CORPORATE PRESENTATION NEW YORK/BOSTON MARKETING TRIP A P RIL 11 & 1 2, 2 017
CAUTIONARY NOTES Cautionary Note Regarding Forward-Looking Information This presentation contains certain information that may constitute forward-looking information under applicable Canadian and U.S. securities legislation, including but not limited to information about results of exploration, development, mining, evaluation activities, results of reclamation activities, the estimation or realization of mineral resources and mineral reserves, the timing and amount of estimated future production, the making of future production decisions, expectations regarding realization of synergies relating to Klondex's projects, the timing and receipt of required permits and approvals, capital expenditures, costs and timing of the development of new mineral deposits, requirements for additional capital, the sufficiency of working capital and liquidity, and the future prices of precious and base metals. 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 and mineral reserve estimates are reflective of actual mineral resources and mineral reserves; 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 the U.S. and 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. U.S. Cautionary Note 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. 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. However, Klondex s estimated proven and probable reserves previously reported under NI 43-101 for Fire Creek, Midas and True North are equivalent to those determined under SEC Industry Guide 7. 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. 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, 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. Qualified Person Brian Morris, Vice President, Exploration of Klondex Mines is a "qualified person" as defined by National Instrument 43-101 Standards of Disclosure for Mineral Projects (NI 43-101) and has reviewed andis responsible for the technical information contained in this presentation. 2
GAINING SCALE IN NORTH AMERICA STRONG UPSIDE POTENTIAL IN A SAFE JURISDICTION True North developing into our third significant operation in North America Consolidating in Northern Nevada three mines serviced by one central mill Three Flagship Assets in Nevada Aurora provides additional optionality 3
2016 OPERATIONAL HIGHLIGHTS CONSOLIDATED STATISTICS FIRE CREEK MIDAS NEVADA TOTAL TRUE NORTH TOTAL Production (GEOs) 102,383 48,623 151,007 10,199 161,289 Sales (GEOs) (1) (2) 100,022 50,977 151,004 8,028 159,118 Cash costs (per GEO sold) (1) $462 $981 $637 $1,552 $683 Mining cost per ton $301 $221 $252 $193 $242 All-in-costs (per Au oz) (2) $1,335 Tons per day milled 330 tpd 523 tpd 854 tpd 262 tpd 1,116 tpd Mill head grade (AuEq) 0.91 opt 0.28 opt 0.52 opt 0.11 opt 0.43 opt No lost time injuries at any of our operations Annual production of 161,289 GEOs, increase of ~26% YoY Achieved full year production and cost guidance (1) This is a non-gaap measure; refer to the Non-GAAP Performance Measures section of this Press Release for additional detail. (2) Gold equivalent measures are the gold measure plus the silver measure divided by a GEO ratio. GEO ratios are computed by dividing the average realized gold price per ounce by the average realized silver price per ounce received by us in the respective period and match the ratios used to determine the production cash costs per GEO sold. Refer to the Non-GAAP Performance Measures section of this Press Release for additional detail. 4
