Acquisition of Rice Lake December 2015
CAUTIONARY NOTES Qualified Person Brian Morris, is the non-independent Klondex Mines "qualified person" as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). He has reviewed and is responsible for the technical information contained in this presentation. Cautionary Note Regarding Technical Information andforward-looking Information A production decision at the Fire Creek Project in Nevada has not been made by Klondex, as it is still in the bulk sampling phase. Although a production decision at the Fire Creek Project has not been made, the mineralized material extracted from the Fire Creek Project under the bulk sample permit is processed through the Midas mill. A production decision at the Midas Mine in Nevada was made by previous operators of the mine, prior to the completion of the acquisition of the Midas mine by Klondex and Klondex made a decision to continue production subsequent to the acquisition. This decision by Klondex to continue production and, to the knowledge of Klondex, the prior production decision were not based on a feasibility study of mineral reserves demonstrating economic and technical viability prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101"). Readers are cautioned that there is increased uncertainty and higher risk of economic and technical failure associated with such production decisions. This presentation contains certain information that may constitute forward-looking information or forward-looking statements under applicable Canadian and United States securities legislation (collectively, "forward-looking information"), including but not limited to information about the timing and completion of the acquisition of the Rice Lake project (the "Acquisition"), the satisfaction of conditions precedent to the Acquisition, the potential benefits of the Acquisition to Klondex and the ability of Klondex to create synergies with its existing operations. This forward-looking information entails various risks and uncertainties that are based on current expectations, and actual results may differ materially from those contained in such information. These uncertainties and risks include, but are not limited to, the strength of the global economy; the price of gold; operational, funding and liquidity risks; the degree to which mineral resource estimates are reflective of actual mineral resources; the degree to which factors which would make a mineral deposit commercially viable are present; the risks and hazards associated with underground operations; and the ability of Klondex to fund its substantial capital requirements and operations. Risks and uncertainties about the Company's business are more fully discussed in the Company's disclosure materials filed with the securities regulatory authorities in Canada and United States available at www.sedar.com and www.sec.gov, respectively. Readers are urged to read these materials. Klondex assumes no obligation to update any forward-looking information or to update the reasons why actual results could differ from such information unless required by law. Cautionary Note to U.S. Investors Regarding the Use of Mining Terms This presentation has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of U.S. securities laws. All resource and reserve estimates included in this presentation have been prepared in accordance with NI 43-101. However, please see discussion in this presentation regarding the Rice Lake Historical Estimate. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. These standards differ significantly from the mineral reserve disclosure requirements of the U.S. Securities and Exchange Commission (the SEC ) set out in Industry Guide 7. In particular, the SEC s Industry Guide 7 applies different standards in order to classify mineralization as a reserve. As a result, the definitions of proven and probable reserves used in NI 43-101 differ from the definitions in SEC Industry Guide 7. Under SEC standards, mineralization may not be classified as a reserve unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. Accordingly, mineral reserve estimates contained in this presentation may not qualify as reserves under SEC standards. This presentation also uses the terms resources, measured