Purchase Agreement; see Notes 8 and 10.
 

For a reconciliation of our sustaining and non-sustaining (growth) capital expenditures see the Investing Cash Flows part of the Financial Position, Liquidity, and Capital Resources section of the MD&A.

Contact Information

  • For More Information Contact:
    John Seaberg
    Senior Vice President, Investor Relations and Corporate Development
    O: 775-284-5757
    M: 303-668-7991
    jseaberg@klondexmines.com