TYHEE GOLD CORP: PRESIDENT’S REPORT

...

I believe it is important to discuss the key areas that we are focusing on that we strongly believe will assist us in significantly enhancing the economics of this project. Of course, the first of these is the gold price, which has improved significantly since 2010 when a price of US$950 an ounce was used in the PFS. Simply put, a higher gold price can improve a mine by making it more cost effective to extract lower grade material by lowering our cut-off grade. Such a change may both lengthen the life of a project and increase the overall revenue generated by the project. It also directly enhances the reserve base of a project as lower grade resources may now be used in the Feasibility Study mine plan. In other words, at the end of the day, we expect to see a marked improvement in the percentage of Measured and Indicated Resources which convert to Proven and Probable Reserves.

Secondly, as an engineer who has designed and built several mines, I expect that the design of the Ormsby open pit can be significantly improved. We are currently running numerous scenarios to determine what our most profitable pit size and tonnage rate is, along with underground stope designs and the timing of when to add the underground development and production. A key result of such pit and overall production optimization would be that, not only will we be able to mine more ore from the Ormsby pit, but the “lion’s share” of production in the first seven years of the project would come from this near surface deposit without going underground or adding any ore from the Nicholas Lake or Clan Lake deposits. Of course, this would also reduce capital costs and should have a particularly positive impact on the early economics of the mine.

We are also enhancing the milling and gold recovery circuits by looking at various yearly throughput options, as well as conducting numerous batch testing procedures to further optimize recovery. The metallurgical testing is almost completed and the results will be available soon. Further, the NWT Government is currently assessing the development of a Seasonal Overland Route (SOR), which could extend from Yellowknife to the diamond mines. One such route is proposed to extend north of Yellowknife, past the hydroelectric plant at Bluefish, and within a few kilometres of the Clan Lake Main Zone. The recommendation of a route for development by the engineering firms consulting for the government is expected in March.

...