resources, indicated resources and inferred resources. United States investors are advised that, while such terms are recognized and required by Canadian securities laws, the SEC does not recognize them. Mineral resources that are not mineral reserves do not have demonstrated economic viability. United States investors are cautioned not to assume that all or any part of measured or indicated resources will ever be converted into reserves. Further, inferred resources have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. It cannot be assumed that all or any part of the inferred resources will ever be upgraded to a higher category. Therefore, United States investors are also cautioned not to assume that all or any part of the inferred resources exist, or that they can be mined legally or economically. Disclosure of contained ounces in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute reserves by SEC standards as in-place tonnage and grade without reference to unit measures. Consequently, reserve and resource information contained in this presentation is not comparable to similar information that would generally be disclosed by U.S. companies in accordance with the rules of the SEC. 1
ACQUISITION HIGHLIGHTS Cash transaction with no dilution to Klondex shareholders Purchase price of $32mm represents a deep discount to invested capital and resource value Production ready asset in a top ranked mining jurisdiction Leverages Klondex s technical expertise in narrow-vein underground mining Immediate value opportunities Extensive infrastructure at surface and underground Proven gold production Significant exploration opportunity and 400km 2 land package Note: All figures in US$ unless otherwise noted 2
TRANSACTION SUMMARY Transaction Purchase Price Acquisition of 100% of the Rice Lake Mine and milling facilities and all associated equipment $32 million comprised of: $20 million cash due at closing $12 million in deferred payments in the form of a secured promissory note Financing $12 million note with an annual interest rate of 4% Three equal instalments of $4 million per year Repayable anytime in whole without penalty Other Terms and Conditions Estimated Closing Satisfaction of customary closing conditions Requisite regulatory approval Expected to occur in the first quarter of 2016 3
RICE LAKE OVERVIEW Fully permitted operation located near the town of Bissett, Manitoba 2,500 stpd gold mill with a replacement cost of $80 $100 million; ~220 pieces of mobile equipment valued at $15 $20 million Historical estimate of proven and probable mineral reserves of 455s 1 ; measured and indicated mineral resources of 634 s 1 Produced approximately 390s from 2007 to 2015 2 Recently discovered 710/711 zones accessible by existing underground infrastructure ~C$375 million of mine and mill capital since 2007 including extensive underground development 2 400 sq.km land package /711 Several existing mineralized zones remain open along strike and down dip 4 1. See "Notes to Rice Lake Historical Mineral Estimate" on slide 11 2. Based on public disclosure of San Gold Corporation
LEVERAGING KLONDEX S EXPERTISE Klondex has a track record of operating narrow vein-type operations profitably Rice Lake: Duplicating Our Success Story Focusing on profitable ounces Right sizing the operations Optimizing conventional processing infrastructure Exploration and capital spending on near term targets 5
PRO FORMA KLONDEX Rice Lake Pro Forma Shares Outstanding/Issued mm 139 139 Cash 1 US$ mm $67 ($20) $47 Debt 1 US$ mm $0 $12 $12 Enterprise Value 2 US$ mm $265 $32 $297 Reserves 3,4 Koz Eq. 445 455 EV/oz Total Reserves US$/oz Eq. $590/oz $70/oz M&I Resources 3,4 Koz Eq. 1,035 634 EV/oz M&I Resources US$/oz Eq. $254/oz $50/oz No Share Dilution For Klondex Shareholders 1. Klondex s cash and debt as of Q3 2015. Cash balance includes finished dore in inventory as of Q3 2015 2. Gross equity portion of EV is on a fully-diluted in the money basis as of 2015-Nov-20 3. Historical estimate see Notes to Rice Lake Historical Estimate on slide 11. 4. M&I Resources are inclusive of Reserves 6
