TORONTO (miningweekly.com) – Gold exploration and development company Klondex Mining on Saturday announced exploration activities had found bonanza grades of up to 22 396 g/t at its flagship Fire Creek project, in Nevada.

Klondex said exploration drifting and metallurgical sampling on the Vonnie vein included assay results of 20 231 g/t gold over 0.15 m, and 15 891 g/t gold and 22 396 g/t gold over 0.12 m. The intercepts were made between depths of 18 m and 22.5 m of the 5400 cross cut.

CEO Paul Huet said the company was encouraged by these results. “With our team's substantial expertise in narrow vein systems, we expect to be able to minimize dilution while maximising grade. We anticipate that these grades will allow us to be more selective in our mining process," he said in a statement.

The company said the high-grade gold mineralisation was encountered while following up on a surface drill intercept from FC-12-11S that returned 2 910 g/t gold over 1.5 m, found at the end of last year.

On Monday, the company said its underground development programme targeting the Joyce and Vonnie structures had yielded 1 302 t of mineralised material grading 119.8 g/t on average.

Klondex said the underground development programme was expected to continue through the rest of the year, and the ore mined in June, together with the 682 t recovered in May, for a total of 2 117 t, would be shipped to US gold major Newmont for treatment and testing under an agreement inked on Friday.

Under the agreement, Newmont would be responsible for the handling, milling and refining of minerals as well as tailings disposal, and Klondex would be responsible for delivering the material. Shipments would be in lots of 1 000 t up to 9 000 t this year, and could continue as needed to the end of 2014, as high-grade material was generated.

"Testing this high-grade material not only gives us the much needed metallurgical information on Fire Creek mineralisation, but it allows us the opportunity to monetise mineralised material generated from the trial exploration drifting from the Joyce and Vonnie structures. Proceeds from the processing of this material will be used towards funding our own waste development and a second drill to follow up on recent discoveries,” Huet said.

The first shipment of 1 000 t was scheduled to begin in August and processing was expected to follow immediately thereafter. Newmont, based on Newmont assays, would pay an initial partial upfront payment of 60% to Klondex, and the 40% balance would be paid based upon finalising the settlement assays. The first payment from processing was expected in August.

"We're extremely encouraged by the grades and continuity of widths encountered during this month's programme along the Joyce and Vonnie structures and look forward to shipping our material in the coming weeks. Proceeds received from monetising our material will be used towards funding a second drill, follow-up work on recent discoveries, and also toward continued waste development in anticipation of our 2014 bulk sampling programme," Klondex GM Mike Doolin said on Monday.

He added that the resource estimate was “progressing well” and would be released within the coming weeks.

While the Fire Creek team remained focused on the exploration and development programme, the company’s vent raise contractors were making steady, but slower-than-expected progress, and now expected to finish the project by early September.

Klondex also announced on Thursday that it had secured $2.39-million in bridge loans as a means to support the development of Fire Creek.