2017 OPERATIONAL GUIDANCE GEO Production Cash Costs per GEO Sold (1) CapEx (millions) LOW HIGH LOW HIGH LOW HIGH MIDAS (2) 42,000 45,000 $925 $950 $15 $17 FIRE CREEK 97,000 100,000 $475 $500 $27 $29 HOLLISTER (3) 30,000 35,000 $935 $960 NEVADA TOTAL 169,000 180,000 $670 $700 $42 $46 TRUE NORTH (4) 41,000 45,000 $725 $750 $15 $16 CONSOLIDATED TOTAL 210,000 225,000 $680 $710 $57 $62 LOW CORPORATE G&A (millions) $15 $17 HOLLISTER DEVELOPMENT & PROJECT COSTS (millions) $7 $9 REGIONAL EXPLORATION EXPENSE (millions) $3 $5 HIGH ALL-IN COSTS PER GOLD OZ SOLD (1) $1,070 $1,130 ~36% production growth YoY Operating 4 mines, 2 mills in 2 countries Flexible capital allocation strategy (1) This is a Non-GAAP measure; refer to the Non-GAAP Performance Measures section of this Presentation for additional detail. (2) Includes CapEx from Midas mill of $4-5 M. (3) The guidance will be updated, as required, upon completion of a technical report for the Gloria zone, expected to be completed in the second quarter of 2017. (4) Based on an estimated CDN:US dollar exchange rate of 0.75:1. *See press release dated January 18, 2017 5
EVOLVING INTO A MID-TIER PRODUCER * *See original guidance in the press release dated January 18, 2017 *See press releases dated September 14, 2016 & March 29, 2017 6
SIGNIFICANT EXPLORATION POTENTIAL FIRE CREEK Extending the veins in the main workings Expanding district-wide mineralization using geophysics as a targeting tool Fire Creek District remains open in all directions and at depth TRUE NORTH Continue to extend mineralization in the 710 and 711 zones New discovery in the SAM zone New Mineral Resource estimate expected in Q2 2017 7
FIRE CREEK UG DRILLING RESULTS EXTENDING THE MAIN VEINS FCU-0562 12.7 @ 0.33 opt Au Including 3.0 @ 0.90 opt Au FCU-0662 5.0 @ 2.50 opt Au FCU-0694 8.0 @ 0.84 opt Au FCU-716 53.8 @ 0.45 opt Au Including 22.1 @ 0.88 opt Au FCU-709 33.0 @ 0.84 opt Au Including 3.0 @ 1.06 opt Au FCU-0688 24.1 @ 0.20 opt Au Modeled Vein N Vein Extension FCU-0692 8.0 @ 1.47 opt Au Including 1.7 @ 6.10 opt Au FCU-0689 18.3 @ 1.08 opt Au Including 1.7 @ 9.86 opt Au FCU-0704 1.8 @ 2.16 opt Au FCU-0714 1.7 @ 96.92 opt Au Including 1.0 @ 161.08 opt Au Inferred Vein Extension Drill Hole showing Intercepts > 0.1 optau New Drill Hole Intercept (drilled thickness) 8 *See Press Release dated February 8, 2017
FIRE CREEK SURFACE DRILLING SUCCESS EXTENDS DISTRICT-WIDE MINERALIZATION TO THE WEST, EAST, AND NORTH 9 *See Press Release dated February 24, 2017
FIRE CREEK SURFACE EXPLORATION RESULTS EXPLORATION POTENTIAL ACROSS THE DISTRICT *FCC-0067: 1.8ft @ 0.12 opt Au FCC-0061: 1.9ft @ 0.56 opt Au *FCC-0068: 17ft @ 0.43 opt Au *FCC-0020: 10ft @ 0.53 opt Au Previously Reported Resistivity Map *Drill holes projected into cross section 10 *See Press Release dated February 24, 2017
HOLLISTER PROPERTY HATTER GRABEN VEIN SYSTEM Open Gloria West Vein System Currently ~1,800 ft of strike and vertical extension Currently ~1,800 ft of strike, and vertical extension of of ~1,200 ft ~1,200 ft GLOR15 034: GLOR15 18.36 opt 034: AuEq 18.36 opt over AuEq 1.7ft over 1.7ft Hatter Graben Vein System Open In All Directions H8 285: 0.47 opt Au over 12.5 ft H8 269: 1.77 opt Au over 2.1 ft 500 ft 11
TRUE NORTH MINERAL RESOURCE ESTIMATE Cohiba Vein +9.2 kozs MI (33.5ktons @ 0.274opt Au) +31.2 kozs Inf (124.8ktons @ 0.250opt Au) 16L 16L Veins -4.9kozs MI (18.2ktons @ 0.269opt Au) +8.4 kozs Inf (22.8ktons @ 0.370opt Au) 007 New Discovery 26-16-001 0.36 opt Au over 15.0 ft 12.3 g/t over 4.6 m 26L SAM Veins +12.2 kozs MI (41.2ktons @ 0.296opt Au) +3.5 kozs Inf (14.1ktons @ 0.250opt Au) 710/711 Veins +56.3 kozs MI (228.1ktons @ 0.247opt Au) +81.2 kozs Inf (343.6ktons @ 0.236opt Au) Measured + Indicated Inferred 12 *See Press Releases dated March 29 & January 24, 2017 Deep East Veins +21.9 kozs MI (126.8ktons @ 0.173opt Au) +84.1 kozs Inf (377.7ktons @ 0.223opt Au)