RESERVES AND RESOURCES Klondex Reserves & Resources Total Reserves M&I Resources Inferred Resources Rice Lake Hist. Reserves & Resources Total Reserves M&I Resources Inferred Resources Contained Gold ( Eq) 445 710 1,035 Contained Gold ( Eq) 455 1,101 634 Reserves Resources Reserves Resources Rice Lake s Reserve & Resource Base is Similar in Size to Klondex s Nevada Operations Note: M&I Resources are inclusive of Reserves (see slide 9 for details). 7
DELIVERING ON OUR STRATEGY The Acquisition of Rice Lake Meets Klondex s Following Strategic Objectives Gaining scale in gold in North America maintaining focus on profitability Purchasing production ready gold asset in a top ranked mining jurisdiction Leverage Klondex s proven underground mining and processing expertise Create a platform for future Canadian consolidation Strong value proposition with limited capital spending requirements Significant exploration opportunity to drive long term value creation with the Goal of Generating Attractive Returns for Our Shareholders. 8
APPENDIX RESERVES AND RESOURCES Fire Creek Project Klondex - Mineral Reserves Tons (000s) Grade Contained Eq Proven 105 2.058 1.481 216 156 221 Probable 135 0.730 0.576 99 78 101 Proven and Probable 240 1.311 0.972 315 233 321 Midas Mine Proven 94 0.284 14.620 27 1,374 48 Probable 215 0.211 8.979 45 1,930 75 Proven and Probable 309 0.233 10.695 72 3,305 123 Klondex Totals Proven 199 1.220 7.687 243 1,530 269 Probable 350 0.411 5.738 144 2,008 176 Proven and Probable 549 0.704 6.444 387 3,538 445 Fire Creek Project Klondex - Measured - and Indicated Resources Tons (000s) Grade Contained Eq Measured 132 2.050 1.451 271 192 274 Indicated 331 0.595 0.516 197 171 199 Measured & Indicated 463 1.011 0.783 468 362 473 Midas Mine Measured 386 0.404 10.436 156 4,028 219 Indicated 769 0.332 7.378 255 5,673 343 Measured & Indicated 1,155 0.356 8.400 411 9,701 562 Klondex Totals Measured 518 0.824 8.144 427 4,220 492 Indicated 1,100 0.411 5.314 452 5,843 542 Measured & Indicated 1,618 0.543 6.221 879 10,063 1,035 Klondex - Inferred Resources Tons (000s) Eq Fire Creek Project Inferred 1,065 0.410 0.319 436 340 441 Midas Mine Inferred 857 0.238 4.814 204 4,125 267 Klondex Totals Inferred 1,922 0.333 2.323 640 4,464 709 The below figures for the Rice Lake project comprise a historical estimate for the purposes of NI 43-101. A qualified person has not done sufficient work to classify the below historical estimate as current mineral resources or mineral reserves and Klondex is not treating such estimate as current mineral resources or mineral reserves (see "Rice Lake Historical Estimate" on slide 11). Rice Lake - Mineral Reserves Grade Tons (000s) Contained Eq Rice Lake Mine Proven 214 0.192-41 - 41 Probable 1,200 0.195-234 - 234 Proven and Probable 1,414 0.194-275 - 275 Hinge District Proven - 0.000 - - - - Probable 972 0.150-146 - 146 Proven and Probable 972 0.150-146 - 146 007 Deposit Proven - 0.000 - - - - Probable 156 0.140-22 - 22 Proven and Probable 156 0.140-22 - 22 Other Deposits Proven - 0.000 - - - - Probable 86 0.145-13 - 13 Proven and Probable 86 0.145-13 - 13 Rice Lake Complex Total Proven 214 0.192-41 - 41 Probable 2,415 0.172-414 - 414 Proven and Probable 2,629 0.173-455 - 455 Rice Rice Lake - Measured - and Indicated Resources Grade Contained Tons Rice Lake Mine (000s) Eq Measured 212 0.235 0.000 50-50 Indicated 1,111 0.234 0.000 260-260 Measured & Indicated 1,323 0.234 0.000 310-310 Hinge District Measured 12 0.126 0.000 2-2 Indicated 871 0.188 0.000 164-164 Measured & Indicated 883 0.187 0.000 166-166 007 Deposit Measured - 0.000 0.000 - - - Indicated 305 0.144 0.000 44-44 Measured & Indicated 305 0.144 0.000 44-44 Other Deposits Measured - 0.000 0.000 - - - Indicated 662 0.172 0.000 114-114 Measured & Indicated 662 0.172 0.000 114-114 Rice Lake Complex Total Measured 224 0.229 0.000 51-51 Indicated 2,949 0.197 0.000 582-582 Measured & Indicated 3,173 0.200 0.000 634-634 Rice Lake - Inferred Resources Tons (000s) Eq Rice Lake Mine Inferred 2,015 0.246 0.000 495 495 Hinge District Inferred 1,174 0.172 0.000 202-202 007 Deposit Inferred 1,000 0.150 0.000 150-150 Other Deposits Inferred 1,640 0.155 0.000 254-254 Rice Lake Complex Total Inferred 5,829 0.189 0.000 1,101-1,101 9
