Klondex Terminates Agreement with Paramount Gold and Silver Corp. Citing Misleading Mineral Resource Disclosure

VANCOUVER-(Business Wire)-September 25, 2009 - Klondex Mines Ltd. (TSX: KDX) (“Klondex”) announces that it has terminated the July 20, 2009 letter agreement (the “Letter Agreement”) with Paramount Gold and Silver Corp. (“Paramount”) in respect of a proposed business combination of Klondex and Paramount. The Letter Agreement was terminated by Klondex in accordance with its terms. As a result of Paramount’s breach of the terms of the Letter Agreement, Klondex believes it is entitled to a reverse break fee of US$2.85 million plus damages and denies it has any obligation to pay Paramount any break fee.

Klondex’s decision to terminate the agreement is based on the results of its due diligence which revealed that Paramount’s public disclosure record contained material misstatements and omissions regarding the inferred resource at Paramount’s San Miguel Project in Mexico. Klondex believes that these misrepresentations have a material adverse affect on the value and potential of the San Miguel Project. Klondex formally advised Paramount of the misrepresentations on September 13, 2009.

On Friday, September 18, 2009, after notice from Klondex of its due diligence review of the San Miguel Project, Paramount made publicly available only on SEDAR an updated 83 page technical report in respect of the San Miguel Project dated September 15, 2009 (the “New Report”). After review of the New Report, Klondex has concluded that the New Report confirms the results of its due diligence investigation and provides first time public disclosure that a significant portion of the newly identified higher grade mineralized material located in Clavo 66 and Clavo 99 of the San Miguel Project resource (the “San Miguel Resource”) is actually located on a neighbouring property, in which Paramount has no known ownership rights. Klondex has been unable to confirm the amount of the higher-grade mineralization located on the neighboring property as Paramount has refused to provide to Klondex the underlying data used to calculate the San Miguel Resource. Klondex believes that the amount of mineralization in question is significant.

From its review of the New Report, Klondex has also determined that, although the resource reported in Clavos 66 and 99 is open to depth, a portion of the resource that is open to depth is actually located on the neighbouring property, in which Paramount has no known ownership rights. Klondex is of the view that this materially limits the prospects for the San Miguel Project.

The foregoing information was not publicly available and not readily apparent from the public record at the time Klondex entered into the Letter Agreement. The public record at that time made no reference to claim boundaries in relation to the mineralized zones at Clavos 66 and 99 and consistently referred to these zones as being open to depth. Klondex only became aware of the discrepancy after completing a site visit and interviewing members of Paramount’s personnel.

Klondex anticipates Paramount will likely make a retaliatory claim of breach of the Letter Agreement citing issues concerning disclosure by Klondex of Klondex’s resource estimate. Klondex believes that any such allegations, if made, are unfounded and without merit.

About Klondex Mines:

Klondex Mines Ltd. is a gold exploration company focused on the development and expansion of its 100%-owned Fire Creek deposit in Nevada which consists of 11,098 acres of fee and lease land. Fire Creek is located in North Central Nevada, an area of prolific gold production, at the intersection of the Battle Mountain-Eureka Trend and the Northern Nevada Rift. The Company was founded over 35 years ago, and its property portfolio consists of four gold exploration projects, all in Nevada. Eighty percent of Klondex’ known resource is on private land. For more information, please visit www.klondexmines.com.