DELIVERING ON OUR COMMITMENTS MILESTONES ACHIEVED TO DATE NO LOST TIME INCIDENTS ACQUIRED THE TRUE NORTH MINE AND MILL IN MANITOBA, CANADA POSITIVE PRODUCTION DECISION MADE AT TRUE NORTH; SUCCESSFULLY RECOVERING GOLD FROM TAILINGS ADDED TO THE GDX, GDXJ, AND TSX COMPOSITE INDICES COMPLETED C$129.5M BOUGHT DEAL EQUITY FINANCING; ACQUIRED HOLLISTER AND AURORA ACHIEVED 2016 FULL YEAR PRODUCTION AND COST GUIDANCE ADDITIONAL OBJECTIVES ADVANCE DISTRICT EXPLORATION AT FIRE CREEK AND MIDAS MINERAL RESERVE UPDATE AT TRUE NORTH Q2 2017 MINERAL RESOURCE ESTIMATE AND DETAILED MINE PLAN FOR THE GLORIA ZONE AT HOLLISTER Q2 2017 DELIVER 2017 OPERATING GUIDANCE 13
For More Information John Seaberg SVP Investor Relations and Corporate Development Office 775.284.5757 Cell 303.668.7991 jseaberg@klondexmines.com
HOLLISTER/ AURORA ACQUISITION Power costs significantly reduced when connected to the grid Powerline and surface exploration now possible with EIS on hand EIS includes permitting for secondary ramp at Hatter Graben Drifting extended Gloria zone ~1,200 ft to the West New and improved dewatering system A-1
HOLLISTER/AURORA ACQUISITION POTENTIAL SYNERGIES OF ~$15M ANNUALLY Shorter Trucking Distance to Mill Lower Transportation Costs Hollister to Aurora mill (~277 miles @ ~$100/t) vs Midas mill (~19 miles @ ~$10/t); Realizable saving of ~$90/t Lower Milling Costs Aurora milling cost (~$96/t) vs Midas mill cost (~$46/t); Realizable saving of ~$50/t Lower Power Costs $17M spent on completing power line; expected to reduce power costs to ~$0.07/kWh from ~$0.66/kWh; Realizable saving of ~$50/t Reduced G&A Costs Will share G&A associated with established Midas and Fire Creek operations A-2
TRACK RECORD OF OPERATIONAL EXCELLENCE MIDAS POST-ACQUISITION IMPROVEMENTS Reduced workforce by 50% Transferred 25% of the equipment for use at Fire Creek reduced 2014 capex by ~$7 million 2 yard scoops, from 4 yard scoops Jumbo s replaced by handheld drills 6-8 wide ore drifts, down from 12 Apply cut and fill mining from raises in appropriate locations Increased resource, doubled grade to the mill Pre-KDX AuEq grade: 0.15 opt vs. 2015 head grade 0.30 opt Note: Please see the press release dated September 16, 2015 and the technical report titled "Preliminary Feasibility Study for the Midas Mine, Elko County, Nevada", as amended and re-filed April 2, 2015 (effective date of January 31, 2014) on SEDAR for details regarding the mineral resources disclosed herein, including details regarding the key assumptions, parameters and methods used to estimate the mineral resources. A-3
SELECTED FINANCIAL DATA SOLID FINANCIAL RESULTS 2016 2015 Revenue $198.2M $154.1M Income from Operations $15.1M $23.4M Net (loss) Income ($1.7M) $44.3M Net (loss) Income Per Share (Basic) ($0.01) $0.33 Revenue was an all-time high totaling $198.2 million, increase of ~29% YoY Sold a record 159,118 GEOs (1), an increase of 19.4% from the prior year. Average Realized Gold Price (US$/oz) Average Realized Silver Price (US$/oz) $1,245 $1,156 $17.44 $15.72 A successful transition from IFRS to US GAAP Capital Expenditures $61.7M $36.6M (1) See Non--GAAP Performance Measures at the end of the presentation A-4