FOOTNOTES Notes to Klondex Mineral Resources 1. Fire Creek mineral resource has an effective date of June 30, 2015 (see press release September 16, 2015). 2. Midas mineral resource has an effective date of May 31, 2015 (see press release September 16, 2015). 3. Mineral resources are inclusive of mineral reserves. 4. Mineral resources have been estimated at a gold price of $1,200 per ounce and a silver price of $19.00 per ounce. 5. Fire Creek mineral resources are calculated at a grade thickness cut-off grade of 1.126 equivalent -feet and a diluted equivalent cut-off grade of 0.256. 6. Midas mineral resources are calculated at a grade thickness cut-off grade of 0.99 equivalent -feet and a diluted equivalent cut-off grade of 0.225. 7. Gold and silver recoveries are 94% and 92%, respectively. 8. Mineral resources include dilution to achieve mining widths of four feet or the vein width plus two feet whichever is greater. 9. Mineral resources include allowances for 5% mining losses and an additional 10% unplanned dilution. 10. Cutoff grade thicknesses are calculated using mining, processing and administrative costs of $249 per ton of mineralization and a minimum mining width of four feet. 11. Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, socio-political, marketing or other relevant issues. In addition, the quantity and grade of reported inferred mineral resources are uncertain in nature and there is insufficient exploration to define these inferred mineral resources as an indicated or measured mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category. Notes to Klondex Mineral Reserves 1. Fire Creek mineral reserve has an effective date of June 30, 2015 (see press release December 3, 2015). 2. Midas mineral reserve has an effective date of May 31, 2015 (see press release December 3, 2015). 3. Reserves have been estimated with a gold price of $1,000/ounce and a silver price of $15.83/ounce. 4. Metallurgical recoveries for gold and silver are 94% and 92% respectively. 5. Gold equivalent ounces are calculated based on 64.53 ounces of silver being equivalent to one ounce of gold. 6. Fire Creek mineral reserves are estimated at a cutoff grade of 0.312 and an incremental cutoff grade of 0.115. 7. Midas mineral reserves are estimated at a cutoff grade of 0.282 and an incremental cutoff grade of 0.067. 8. Mining losses of 5% and unplanned mining dilution of 10% have been applied to the designed mine excavations. 10
FOOTNOTES Notes to Rice Lake Historical Mineral Estimate A historical estimate of the mineral reserves and resources at Rice Lake as at December 31, 2014, as reported by San Gold Corporation (a prior owner of Rice Lake) in its annual information form dated March 31, 2015 (the "San Gold AIF") for the financial year ended December 31, 2014, which refers to the technical report dated effective February 4, 2013 and amended on February 25, 2013 (with an effective date of mineral resources and mineral reserves of December 31, 2012) as updated by subsequent press releases of San Gold (all of which are available at www.sedar.com under San Gold's profile), is shown in this presentation. A qualified person has not done sufficient work to classify this historical estimate as current mineral resources or mineral reserves and Klondex is not treating such estimate as current mineral resources or mineral reserves. The key assumptions, parameters and methods used to prepare the estimate are described in the San Gold AIF. As discussed in the San Gold AIF, mineral reserves and mineral resources were prepared by San Gold in accordance with NI 43-101 under the supervision of a qualified person. As discussed in the San Gold AIF, mineral reserves were calculated by San Gold using a gold price of C$1,350 per ounce. A cut-off grade of 4.11 g/tonne gold was used for estimating mineral reserves. A cut-off grade of between 2.74 and 3.43 g/tonne gold was used for estimating mineral resources. Proven and probable mineral reserves are included in the measured and indicated mineral resources. Inferred Resources are in addition to Measured and Indicated Resources. Inferred Resources have a great amount of uncertainty as to their existence and whether they can be mined legally or economically. It cannot be assumed that all or any part of the Inferred Resources will ever be upgraded to a higher category. See "Cautionary Note Concerning Reserve & Resource Estimates". 11