Positive economics for Tyhee’s Yellowknife gold project

Vancouver – Tyhee Development‘s (TDC-V) Yellowknife gold project could produce more than 800,000 oz. gold over a 7.5-year mine life, according to a preliminary feasibility study that examined just three of the project’s five deposits.

The Yellowknife project comprises four properties, aligned along some 40 km of north-northeast trending strike and starting 50 km north of the city of Yellowknife in the Northwest Territories. The land package is home to five deposits but two only contain inferred resources and therefore were excluded from the economic assessment.

The three deposits with measured and indicated resources are Ormsby, Nicholas Lake Main, and Clan Lake Main. Tyhee is proposing to mine all three, using a staged combination of open pit and underground operations.

A mill at the Ormsby zone would churn through 3,000 tonnes of ore daily. Over a 7.5-year mine life the mill would process 7.56 million tonnes of ore carrying an average grade of 3.34 grams gold, to produce 811,200 oz. gold.

At first the ore would come from an open pit at Ormsby and an underground mine at Nicholas Lake. In the fourth year the underground mining equipment would transition from Nicholas Lake to Ormsby to commence underground operations there. The next year the surface equipment would move from Ormbsy to Clan Lake to initiate an open pit at that site.

At present, the Ormsby open pit reserve stands at 5.2 million proven and probable tonnes grading 3.2 grams gold while the underground reserve at Ormsby hosts 976,000 tonnes averaging 5.6 grams gold. At Nicholas Lake, the underground deposit contains 975,000 tonnes grading 4.36 grams gold. And at Clan Lake the open-pittable portion of the deposit is home to 441,000 tonnes averaging 2.95 grams gold.

Tyhee says the potential to expand the project is significant. First, the company is currently drilling at Clan Lake to prove up the underground resource there; the study onlu considered Clan Lake’s resource to 105 metres depth. Second, further drilling at the two inferred resource deposits, Bruce Lake and Goodwin Lake Vad, should increase the confidence in those deposits to the point where they could be considered in a mine plan. And third, all five zones remain open to depth, while several also remain open along strike.
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Archean gold deposits, like the Yellowknife project, are not easy to evaluate due to their limited lateral but significant vertical extent,” said Tyhee’s president and CEO Dave Webb, adding that similar deposits extend thousands of metres below surface. He also noted that the inclusion of Clan Lake, which was not part of the 2008 preliminary assessment, confirms the viability of one central mill treating ores from multiple open-pit and underground sources.

All of the ores are non-refractory, which means they can be treated using conventional crushing and grinding followed by gravity and flotation separation. A Merrill Crowe recovery system would allow Tyhee to pour gold dore bars on site. Metallurgical testwork indicates all ores provides gold recoveries of 90% or better.

As it stands now, the project generates a pre-tax net present value (NPV) of $71.3 million and a 16.1% internal rate of return (IRR), using a 5% discount rate and a gold price of US$950 per oz. Boosting the gold price to US$1,200 per oz. lifts the NPV above $200 million and increases the IRR to 38%.

To build the operation should cost $170 million, including a $20-million contingency.

Tyhee’s share price did not budge on news of the prefeasibility study, staying at 15¢. The company has a 52-week trading range of 10¢ to 28.5¢ and has 222 million shares outstanding, 256 million fully diluted.