BALANCE SHEET STRENGTH IMPROVING LIQUIDITY AND WORKING CAPITAL ~$96.8 Million of Available Liquidity $23M (US$M) Q4 2016 FY 2016 FY 2015 $26.2M Cash Flow from Operations $14.6 $45.3 $41.3 $47.6M Cash Balance $47.6 $47.6 $59.1 Working Capital $33.2 $33.2 $60.5 (1) Metal inventory is the value of the estimated recoverable gold and silver ounces contained in our Inventories if sold at December 31, 2016 period-end prices. (2) LOC was increased by $10M to $35 in October 27, 2016. December 31, 2016, the Company drew $12M from the Revolver to retire the Promissory Note. A-5
BUY-SIDE OUTREACH SHIFTING FOCUS TO INSTITUTIONAL INVESTORS CURRENT SHAREHOLDERS LOCATION % OWNERSHIP VAN ECK ASSOCIATES New York, NY 13.56% SENTRY INVESTMENTS Toronto, ON 8.18% U.S. GLOBAL INVESTORS San Antonio, TX 6.76% OPPENHEIMER New York, NY 4.17% FIDELITY (CANADA) AM Toronto, ON 3.74% K2 & ASSOCIATES Toronto, ON 3.85% BMO AM Toronto, ON 2.65% TOCQUEVILLE AM New York, NY 2.53% O'SHAUGHNESSY AM Stamford, CT 2.28% SPROTT AM Toronto, ON 2.12% DEUTSCHE BANK New York, NY 1.77% *Source: FactSet April 10, 2017 A-6
MINERAL RESERVES Fire Creek Mineral Reserves Category Tons (k) Au opt Au g/t Ag opt Ag g/t AuEq opt AuEq g/t Au koz Ag koz AuEq koz Proven 121 1.703 58.40 1.37 47.1 1.722 59.05 206 166 208 Probable 119 0.715 24.51 0.50 17.0 0.722 24.74 85 59 86 Total P&P 240 1.213 41.59 0.94 32.2 1.226 42.03 291 225 294 Midas Mineral Reserves Category Tons (k) Au opt Au g/t Ag opt Ag g/t AuEq opt AuEq g/t Au koz Ag koz AuEq koz Proven 141 0.261 8.95 9.18 314.8 0.388 13.31 37 1,295 55 Probable 307 0.335 11.47 3.84 131.6 0.388 13.29 103 1,180 119 Total P&P 449 0.311 10.68 5.52 189.2 0.388 13.30 140 2,475 174 True North Mineral Reserves True North Tailings Mineral Reserves Category Tons (k) Au opt Au g/t Au koz Proven 153 0.241 8.26 36.7 Category Tons (k) Au opt Au g/t Au koz Probable 1,170 0.028 0.96 32.4 Probable 199 0.245 8.40 48.8 Total P&P 352 0.243 8.33 85.5 Note: See Notes to Mineral Reserves and Mineral Resources on slide A - 7. A-7
MINERAL RESOURCES Fire Creek Mineral Resources Category Tons (k) Au opt Au g/t Ag opt Ag g/t AuEq opt AuEq g/t Au koz Ag koz AuEq koz Measured 180 1.637 56.12 1.30 44.7 1.655 56.74 294 234 298 Indicated 346 0.591 20.27 0.51 17.5 0.598 20.50 205 176 207 Total M&I 526 0.948 32.52 0.78 26.8 0.959 32.89 499 411 505 Inferred 931 0.538 18.43 0.48 16.4 0.544 18.66 501 446 507 Midas Mineral Resources Category Tons (k) Au opt Au g/t Ag opt Ag g/t AuEq opt AuEq g/t Au koz Ag koz AuEq koz Measured 417 0.400 13.72 7.97 273.4 0.511 17.51 167 3,325 213 Indicated 697 0.362 12.41 4.73 162.1 0.428 14.66 252 3,295 298 Total M&I 1,114 0.376 12.90 5.94 203.7 0.459 15.73 419 6,620 511 Inferred 671 0.303 10.39 2.93 100.5 0.344 11.79 203 1,966 231 True North Mineral Resources True North Tailings Mineral Resources Category Tons (k) Au opt Au g/t Au koz Measured 521 0.220 7.54 115 Indicated 1,276 0.214 7.34 273 Total M&I 1,797 0.216 7.40 388 Inferred 3,676 0.182 6.24 668 Category Tons (k) Au opt Au g/t Au koz Indicated 2,138 0.024 0.82 51.0 Inferred 47 0.022 0.75 1.1 Note: See Notes to Mineral Reserves and Mineral Resources on slide A - 7. A-8
