RAGS TO RICHES: A KLONDEX STORY
Project Partners: Quality Transportation, Inc
Rags to Riches: A Klondex Story With a whirlwind of challenges and milestones in recent months, including the extraordinary achievement of acquiring its Midas asset, Klondex President and CEO Paul Huet discusses how his team achieved the impossible. Written by: Robert Spence Produced by: Andy Turner
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K L O N D E X M I N E S LT D .
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eadquartered in Reno, Nevada, Klondex Mines Ltd. is a mining company wellpositioned to further its two worldclass producing mineral properties: the Fire Creek project and the Midas mine and milling facility. The company, which was recently approved to be listed on the New York Stock Exchange (NYSE MKT), has recently overcome a whirlwind 4
December 2015
of challenges and milestones, including the extraordinary achievement of acquiring its Midas assets. The story resembles a modern day tale of David and Goliath. A natural fit Previously owned by Newmont Mining, the Midas mine was hitting the tail end of its life cycle, from both
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a human resources and a capital perspective, becoming what’s known as a “non-core asset.” “The acquisition was a natural fit, because not only would it add another producing mine to our portfolio, but it would also cement a long-term milling solution at Firecreek,” said John Seaberg, Senior Vice President, Investor Relations at Klondex. But with a single asset at the time, the Fire Creek project in Northern Nevada, with no production and a strained balance sheet, Klondex
“The acquisition was a natural fit, because not only would it add another producing mine to our portfolio, but it would also cement a long-term milling solution at Firecreek” – John Seaberg, Senior VP, Investor Relations at Klondex.
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Major Drilling is a public company traded on the Toronto Stock Exchange operating in over 15 countries around the world with 2,500 employees working more than 6 million hours safely each year. Through extensive research and development, Major Drilling has the proven resources, experience, and technical ability to safely and productively executea variety of underground drilling & dewatering services.
MAJOR DRILLING = MAJOR SUCCESS Our team unites to produce experienced & unparalleled services: • Specializing in safety, quality and productivity • Offering many cumulative years of drilling experience and resources • Possessing extensive technical resources • Including self-sufficient mechanical and fabrication facilities
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SUPPLIER PROFILE
Major Drilling is one of the world’s largest drilling services companies primarily serving the mining industry. Major Drilling maintains field operations and offices in Canada, the United States, Mexico, South America, Asia and Africa. Major Drilling provides all types of drilling services including surface and underground coring, percussive long hole, directional, reverse circulation, sonic, geotechnical, environmental, water-well, coal-bed methane and shallow gas. Over the years, the Company has positioned itself as one of the largest specialized operators in the world by leveraging its main competitive advantages: specialized equipment, long-standing relationships with the world’s largest mining companies, access to capital, and skilled personnel. This positioning is strengthened by the Company’s senior management having experienced several economic and mining industry cycles. We would like to thank Klondex for the opportunity to work at their work Class operations in Nevada. Utilizing our experience in engineering, research, and dedication, the team has been able to reduce dilution by more than 200% compared to previous methods utilized at Midas Operations. Through teamwork, we have successfully excavated longhole stopes as narrow as 18” by 50’ deep. Paul Huet and his team’s willingness to try new things has allowed our groups to work together on creating a method of longhole that is cost effective, efficient and timely. Management: Denis Larocque, President & Chief Executive Officer David Balser, Chief Financial Officer Denis Despres, Chief Operations Officer Kelly Johnson, Vice President Latin America & West Africa Larry Pisto, Vice President North America Website: www.majordrilling.com
K L O N D E X M I N E S LT D . was in a dire situation. In addition, they faced competition in the Midas transaction. Newmont had signed a Letter of Intent (LOI) in September 2013 to sell the operation to another company. As part of the deal, both parties agreed the LOI would be terminated by October 14th, unless extended by mutual agreement. But Klondex President, CEO and Director Paul Huet had a plan to tackle this uphill battle and never gave up. “When the LOI was signed
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between Newmont and the other company, I never got discourage. In fact, it fueled my motivation and forced me to work even harder,” he said. Persistence conquers all things As a third generation miner, Huet’s upbringing in the mining industry has ingrained the CEO with a tremendous work ethic and matching attitude to work hard no matter what you do. “I saw firsthand from my father the
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K L O N D E X M I N E S LT D . work ethic needed to be successful in the mining industry,” said Huet. “He just turned 70 years old and still wakes up every day at 4:30 a.m. to work at an underground mine. He doesn’t know how to fail and that’s our culture here at Klondex.” Straight out of high school, Huet commenced his mining career as a mine site janitor for a local mine in Timmins, Canada, before eventually working his way through the ranks to earn supervisory mining positions with Kinross Gold in Timmins and Red Lake. “I was very eager to learn and work hard, sometimes even drilling
