L-R at PDAC 2010: Bryson Goodwin, Director, Investor Relations; Blane Wilson, Executive Mining Advisor; Brendan Donohoe, Director and Treasurer

Darwin's Theory of Evolution describes how strong species survive by adapting and evolving to meet the new demands of their environment.  Investors who understand such transitions create very attractive investments will enjoy the opportunity that Klondex presents.

Klondex Mines Ltd., which trades on the TSX as KDX and is available OTC as KLNDF began life back in the seventies. It started as a land bank and royalty trust, inspired by Dr. Ralph Robert’s landmark 1960s study of Nevada's gold and the surface mining opportunities possible via low-grade, sub-microscopic gold.  Today, Klondex is still at work in Nevada and has weathered the decades, evolving and substantially growing its land position as the times change.  Today, Klondex is a high-grade, underground gold exploration company, and its focus is on evolving from just being an exploration company toward becoming a mid-level producer. 

We spoke to Blane W. Wilson, the Executive Mining Advisor of Klondex's Nevada operations. Mr. Wilson has over 2 decades of experience in the industry and has worked with Golden Eagle International and Queenstake Resources USA.  We spoke about Klondex, about their burgeoning Nevada opportunity and what it meant for the company. "I've been working with Klondex for about the past six months, and we are full speed ahead in bringing this tremendous exploration property into production."

The property Mr. Wilson spoke about is their Fire Creek property, a 100% Klondex-owned gold property in Nevada. "It has an indicated resource of 1.6 million ounces of gold and another 500,000 ounces of inferred resource.  We've done over 270,000 feet of drilling so far to establish the resource, and there’s still substantial potential for continued exploration.  Beyond exploration, we are now nearing the final phase of the permitting stage, after which we will be in a position to begin an underground program and later initiate production via bulk sampling."

The project is well underway and Klondex is eagerly stepping into the role of producer. "Within about 90 days the permitting process should be complete, and we'll be able to start our decline down into the mine and bring it into production," said Mr. Wilson.

While the term “high-grade” is often stretched by explorers, Klondex’s Fire Creek property is truly a high-grade, epithermal deposit.  Fire Creek has an average grade of a little over 10 grams per tonne (~ 1/3 of an ounce) for the 1.6 million ounce indicated resource and over 8 grams per tonne for the 0.5 million ounce inferred resource.  And the opportunity for further high-grade discoveries at Fire Creek is also very likely.  There is also a great deal of gold mining activity in the region.   Within Klondex's Fire Creek property itself, Mr. Wilson is optimistic: "The main vein zones that we are targeting should average an ounce or more of gold per ton, and our first target is to bring in a bulk sample of 36,500 tons and generate some meaningful cash flow from there.  The property is extensive, and we've only explored 20% of our current holdings so far."

Klondex’s Fire Creek property is well situated, putting it in an ideal location to take advantage of existing infrastructure including power, transportation, milling facilities and mining equipment and personnel.  Newmont’s Mule Canyon and Barrick’s Cortez mines are both nearby. "We're sitting right in the middle of a tremendous high-grade gold district in North Central Nevada.  We're about 5 miles to a paved road and Interstate 80 is about 30 miles to the north.  We're in a very good place compared to other properties in the area and it’s even more impressive when you compare it to more rugged or politically unstable areas where gold is being produced around the world. "

Klondex is well staffed with experienced industry professionals who collectively bring a wealth of experience to Klondex and the Fire Creek project.  William J. Solloway, President, has been involved with the company for over 30 years and has served as president for over 10 years.  Recently, the Company has added new roles like a director of investor relations to help them in gaining recognition from investors. "It's an exciting time for Klondex," said Mr. Wilson.  "We're taking the company to the next step and there’s a bright future for Klondex.  Furthermore, with strong metals pricing and the success of our exploration programs in building our resource over the past few years, it's an ideal time to make the transition from an exploration company to a mid-major producer and explorer."

The opportunities are exciting but there is still some work to be done. "Right now we're completing the archaeological site study" – to ensure that there are no significant historical finds that need to be protected – "and once that is complete we can extend our exploration to the south, which is open on strike. We expect to see some more good things there."

Having recently posted the US$1.4 million reclamation bond, Klondex is now just waiting on one more permit to allow them to proceed. "What's left is the Water Pollution Control Permit which is what allows us to pursue the bulk sampling production.  We believe we'll secure that permit by June of this year.  Once that happens, we're allowed to produce up to 120,000 tons of ore, limited to 36,500 tons per year.  Once we start the underground program, we will then begin the process for a full production permit so there are no production limits… By about January 2012, we should be in full production of about 500 to 1000 tons per day of high grade ore."

Raising money is important for all companies, as it is for Klondex, but they are starting strong. "We have a treasury of around $4 million, including recent proceeds from warrants, and we're also raising additional funds to complete all this work.  We hope to have some more information about that in the next few weeks," said Mr. Wilson.

One of the advantages that Klondex has in their property is the mineralization. Mr. Wilson explained: "The resource itself is approximately 98% gold… and only 2% silver and it's a high-grade mineralization as well.  Many high grade veins are very narrow, but because we have mineralization to the outside of that, we think we can use much more economical mining methods without risk to dilution."

That's a production plan that any investor can get excited about and Mr. Wilson estimates that their production costs will be about $450/per oz. to start and will then decline to about $375 to $350 when they are in full production.  With gold prices over $1,000 per ounce – that leaves a very attractive margin for Klondex shareholders.

"I think it's one of the hottest properties in Nevada, and that is why I have joined the team in a senior capacity.  If you look at a lot of our junior neighbors, there are some attractive properties, but they haven't advanced to the permitting stage, a process that takes substantial time, investment and management resources.  Klondex initiated its permits in March 2007 and we are now in the final stages of permitting.  In summary, we have a large, high-grade deposit, we are nearing completion on permitting, putting us in great position to initiate production, and we are confident in our ability to secure needed capital to fund the effort.  I believe investors want to see properties that are in production, and that's where we're headed."

Klondex is growing up and taking some exciting steps into the world of production. All the pieces are in place and investors will see the benefits of this evolution.

References

Klondex Mines Ltd.

http://www.klondexmines.com/

Investor Relations:

Bryson Goodwin

Director, Investor Relations

Klondex Mines Ltd.

Vancouver, B.C.

brysongoodwin@shaw.ca

Phone: (604) 341-1531

David Collins

Jaffoni & Collins

116 East 16th Street, 11th Floor

New York, NY 10003

kdx@jcir.com

Phone: (212) 835-8500