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Tyhee Gold Corp. merger in works
Exploration company seeks partnership with Santa Fe Gold Corp. to finance Yellowknife Gold Project

Daron Letts
Northern News Services
Published Tuesday, February 4, 2014

Following two years of weak equity markets, Tyhee Gold Corporation plans to merge with Santa Fe Gold Corporation this spring to help generate financing for its stalled $193 million Yellowknife Gold Project.

nnsl photo

Tyhee Gold Corporation's chief geologist, Val Pratico stands outside the Ormsby Portal at the company's Yellowknife Gold Project in 2005. Exploration activities have slowed down at the site as the company pursues financing for the project. - photo courtesy of Tyhee Gold Corporation

The Vancouver-based junior resource company and the New Mexico-based mining company, whose Summit gold mine suspended operation after almost two years of production in November due to capital constraints, reached a merger agreement late last month, pending certain conditions.

Directors of both the Santa Fe and Tyhee boards unanimously endorsed the transaction. Santa Fe shareholders are scheduled to vote on the deal in March. Following completion of the transaction, Tyhee president and CEO Brian Briggs would continue to lead the company, with Santa Fe CEO Pierce Carson serving as a part-time consultant.

"Once this transaction is completed – if this transaction is completed -- our plan is to redesign the (Summit) mine, restart it, and invest in the company," Taylor said. "We're planning on putting about $19 million into the company and start production in the first half of this year."

The estimated operational life of the under-capitalized Summit mine is five years, but Taylor said Tyhee engineers are confident they can increase that substantially with more money, better mine planning and by accessing adjacent deposits.

"We still are looking forward to building the Yellowknife Gold Project into a mine, but we've got a lot of permitting work underway and so we would need certain approvals and support, and we also need to raise the money," Taylor said.

"The main thing that the Santa Fe deal does in terms of its potential impact on the Yellowknife Gold Project is that it should provide more cash flow that would allow us to continue to invest in developing the Yellowknife Gold Project."

If permitting and financing are achieved, Tyhee's Yellowknife Gold Project, which encompasses Ormsby, Bruce Lake, Clan Lake and Nicholas Lake, would include a 4,000-tonne-per-day processing plant, annual gold production of 104,000 ounces, and a mine life of 15 years, according to the company's 2012 feasibility study.

"There's work that needs to be done on the permitting side and the development side. There's some technical work that needs to be done, and because cash has been so tight, we haven't been able to advance the project as quickly as we had wanted to," Taylor said. "Broadly speaking, we're probably approximately a year behind schedule right now."

Tyhee announced it was "aggressively" pursuing a merger with or acquisition of a company involved with a late-term gold project this past fall. Taylor said more partnerships may be sought in the second quarter of 2014, as well.

"We're actually looking at possibly doing another acquisition once the Santa Fe deal is completed," he said.

The main obstacle to development of the Yellowknife Gold Project remains commodity prices, he added.

"Tyhee are in a position where the majority of companies in the resource sector are somewhat under siege," he said. "If the gold price strengthens that will benefit us and also our investors and it would benefit the communities affected by our gold project in the Yellowknife area. The bottom line is it's all about investment."

The merger is expected to be complete in March, Taylor said.

“This is precisely the sort of opportunity that my team and I have been looking forward to over the past several months as market conditions have affected the timing of our plan to bring the Yellowknife Gold Project into production," Briggs stated in a Jan. 23 news release. "Although we remain committed to that longer term goal, we are extremely happy to be able to start producing gold at Summit and then to optimize this operation in line with our target of becoming a profitable new mid-tier, multi-project gold company.”

Tyhee shares closed at $0.10 on the Toronto Stock Exchange last week, unchanged from earlier in the week.

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