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and operating after hours for free. It launched my path to being a miner and eventually earning the right and privilege to lead a company like Klondex,” he said. While at Kinross, Huet was selected as part of a next generation leader program that granted him a scholarship to attend the Haileybury School of Mines in Ontario, Canada, while also paying his salary in the process. “Mining helped paved my way through college, including helping me earn an MBA at Stanford. I’m incredibly grateful for the opportunities the mining industry
SUPPLIER PROFILE
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Superior Surface and Underground Exploration Drilling Diamond Core Drilling and Reverse Circulation Drilling Internationally Depth Capability Beyond 10,000ft
American Drilling Corporation is an industrial services company that provides superior surface and underground exploration drilling for both mining and geotechnical industries. An innovative privately owned company headquartered in the state of Washington, with additional offices in Mexico, Winnemucca and Elko, Nevada. Our mission is to provide safe, industry-leading drill performance an and expertise to our clients, through experienced drilling staff and strong management oversight. We pride ourselves with a fleet of world class, well maintained modern equipment regardless of the location or environment.
19208 E. Broadway Ave., Spokane Valley, WA 99016 Office: 509-279-2859 Fax: 509-769-0300
Email: adeeds@americandrillingcorp.com Web: www.AmericanDrillingCorp.com
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American Mining and Tunneling LLC provides superior expertise and experienced services to the mining industry, from beginning stage exploration to end of mine life reclamation.
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Our commitment to maintaining the highest safety standards and qualified personnel gives us the ability meet critical deadlines. Successfully completed projects are the reason why so many Mines have chosen AMT.
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Office 509-921-7836 Fax 509-769-0300 Email: info@americanmt.com
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THE MINING INDUSTRY HAS OPENED A LOT OF DOORS ON THE EDUCATION SIDE FOR ME, BUT IT’S ALSO HELPED ME ESTABLISH A LOT OF CONTACTS -CEO Paul Huet
SUPPLIER PROFILE
AMERICAN DRILLING CORP, LLC
American Drilling Corp is a privately owned drilling services company headquartered in Spokane Valley, Washington. The Company provides specialty drilling services through its US divisions in Elko, Nevada and Spokane Valley, Washington. We have become the recognized performance leader by setting the highest standards in service, reliability, safety and cost containment in our industry. We believe that a “safety first” company culture combined with creative flexibility are the key elements to success in providing drilling services to companies such as Klondex Mines and other leading gold and silver producers. It is our pursuit to always demonstrate our commitment to integrity in all aspects of our operations and business conduct. American Drilling Corp combines modernized industry leading equipment with experienced technical and professional operational staff resulting in completion of complex challenging drilling projects. American Drilling Corp, LLC, 19208 E. Broadway, Spokane Valley, Washington 99016 Further information about the Company can be found on the American Drilling Corp Website: www.Americandrillingcorp.com
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has presented,” said Huet. One of those opportunities consisted of working for Newmont Mining from 2000 to 2007, which saw Huet serve various senior capacities, including Mine Superintendent and Mine Manager, at their Midas mining operation. “The mining industry has opened a lot of doors on the education side for me, but it’s also helped me establish a lot of contacts,” Huet explained. “Many of these contacts have been critical to driving Klondex from a small exploration company to a significant junior mining company.” To successfully acquire Midas against
SUPPLIER PROFILE
Paul Huet President, CEO and Director
AMERICAN MINING & TUNNELING, LLC
American Mining and Tunneling LLC is a privately owned mining services company headquartered in Spokane Valley, Washington. The Company provides mine development and construction services to the mining industry ranging from beginning stage exploration to the end of mine life reclamation. We are a recognized performance leader, setting the highest standards in reliability, safety and cost containment in our industry, while providing services to companies such as Klondex Mines and other leading gold and silver producers. American Mining and Tunneling combines modernized industry leading equipment with experienced technical and professional operational staff resulting in completion of complex challenging mine development and construction projects. International services are provided through our North American divisions in Elko and Winnemucca, Nevada, Spokane Valley, Washington and Hermisillo, Mexico. Emphasis at American is on maintaining the highest quality and experienced personnel supported by a “safety first” companywide culture. Further information about the Company can be found on the American Mining and Tunneling website Website: www.Americanmt.com w w w. k l o n d e x m i n e s . c o m
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Quality Transportation, Inc.
