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Klondex Mines increases credit facilities as focus turns to generating cash

Last updated: 16:26 22 Feb 2018 EST, First published: 11:26 22 Feb 2018 EST

gold pour
Klondex is a gold producer

Precious metals miner Klondex Mines Ltd (TSE:KDX, NYSE:KLDX) says it has refocused efforts for 2018 on generating cash and has increased its revolving credit facilities.

It has increased its revolving credit facilities with Investec by US$10mln to US$45mln, including an addition of US$5mln in the revolving credit facility to US$40mln and an additional working capital tranche of US$5mln.

In the fourth quarter, 2017 the revolver was used to buy 8,000 gold ounces at US$1,269 per ounce and delivered them against its outstanding gold loan (now paid in full) to Franco-Nevada, one year early.

Repaying the loan improved working capital by replacing a current debt with a non-current debt and will improve 2018 quarterly cash flow as it frees up 2,000 gold ounces per quarter, the firm said.

The firm's gold supply agreement with Waterton will expire on February 28 this year. Waterton has the option to  purchase gold produced from the Fire Creek Mine.

Historically, the realised purchase price under this agreement has been at a discount to market price, which negatively impacted Klondex’s cash flow.

"Historically, Klondex’s focus has concentrated on growth and consolidating the mining district where we operate in Nevada," said Klondex chief Paul Huet.

"Our focus for 2018 is different. In 2018, we have refocused our efforts on generating cash.

"This emphasis was a contributing factor in the decision to place True North under care and maintenance, which should provide an opportunity for the company to add cash to the balance sheet.

"As previously stated on December 21, 2017, Klondex will continue to utilise our core competencies and focus on narrow vein, high grade underground mining in Nevada."

Also today, Klondex said Huet will participate in the BMO Capital Markets 27th Global Metals and Mining Conference in Hollywood, Florida on February 28 this year.