NOTES TO MINERAL RESERVES AND RESOURCES Notes to Nevada s Mineral Reserve and Resource 1. Mineral Resource is inclusive of Mineral Reserve. 2. Fire Creek and Midas Mineral Reserves are calculated at a gold price of US$1,200 per ounce and a silver price of US$17.00 per ounce. 3. Fire Creek and Midas Mineral Resources are calculated at a gold price of US$1,400 per ounce and a silver price of US$19.83 per ounce. 4. Metallurgical recoveries for gold and silver are 94% and 92%, respectively, at all properties. 5. One ounce of gold is equivalent to 72.12 ounces of silver. 6. Mineral Resources include resource dilution to a minimum mining width of four feet or the vein width plus two feet, whichever is greater. 7. Cut off grades for the Mineral Resources at Fire Creek and Midas are 0.228 and 0.196 opt AuEq, respectively. 8. Cut off grade for the Mineral Reserves at Fire Creek and Midas are 0.343 and 0.305 opt AuEq, respectively. 9. The effective date for the Fire Creek and Midas Mineral Resource is June 30, 2016 and May 31, 2016, respectively. 10. 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, taxation, sociopolitical, marketing, or other relevant issues. 11. The quantity and grade of reported Inferred Resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred 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. 12. The Mineral Resources in this press release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council. Notes to True North Mineral Reserve and Resource 1. Mineral Resource is inclusive of Mineral Reserve. 2. Mineral Reserve is calculated at a gold price of C$1,500 per ounce. 3. Mineral Resource is calculated at a gold price US $1,400 per oz. 4. US$:CDN$ exchange rate is 0.80. 5. Metallurgical process recovery for gold is 94%. 6. Mine and Mill Cost C$141.52 per ton. 7. The effective date for True North mineral resources is February 14, 2017. 8. CIM definitions were followed for the Mineral Resource Estimate. 9. Mineral Resource include resource modeling dilution to a minimum width of four feet or the vein width, whichever is greater. 10. Mineral Reserve includes mining dilution and is constrained to a five foot minimum mining width. 11. Cut off grade for the Resource is 0.09 opt Au (3.09 grams per tonne). 12. Cut off grade for the Reserve is 0.13 opt Au which includes a mining cost of C$69/ton, processing cost of C$28/ton, G&A cost of C$45/ton and sustaining development cost of C$42/ton. 13. Mineral Resource and Reserve tonnage calculations used a bulk density 0.086 tons/cu. ft. 14. Mining losses of 2% have been applied to the designed mine excavations, and no additional unplanned dilution has been applied. 15. The effective date for Mineral Reserve and Resource is June 30, 2016. 16. 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, taxation, socio-political, marketing, or other relevant issues. There is no certainty that all or any part of the Inferred Mineral Resource will be upgraded to an Indicated or Measured Mineral Resource as a result of continued exploration. 17. The quantity and grade of reported Inferred Resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred 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. 18. The Mineral Resources in this press release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council. (1) See press releases dated September 12 & 14, 2016, & March 29, 2017 A-9
NOTES TO MINERAL RESERVES AND RESOURCES Notes to True North Tailings Mineral Reserve 1. Tailings Mineral Resource is inclusive of Mineral Reserves. 2. Tailings Mineral Reserve estimate is based on tailings located at True North produced by previous operators to Klondex. 3. Tailings Mineral Reserve was estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council. 4. No mining losses have been applied to the designed historic tailing excavations and no additional unplanned dilution has been included. 5. Contained metal may differ due to rounding. 