Our Name Says It All! Quality Transportation, Inc 1110 Muleshoe Road Battle Mountain, NV 89820 Office: 775-635-2443 Mobile: 775-635-9540 Email: jdavis@qtinv.net
www.qtinv.net
“Proud to be a partner with Klondex Gold & Silver Mining!”
K L O N D E X M I N E S LT D .
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very stiff competition, Klondex needed to raise money – more money than the entire value of the company at the time. In the face of this nearly insurmountable task, Huet and his team set to work. Huet’s relationship with senior members of Franco-Nevada, Pierre Lassonde and David Harquail, was the key in getting the deal done. “I knew Pierre when I worked with him at Newmont, and I basically informed him of my intent to buy Midas and explained how acquiring it would be a perfect marriage of assets with our Fire Creek asset.” While not easy, Paul and his team were able to raise three forms of funding: $42.6 million in equity, $25 million in debt, and a $36 million gold loan from Franco-Nevada.
Ore from the Fire Creek project in Northern Nevada
SUPPLIER PROFILE QUALITY TRANSPORTATION Quality Transportation was formed in 2012 by Shane Davis (president) and John W. Davis (secretary treasurer). With our operation manager Jerry Lanphear, we have a combined industry experience of over 60 years. We cater to the mining industry in northern Nevada with Klondex being one of our biggest contracts, Ridge and Halliburton. Website: www.qtinv.net
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K L O N D E X M I N E S LT D .
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“We were able to raise more than $100 million, which is very uncommon of for a company our size, especially in this environment,” explained Huet. “We never gave up. We were able to get all the right people on board, and connect with all the right partners.” As a result of that persistence, Klondex acquired the Midas Property in February 2014 from Newmont Mining, which included the underground gold and silver mine, the Merrill Crow processing facility, related support infrastructure and mining and milling equipment. “The acquisition of Midas would not have been possible without Paul’s past experience and relationships in the mining sector,” said John Seaberg, Senior Vice President, Investor Relations for Klondex.
SUPPLIER PROFILE Employees: 12,000
The portal to the Fire Creek project in Northern Nevada
SANDVIK MINING
Established: 1862 Industry: Sandvik Mining is a business area within the Sandvik Group and a leading global supplier. of equipment and tools, service and technical solutions for the mining industry. Services: The offering covers rock drilling, rock cutting, rock crushing, loading and hauling and materials handling. In 2014 sales were about 27,000 million SEK. Management: Björn Rosengren - CEO Sandvik , Scot Smith, President Sandvik Mining, Paul Painter- US Sales Area Manager Sandvik Mining Website: www.mining.sandvik.com w w w. k l o n d e x m i n e s . c o m
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Your Partner in Health. We are dedicated to providing your employees with access to high quality doctors and hospitals. Anthem Blue Cross and Blue Shield is the trade name of: In Colorado: Rocky Mountain Hospital and Medical Service, Inc. HMO products underwritten by HMO Colorado, Inc. In Connecticut: Anthem Health Plans, Inc. In Georgia: Blue Cross and Blue Shield of Georgia, Inc. In Indiana: Anthem Insurance Companies, Inc. In Kentucky: Anthem Health Plans of Kentucky, Inc. In Maine: Anthem Health Plans of Maine, Inc. In Missouri (excluding 30 counties in the Kansas City area): RightCHOICE® Managed Care, Inc. (RIT), Healthy Alliance® Life Insurance Company (HALIC), and HMO Missouri, Inc. RIT and certain affiliates administer non-HMO benefits underwritten by HALIC and HMO benefits underwritten by HMO Missouri, Inc. RIT and certain affiliates only provide administrative services for self-funded plans and do not underwrite benefits. In Nevada: Rocky Mountain Hospital and Medical Service, Inc. HMO products underwritten by HMO Colorado, Inc., dba HMO Nevada. In New Hampshire: Anthem Health Plans of New Hampshire, Inc. Anthem Health Plans of New Hampshire, Inc. HMO plans are administered by Anthem Health Plans of New Hampshire, Inc. and underwritten by Matthew Thornton