Junior chases gold near Yellowknife

After seven years of looking for gold to produce economically in the Yellowknife Gold Camp in Northwest Territories, Tyhee Development Corp. is closing in on a potentially lucrative payday.

The Vancouver, B.C.-based junior has grown into the largest property holder in the historic gold camp with four properties encompassing 6,625 hectares, or 15,481 acres, in its Yellowknife Gold Project located 90 kilometers, or 56 miles, north of Yellowknife, NWT. In all, Tyhee controls more than 16,300 hectares, or 39,283 acres, in the region.

Tyhee is also conducting the largest exploration and development program currently underway in Northwest Territories, where miners have searched more intently in recent years for diamonds, uranium and rare earth metals than for gold.

But the Yellowknife Gold Camp was a prolific gold producer for decades and not surprisingly, it is yielding substantial new potential for Tyhee.

Decades of gold production

Gold was discovered near Yellowknife in the late 1800s, but miners did not rush to the area in great numbers until the 1930s.

In the summer of 1944, prospector A.V. (Fred) Giauque staked claims near the west shore of the since-named Giauque Lake following his discovery of visible gold in quartz veins in rusty mafic volcanic rocks (now known as the Bruce Lake Zone).

Subsequent prospecting and exploration in 1945 discovered more spectacular visible gold in a folded, thick quartz vein hosted by metasedimentary rocks about 100 meters northeast of the Bruce Lake Zone, in what came to be known as the North Vein of the Main Zone.

Giauque and sons optioned the claims to Discovery Yellowknife Mines Ltd. in 1945.

In 1944, they also had discovered gold mineralization (now termed the Ormsby Zone) about 2 kilometers to the southwest of the Main Zone.

The Giauques subsequently sold the claims to LaSalle Yellowknife Gold Mines Ltd.

Sufficient high-grade ore had been indicated in the property's Main Zone to warrant initiation of shaft sinking and underground development in November 1946. Surface exploration and underground development continued in 1948 and 1949 while surface buildings, including a 90-ton-per-day mill with amalgamation and cyanide circuits, were installed.

Production began in January 1950 from the 112-meter (365-foot) deep shaft. Discovery Yellowknife Gold Mines was renamed Consolidated Discovery Yellowknife Gold Mines Ltd. in 1952.

In 1953, a power line was installed from the Bluefish hydroelectric complex near Yellowknife to serve the expanding mine operation.

With the discovery of deeper ores below the North Vein (No. 4 and No. 16 Veins) in the Main Zone, the mill capacity was increased incrementally to 225 tons per day and the shaft ultimately deepened to 1,237 meters (4025 feet) by 1960.

The mine produced continuously until the mill was destroyed by fire in 1968.

Ore was trucked to Yellowknife for milling on a winter road the following year, but the mine closed later in 1969.

The Discovery Mine produced an estimated 1.023 million troy ounces of gold from 937,000 metric tons of ore. An average production grade of slightly more than 1 ounce per metric ton gold is generally considered the highest average grade of produced gold in the Yellowknife gold district.

Tyhee acquires properties

In recent years, the federal government funded cleanup and reclamation of the area's abandoned mines and even removed buildings from some mine sites. A number of mining companies have explored the gold claims in the years since, but it was Tyhee that took up the quest in earnest in 2001.

"We moved in and picked up the Discovery Mine site, which includes the past gold producer," Tyhee President and CEO D.R. "Dave" Webb told Canada's BTV in a recent interview. The junior also acquired a sizable database and archived samples from earlier exploration of the area.

Tyhee started out with two properties, Discovery Mine, which includes the Ormsby and Bruce Lake zones, and Nicholas Lake (13 kilometers, or 8 miles, south of the Ormsby Zone), and added two more properties, Goodwin Lake (13 kilometers, or 8 miles, south of the Ormsby Zone), and Clan Lake (27 kilometers, or 17 miles, south of the Ormsby Zone) in 2006. Over the years, the company has identified and steadily increased the project's gold resources.

Today, the junior boasts at least 2.1 million ounces of gold in measured and indicated resources, plus another 300,000 ounces in inferred resource on the properties. Not only has the project's resources estimate continued to grow at an annual rate of about 200,000 ounces, but recent results also suggest that more growth lies ahead.

Junior discovers more gold

Webb said Tyhee has already demonstrated that the gold resources it has discovered are somewhat economic. Among the project's advantages is its relatively close proximity to Yellowknife, land access by a winter road and a good possibility of hydroelectric power being extended to the mine's site. Add to that gold prices recently hitting record highs greater than US$1,000 per ounce, and Tyhee's future appears golden.

