SOMBA K'E/YELLOWKNIFE
It's lean times for gold explorers, especially those on the cusp of developing a mine.

Tyhee Development Corporation's chief geologist, Val Pratico, stands outside of the Ormsby Portal at the company's Yellowknife Gold Project in 2005. The company is arranging to purchase a gold mine in California to help finance their Yellowknife project. - photo courtesy of Tyhee Development Corporation

Although sub $5 million dollar capital raises to fund drilling on young projects are fairly common in the North, explorers like Tyhee Gold Corp. who have moved well beyond exploratory drilling to a permit and construction-ready project face a more difficult capital market.

"For the most part, it's very difficult to raise money for projects that aren't near term or small capital," said Greg Taylor, head of investor relations for Tyhee Gold.

With a formal feasibility study in hand, Tyhee is ready to build a gold mine 90 km north of Yellowknife, but there's the matter of the $200 million cash the company needs to make that happen.

"The state of the market is such that we're going through a serious period where investors are looking shorter term," Taylor said.

But Tyhee isn't sitting on the sidelines waiting for the market price of gold to shift gears. Tyhee has responded with a short-term option designed to help finance the Yellowknife Gold Project.

That short-term prospect is the Lincoln gold mine project in California near Sutter Creek developed by the Sutter Gold Mining Inc. It's a ready-to-produce gold mine with the majority of mine infrastructure in place.

What's lacking, Taylor said, is a strong mine management team -- which Tyhee brings to the table -- and a relatively small capital raise.

"We've worked out potential terms with the major debtor, RMB (RMB Australia Holdings Limited) - who's also the largest shareholder (in Sutter Gold) -- whereby we could satisfy the debt side and acquire the company, and put money into getting the mine properly operating."

Tyhee still needs to raise significant financing to close the deal -- approximately USD $35 million -- but that may be feasible considering Sutter Creek could be producing gold within a matter of months.

"If we're able to put Sutter into production, it should generate cash flow, some of which could go into the Yellowknife project."

This isn't the first time Tyhee has approached financing their Yellowknife project tangentially through the purchase of another production-ready gold mine.

Earlier this year, Tyhee was negotiating a partnership with the Santa Fe Gold Corp. on the American company's underground gold mine in New Mexico. The deal fell through early this spring.

If Tyhee closes the deal for Sutter, the company will have approximately 73 per cent interest in the Lincoln project which lists an NI 43-101 compliant 223,044 ounces gold indicated and 458,914 ounces gold inferred resources.

Raising money for Sutter is a different prospect than for their Yellowknife gold project. Besides the difference in capital needed, the Sutter project would have a relatively quick turnaround.

"It's a different beast," Taylor said. "In this case, you're investing in a project we could put into production within a few months."

Owning a producing gold mine would also raise Tyhee's profile in the market, perhaps making the company a more stable investment option.

"It doesn't, by any stretch of the imagination, eliminate the risk (to investors), but it certainly should mitigate them somewhat," Taylor said.

In this respect, Tyhee Gold is not alone.

Fortune Minerals Inc. is ready to go to construction on its NICO mine gold-cobalt-bismuth-copper mine, 160 km northwest of Yellowknife. The project is fully permitted, but needs approximately $600 million to advance to construction.

Fortune Minerals recently closed a deal to purchase an American silver mine, both for the revenues it would generate, and for the increased profile a junior mineral explorer gains once the company becomes a commodity producer.

In the long run, an upward trend in the price of gold would probably do wonders for Northern projects, but until then, a revenue generating gold mine in California could help Tyhee advance through the remaining environmental permitting stages.

"Permitting has been slowed down because of a lack of sufficient funds to pay engineering groups to advance it as quickly as we'd like," Taylor said.

Taylor said that even if the price of gold remains depressed compared to the company's 2012 feasibility study that was based on a 36-month trailing average of $1,400 an ounce gold, that doesn't necessarily mean the Yellowknife Gold project is untenable.

"At a lower gold price you're probably not going to build the mine in exactly the same way," Taylor said. "But that by no means means that you can't build the mine."

"It just means that your model for the size, in the simplest terms, will be smaller."

"The objective is still to see Yellowknife go into production as soon as possible."