Health Plan, Inc. In Ohio: Community Insurance Company. In Virginia Anthem Health Plans of Virginia, Inc. trades as Anthem Blue Cross and Blue Shield in Virginia, and its service area is all of Virginia except for the City of Fairfax, the Town of Vienna, and the area east of State Route 123. In Wisconsin: Blue Cross Blue Shield of Wisconsin (BCBSWi), which underwrites or administers the PPO and indemnity policies; Compcare Health Services Insurance Corporation (Compcare), which underwrites or administers the HMO policies; and Compcare and BCBSWi collectively, which underwrite or administer the POS policies. Independent licensees of the Blue Cross and Blue Shield Association. ANTHEM is a registered trademark of Anthem Insurance Companies, Inc. The Blue Cross and Blue Shield names and symbols are registered marks of the Blue Cross and Blue Shield Association. CA15110024341497
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K L O N D E X M I N E S LT D . “No one knows this asset better than Paul. His relationship with Pierre was instrumental to getting this deal done,” Seaberg said. “The acquisition was transformational for us, and it occurred during a pivotal point in our company’s development,” added Huet. “To this day, raising $100 million is one of the biggest highlights of my career. On my
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deathbed I’ll be talking about it.” Klondex moving forward Before Huet’s arrival, Klondex was in bad shape—owing more than six million dollars to vendors with only $400,000 in the treasury, the company had negative working capital. Today, Klondex possesses two of the highest grade gold mines in the world, with $60 million in cash,
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445 Fifth Street Elko, Nevada 89801 License #71192 A License #74810 B-2
K L O N D E X M I N E S LT D . a market cap of approximately $400 million and over 300 employees. Under the leadership of Huet, the company continues to deliver on its promises. “Our production guidance at the beginning of the year was 120125,000 gold equivalent ounces.
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We raised that number in the second quarter and just recently raised it again to 130-135,000 gold equivalent ounces,” said Huet. “It just goes to show that hard work and surrounding yourself with a great team can help you achieve the impossible.”
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K L O N D E X M I N E S LT D .
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December 2015
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Klondex continues to develop and understand its assets, especially with Midas. The company recently discovered additional reserves at the deposit, potentially extending the life of the mine. “A lot of the market thinks Midas is over and that it’s reached its peak, but we’ve just begun,” said Huet. “I’ve never seen a mine like Midas.” Fire Creek, the company’s other prized asset also continues to show significant upside potential. The company is currently operating an ongoing bulk sampling program, and shipping all mineralized material to its Midas Mill. “There’s still 93 percent of the deposit untested,” Seaberg said. “We have only scratched the surface with Fire Creek.” Along with furthering operations, Klondex remains steadfast on safety. The company recently achieved two significant safety milestones; three years of no loss time accidents at Fire Creek and one year of no loss time accidents at Midas. “The correlation of safety and productivity go hand in hand,” said Huet. “If you get safety right, you get operations right.” Along with being listed on the NYSE MKT in October, Klondex Mines continues to gain momentum and has the potential to become a real powerhouse in the mining industry for years to come. “We’re not forced by the market or shareholders,” explained Huet. “We’re doing what we set out to do, and that’s make money while becoming a major player.”
Company Information INDUSTRY
mining HEADQUARTERS
360 Western Road, Suite 1 Reno, Nevada, United States, 89506 EMPLOYEES
Not Disclosed REVENUE
Not Disclosed PRODUCTS/ SERVICES
Exploration, mining
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360 Western Road, Suite 1 Reno, Nevada, United States, 89506 Tel: 775-284-5757 www.klondexmines.com