6. Cut-off grade = 0.026 opt Au (0.89 g/t Au) for 2016 to 2018 and0.020 opt Au (0.69 g/t Au) for 2019 to 2023 7. A dry bulk density of 0.044 tons per cubic foot was utilized in the tailings Mineral Reserve tonnage calculation. Notes to True North Tailings Mineral Resource 1. Tailings Mineral Resource is inclusive of Tailings Mineral Reserve. 2. Tailings Mineral Resource estimate is based on tailings located at True North produced by previous operators to Klondex. 3. 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, marketing, or other relevant issues. 4. Mineral Resource was estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council. 5. The quantity and grade of reported Inferred Mineral Resources in this estimation are uncertain in nature and there has been 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. 6. Contained metal may differ due to rounding. 7. Cut-off grade = 0.015 opt Au (0.51 g/t Au). 8. A dry bulk density of 0.044 tons per cubic foot per cubic foot was utilized in the tailings Mineral Resource estimate tonnage calculation. (1) See press releases dated October 27, 2016 A-10
NON-GAAP PERFORMANCE MEASURES Non-GAAP Performance Measures We have included the non-gaap measures "Production cash costs per gold equivalent ounce sold" and "All-in costs per gold ounce sold" in this MD&A (collectively, the "Non-GAAP Measures"). These Non-GAAP Measures are used internally to assess our operating and economic performance and to provide key performance information to management. We believe that these Non-GAAP Measures, in addition to conventional measures prepared in accordance with GAAP, provide investors with an improved ability to evaluate our performance and ability to generate cash flows required to fund and sustain our business. These Non-GAAP Measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. These Non-GAAP Measures do not have any standardized meaning prescribed under GAAP, and therefore may not be comparable to or consistent with measures used by other issuers or with amounts presented in our financial statements. Our primary business is gold production and our current and future operations, development, exploration, and life-of-mine plans primarily focus on maximizing returns from such gold production. As a result, our Non-GAAP Measures are calculated and disclosed on a per gold or gold equivalent ounce basis. Production Cash Costs Per Gold Equivalent Ounce Sold Production cash costs per gold equivalent ounce sold presents our cash costs associated with the production of gold equivalent ounces and, as such, non-cash depreciation and depletion charges are excluded. Production cash costs per gold equivalent ounce sold is calculated on a per gold equivalent ounce sold basis, and includes all direct and indirect operating costs related to the physical activities of producing gold, including mining, processing, third-party refining expenses, on-site administrative and support costs, royalties, and cash portions of net realizable value write-downs on production-related inventories (State of Nevada net proceeds and other such taxes are excluded). We believe that converting the benefits from selling silver ounces into gold ounces is helpful to analysts and investors as it best represents the way we operate, which is to maximize returns from gold production. Gold equivalent ounces are computed as the number of silver ounces required to generate the revenue derived from the sale of one gold ounce, using average realized selling prices (in thousands, except ounces sold and per ounce amounts): A-11