"When we did the preliminary assessment in July 2008, the price of oil was $140US and the Canadian dollar was at par. Everything has improved - the price of oil, the Canadian dollar exchange rate and the cost of capital. We've had many things going in our favor, plus the expansion of resources," he said.

Recently exploration crews completed full reconnaissance on the less-explored Clan Lake property and discovered seven new gold zones that occur across 2,800 hectares, or 6,748 acres, with showings ranging up to 100 meters-plus in length. Tyhee conducted a high-resolution airborne aeromagnetic survey on the Clan Lake property in 2008.

In September Tyhee reported initial exploration results from 2009 diamond drilling and updated assays from a summer sampling program on the Clan Lake property. Grab samples exceeding 100 grams of gold per metric ton (final assays pending) helped to identify these new showings.

In addition, seven showings previously identified were mapped and sampled in greater detail, resulting in three of the zones, Main, Pond and Cranberry, now being recognized as a single large zone, the Main zone. The original Main zone, which hosts an NI 43-101-compliant resource of 254,000 ounces of indicated gold, is four times larger, extending for 1,300 meters in strike length and up to 220 meters in width in an arcuate northwest to east-southeast domain. Archival diamond drill holes west and east of the Main zone have been sampled and assays are pending.

More than 200 meters of trenches have been blasted and sampling over a 450-meter length of the eastern extension of the Main zone was completed, exposing extensive domains of quartz veining with significant pyrrhotite.

In October Tyhee reported that the three grab samples from the Cub and Morel zones that it described in September as being greater than 100 g/t gold, actually assayed at 250.83 g/t, 266.28 g/t and 169.54 g/t gold. Diamond drill core from 16 archival holes that had not been sampled in their entirety were obtained, re-logged and sampled (appended) for gold mineralization, and returned 2.34 g/t over 38.0 meters in CL01, including 2.96 g/t over 15.0 meters and 4.18 g/t over 7.5 meters; and 1.55 g/t over 45.0 meters in CL029, including 4.70 g/t over 7.5 meters and 2.53 g/t over 10.5 meters.

Webb said the Cub and Morel zones have large surface expressions of quartz-veined and sulphide -mineralized volcanic rocks (300 meters by 20 meters and 800 meters by 70 meters, respectively).

"So we see tremendous tonnage potential," Webb said Oct. 14.

He also noted that the diamond drill results provided new information on the Main zone to the northwest and extended it to the east by at least 30 meters.

"We will incorporate these drill holes (results) into our resource database to facilitate a revised resource calculation on the Main zone before the end of this year," he said.

Tyhee also said it expects to receive assay results from another four diamond drill holes and from more than 200 meters of trenching on the Main zone extensions, 400 meters east of any existing drill holes, over the next few weeks.

Prefeasibility work progresses

Elsewhere on the Yellowknife Gold Project, the field work portion of a preliminary feasibility study is nearing completion for 2009. Drilling at Nicholas Lake and on the Ormsby Zone, where Tyhee has completed extensive exploration work prior to 2009 and on infrastructure sites are complete, and crews and equipment have demobilized for the season. Metallurgical samples are being shipped for processing and environmental studies, and hydrology and power studies are ongoing.

"Instead of re-doing the preliminary assessment, which was tempting, we opted to move for a full prefeasibility study, which will include an engineering component. So rather than estimating what groundwater quantity and quality might be, we will have it measured," Webb explained.

The company is currently pursuing two phases of development - permitting and prefeasibility.

"We are drilling holes where we intend to put foundations for the mill. We're drilling holes for the tailings dam sites, and we're drilling seven new holes to pump water to determine the quality and quantity of water that will be discharged," Webb said.

Tyhee is pursuing a strategy of cautious spending on development with a 2009 budget of about C$160,000, though it has about C$3 million in the bank. "We're sufficiently funded for our current program fully financed for the short term," said Webb.

The money should cover the cost of financing the balance of the prefeasibility study and taking permitting to the full environmental assessment stage, he said. "If we do an expanded drill program, we may have to go back to the markets then," Webb added.

While some juniors are focused on bringing their projects expeditiously to the attention of a major investor, Tyhee is advancing development of the Yellowknife project on its own. Among steps the company has taken to protect its future prospects was adoption of a shareholder rights plan March 31.

Though it did not anticipate a takeover bid, Tyhee said it adopted the rights plan to ensure the fair treatment of shareholders in connection with any bid for common shares of the company, should one occur. The junior said the plan seeks to provide shareholders with adequate time to properly assess a takeover bid without undue pressure and provides the Tyhee's board of directors with more time to fully consider an unsolicited takeover bid and, if applicable, to explore other alternatives to maximize shareholder value.