Klondex Mines Draws U.S. $5 Million from Gold Loan to Fund

Klondex Mines Ltd. (TSX: KDX) announced today that it has drawn-down
U.S. $5 million from its gold-backed debt facility to fund continued
exploration and development at its 100%-owned Fire Creek gold property
in the Battle Mountain-Eureka Trend in Northern Nevada.

The funding was pursuant to a U.S. $20 million gold-backed debt facility
bearing interest at 9% per annum secured by Klondex in April 2011.
Today′s tranche follows the initial U.S. $10 million funding in April
and leaves U.S. $5 million, conditioned on the achievement of
development milestones, available under the facility. The loan is being
provided by Waterton Global Value, L.P. (the 'Lender?).

Klondex CEO, Blane Wilson, commented, 'We have an extremely active
exploration and development program moving forward at Fire Creek. Five
drill rigs are now executing our surface exploration program, and our
underground decline is progressing well under the very capable teams
from Small Mines Development. We are fortunate to have put in place the
gold loan structure earlier this year as it is allowing Klondex to fund
its operations without disruption.?

Cheryl Brandon, portfolio manager at Waterton, stated, 'We are pleased
with the progress Klondex has made to date at its Fire Creek project. We
look forward to continue working with management during the development
of the underground mine to facilitate the bulk sample and fund further
ongoing exploration drilling.?

Facility borrowings are to be repaid in monthly bullion installments
from Klondex′s anticipated gold recovery at Fire Creek priced at a 20%
discount to gold′s spot price. The Lender may also request payments be
made in cash, and Klondex may prepay the Facility in whole or in part at
its discretion. Klondex′s obligations are secured by a lien and a first
priority security interest in all its properties and assets, including
Fire Creek. Klondex paid a structuring fee of 1% of the aggregate amount
of the Facility and a structuring fee of 1% of each drawdown.

In addition, the Lender had been granted an exclusive right to purchase
all gold produced by Fire Creek for three years beginning one year prior
to Facility′s maturity date. Pricing will be based on a 1% discount to a
30-day average gold price. As consideration for waiving certain
operational conditions to the drawdown of this tranche, this right has
been extended for an additional two years with no discount in pricing
during this time.

With the funding of the second tranche, the Lender received an
additional 300,000 four-year warrants to purchase KDX′s common shares at
a strike price of $2.49 per share. The Lender is entitled to receive
additional comparable warrant consideration should the third tranche be
funded. All warrants are non-transferable.

About Klondex Mines Ltd. (www.klondexmines.com):

Klondex Mines is focused on the exploration and development of its 100%
owned Fire Creek gold deposit in North Central Nevada. Fire Creek is a
compelling gold mining prospect that is located near power,
transportation, mining infrastructure and several milling facilities.
Fire Creek′s updated mineral resource is reviewed in the table below.
For more information on the mineral resource estimates, please refer to
Klondex′s disclosure available at the SEDAR website and at Klondex′s
website.

In addition to an active surface exploration program at Fire Creek, in
April 2011 Klondex initiated an underground exploration and development
program being pursued via an underground decline. The program is
designed to enable more cost effective in-fill drilling of its existing
resource from underground stations as well as to enable bulk sampling
for metallurgical testing of up to 120,000 short tons of material
(limited to 36,500 short tons per year). Bulk sampling is targeted to
begin in Q1 2012.

Giving effect to warrants issued pursuant to the second tranche, Klondex
had 37.0 million shares issued and outstanding and 43.8 million shares
on a diluted basis as of October 5, 2011. Klondex′s cash position
following the second tranche funding was approximately CDN $11.6 million.

Richard Kern (P.Geo), of Reno, Nevada, a qualified person as defined
under National Instrument 43-101, has reviewed and approved the
technical information contained in this press release.

On Behalf of Klondex Mines Ltd.

Blane W. Wilson

President & CEO

Investor & Media Contact:

Jaffoni & Collins

David
Collins, 212-835-8500

KDX@jcir.com