NON-GAAP PERFORMANCE MEASURES Three months ended December 31, 2016 Fire Creek Midas Nevada Total True North Total Average realized price per gold ounce sold $ 1,181 $ 1,185 $ 1,182 $ 1,139 $ 1,175 Average realized price per silver ounce sold $ 16.69 $ 16.73 $ 16.73 $ 16.41 $ 16.73 Silver ounces equivalent to revenue from one gold ounce 70.8 70.9 70.7 69.4 70.2 Silver ounces sold 22,103 351,946 374,049 853 374,902 GEOs from silver ounces sold 312 4,964 5,291 12 5,340 Gold ounces sold 27,035 8,354 35,389 7,016 42,405 Gold equivalent ounces 27,347 13,318 40,680 7,028 47,745 Production costs $ 12,961 $ 12,815 $ 25,776 $ 9,932 $ 35,708 Add: Write-down of production inventories (cash portion) 405 405 1,918 2,323 $ 12,961 $ 13,220 $ 26,181 $ 11,850 $ 38,031 Production cash costs per GEO sold $ 474 $ 993 $ 644 $ 1,686 $ 797 (1) Nevada Total includes Fire Creek and Midas. Years ended December 31, 2016 2015 2014 Consolidated Nevada Total (1) True North Total Nevada Total (1) Nevada Total (1) Average realized price per gold ounce sold $ 1,250 $ 1,164 $ 1,245 $ 1,156 $ 1,258 Average realized price per silver ounce sold $ 17.44 $ 16.41 $ 17.44 $ 15.72 $ 18.47 Silver ounces equivalent to revenue from one gold ounce 71.7 70.9 71.4 73.6 68.1 Silver ounces sold 1,470,139 853 1,470,992 1,708,548 1,117,288 GEOs from silver ounces sold 20,504 12 20,602 23,214 16,407 Gold ounces sold (2) 130,500 8,016 138,516 110,058 73,100 Gold equivalent ounces 151,004 8,028 159,118 133,272 89,507 Production costs $ 95,845 $ 10,544 $ 106,389 $ 83,318 $ 54,430 Add: Write-down of production inventories (cash portion) (see Note 5 - Inventories) 405 1,918 2,323 1,016 $ 96,250 $ 12,462 $ 108,712 $ 84,334 $ 54,430 Production cash costs per GEO sold $ 637 $ 1,552 $ 683 $ 633 $ 608 (1) During 2015 and 2014, production was only from Fire Creek and Midas. Details for Nevada are presented in the following table. A-12
NON-GAAP PERFORMANCE MEASURES The following table presents a reconciliation of Fire Creek and Midas to the "Nevada Total" for the years 2016, 2015, and 2014 (in thousands, except ounces sold and per ounce amounts): Nevada Total Fire Creek Midas Average realized price per gold ounce sold Average realized price per silver ounce sold Silver ounces equivalent to revenue from one gold ounce Years ended December 31, 2016 2015 2014 Nevada Total (1) Fire Creek Midas Nevada Total (1) Fire Creek Midas Nevada Total (1) $ 1,250 $ 1,252 $ 1,250 $ 1,156 $ 1,156 $ 1,156 $ 1,261 $ 1,245 $ 1,258 $ 17.00 $ 17.48 $ 17.44 $ 15.77 $ 15.71 $ 15.72 $ 18.32 $ 18.48 $ 18.47 73.5 71.6 71.7 73.3 73.6 73.6 68.8 67.4 68.1 Silver ounces sold 95,454 1,374,685 1,470,139 81,441 1,627,107 1,708,548 56,015 1,061,273 1,117,288 GEOs from silver ounces sold 1,299 19,200 20,504 1,111 22,107 23,214 814 15,746 16,407 Gold ounces sold (2) 98,723 31,777 130,500 81,080 28,978 110,058 59,352 13,748 73,100 Gold equivalent ounces $ 100,022 $ 50,977 $ 151,004 $ 82,191 $ 51,085 $ 133,272 $ 60,166 $ 29,494 $ 89,507 Production costs $ 46,246 $ 49,599 $ 95,845 $ 37,394 $ 45,924 $ 83,318 $ 25,156 $ 29,274 $ 54,430 Add: Write-down of production inventories (cash portion) (see Note 5 - Inventories) Production cash costs per GEO sold 405 405 1,016 1,016 $ 46,246 $ 50,004 $ 96,250 $ 37,394 $ 46,940 $ 84,334 $ 25,156 $ 29,274 $ 54,430 $ 462 $ 981 $ 637 $ 455 $ 919 $ 633 $ 418 $ 993 $ 608 All-in Costs Per Gold Ounce Sold Our calculation of all-in costs per gold ounce sold is consistent with the June 2013 guidance released by the World Gold Council, a non-regulatory, non-profit market development organization for the gold industry. All-in costs per