The release of Klondex Mines' full-year and fourth-quarter numbers for 2016, as well as limited guidance for 2017, prompted commentary by analysts following the company's operations in both the United States and Canada.
In 2016, Klondex Mines Ltd. (KDX:TSX; KLDX:NYSE.MKT) reported that, "operations at Fire Creek and Midas produced a record 43,264 gold equivalent ounces (GEOs) during the fourth quarter, bringing the full year 2016 Nevada production total to 150,099 GEOs, slightly above the top end of the Company's guidance of 145,000 to 150,000 GEOs. Fourth quarter production benefited from planned higher grades at both Fire Creek and Midas as well as planned higher mining rates."
Also in its Jan. 18 announcement, Klondex stated that it "expects to produce between 210,000 and 225,000 GEOs during 2017 at an expected cash cost of $680 to $710 per GEO sold. This represents an increase in GEOs sold of approximately 37% from the prior year as the Company benefits from bulk sampling production at its Hollister project in Nevada as well as higher production from its True North mine in Canada as ramp-up continues. Fire Creek and Midas' 2017 production is expected to be in line with the prior year."
Commenting in a research report released Jan. 19, Mackie Research analyst Barry Allan observed, "KDX continues to achieve good operating results while at the same time digesting two new mines that presented prior operators with challenges. Adding value for the newly purchased Hollister mine and upgrading our forecast for 2017 and beyond, coupled with a drop in the share price, allows us to upgrade to BUY from HOLD."
"We expect 2017 to feature strong production growth," Heiko Ihle of Rodman & Renshaw wrote in a Jan. 20 research report. The analyst noted that, "In our view, operations at both Midas and Fire Creek should remain somewhat steady in 2017," and added that Rodman & Renshaw anticipates "production growth to come from two of the firm's newer assets: True North and Hollister."
In addition, Ihle wrote that his firm expects "Klondex to reach record production in 2017 and think[s] gold equivalent production could reach approximately 220,000 ounces for the year, which would represent an approximate 46% production increase YoY."
Jamie Spratt of Clarus Securities, in a Jan. 19 research report, noted that "2016 was another year of meeting guidance with full year production of +150 koz beating the high end of revised guidance of 145–150 koz. While we see production growth of +25% from True North that will be fully ramped up in 2017, we see further growth in 2018 from the Hollister mine, which could see AuEq production expand to 300 koz. Overall, we see further upside remaining in the stock given management's successful execution track record and the growth left on the table."
In addition, Spratt wrote, "Overall, we continue to believe that KDX is well positioned to deliver compelling production growth of ~100% supported by True North and Hollister mines that would boost production to ~300 koz by 2018, the best growth profile among its mid-cap producer peers. . .Our thesis continues to be that KDX offers best in class production growth, low cost production and a solid management execution track record."
PI Financial's Philip Ker, in a Jan. 19 research report, stated, "given the high-grade nature of Fire Creek and the potential of Hollister coming online sooner than anticipated, Klondex could potentially see production above its current guidance." The analyst added that PI Financial believes "further ramp-up of the True North mine and its recently acquired Hollister mine into the Company's production profile will be critical for Klondex to realize an increased production profile, help support reduced costs and help generate increased cash flow."
"The evolution of Klondex continues and 2016 was a banner year in many ways," company President and CEO Paul Huet stated in the Klondex announcement. "We are excited to enter 2017 with four mines and three mills in Nevada and Canada. Fire Creek and Midas continue to be our flagship operations. We are also pleased with the progress thus far at True North in Canada and the recently acquired Hollister project in Nevada. We are well positioned for yet another record year in 2017."