gold ounce sold reflect the varying costs of producing gold over the life-cycle of a mine or project, including costs required to discover and develop new sources of production; therefore, capital amounts related to expansion and growth projects are included. All-in costs per gold ounce sold includes all: (1) direct and indirect operating cash costs related to the physical activities of producing gold, including mining, processing, third-party refining expenses, on-site administrative and support costs, royalties, and cash portions of net realizable value write-downs on production-related inventories (2) general and administrative expenses, (3) asset retirement and accretion expenses, and (4) capital expenditures, the total of which is reduced for revenues earned from silver sales. Certain cash expenditures, including State of Nevada net proceeds and other related taxes, federal tax payments, and financing costs are excluded (in thousands, except ounces sold and per ounce amounts): A-13
NON-GAAP PERFORMANCE MEASURES Production costs $ 25,776 $ 9,932 $ $ 35,708 Add: Write-down of production inventories (cash portion) 405 1,918 2,323 26,181 11,850 38,031 General and administrative 4,368 Exploration 4,502 Development and projects costs 3,423 Asset retirement and accretion 1,898 Expenditures on mineral properties, plant and equipment 15,874 Less: silver revenue (6,271 ) All-in costs 61,825 Gold ounces sold 35,389 7,016 42,405 All-in costs per gold ounce sold $ 1,458 (1) Nevada Total includes Fire Creek and Midas. Years ended December 31, Nevada Total (1) True North 2016 2015 2014 Hollister, Aurora, and Corporate Total Nevada Total (1) Nevada Total (1) Production costs $ 95,845 $ 10,544 $ $ 106,389 $ 83,318 $ 54,430 Add: Write-down of production inventories (cash portion) (see Note 5 - Inventories) 405 1,918 2,323 1,016 96,250 12,462 108,712 84,334 54,430 General and administrative 15,804 12,375 8,818 Exploration 12,765 9,813 3,415 Development and projects costs 8,953 15,467 Asset retirement and accretion 2,653 871 628 Expenditures on mineral properties, plant and equipment 61,716 36,598 7,882 Less: silver revenue (25,660) (26,850) (20,639) All-in costs 184,943 117,141 70,001 Gold ounces sold 130,500 8,016 138,516 110,058 73,100 All-in costs per gold ounce sold $ 1,335 $ 1,064 $ 958 (1) Nevada Total includes Fire Creek and Midas. During 2015 and 2014, production was only from Nevada. Nevada Total (1) Three months ended December 31, 2016 True North Hollister, Aurora, and Corporate For a listing of our total capital expenditures see the Investing cash flows part of the Financial position, liquidity, and capital resources section. Total A-14
NON-GAAP PERFORMANCE MEASURES Klondex has not reconciled forward-looking full year non-gaap performance measures contained in this presentation to their most directly comparable GAAP measures, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K. Such reconciliations would require unreasonable efforts at this time to estimate and quantify with a reasonable degree of certainty various necessary GAAP components, including for example those related to future production costs, realized sales prices and the timing of such sales, timing and amounts of capital expenditures, metal recoveries, and corporate general and administrative amounts and timing, or others that may arise during the year. These components and other factors could materially impact the amount of the future directly comparable GAAP measures, which may differ significantly from their non-gaap counterparts. A-15