Not so long ago on Stockhouse.com, 17 "Reasons" were listed as to why we should be "concerned" over Tyhee.

http://www.stockhouse.com/Bullboards/MessageDetail.aspx?p=0&m=27410284&l=0&r=0&s=TDC&t=list

I asked Dr. David R. Webb, Tyhee's CEO, what he thought about this. Here, paraphrased, is what he said:

Firstly, he wrote me this summary for the sake of a perspective.

The “List” and Dave’s comments follow this summary:

'Almost a decade' must refer to the eight years Tyhee has owned the initial assets (Discovery Mine and Nicholas Lake Claims, or the seven years Tyhee's been active on the project. On acquisition Tyhee had approximately 500,000 ounces in resources, now Tyhee has 2.1 million ounces with approximately 350,000 ounces on Clan and Goodwin. Reserves can only be reported after a prefeasibility or feasibility study, or once in production. All employees and consultants get paid.

Tyhee has claimed to have discovered some gold, but never claimed to have found all gold. Nicholas Lake had been discovered in the 1940’s and abandoned as a low-grade single vein. Webb discovered these old showings, identified greater potential and optioned the property to Chevron who JV-ed with Athabaska who sold to Royal Oak who went into CCAA protection, all the while completing drilling, geophysics, and some ramping and underground work. Fred Giauque discovered gold at Discovery and sold to Discovery Mines. A separate group of claims south of this were sold to Ormsby Mines Ltd. Discovery developed a high-grade quartz vein in metasedimentary rocks, and several large but low-grade stope within altered volcanic rocks. This provided for 1 million ounces of production. Ormsby Mines completed some drilling and no underground work. They ended up selling their package to Discovery Mines. A long drift on the 900 foot level tested the sedimentary rocks at the northern end of the Ormsby property with no success. In 1992, New Discovery Mines Ltd (NDM) (50% owned by D.R. Webb) acquired the Discovery and Ormsby claims and optioned these to GMD Resource Corp. GMD drilled stope extensions at Discovery, but quickly refocused 2,000 metres to the south where Ormsby Mines had drilled. While under option and directed by NDM, discovered substantial gold peripheral to the quartz veins targeted by all other explorers. GMD earned a 100% interest in the claims and completed a short underground program in 1995 included <100 m of ramp. In 2001 Tyhee purchased the GMD interests and consolidated the land for the first time by acquiring the Nicholas Lake Property as well.

In January 2001 the price of gold was $260 per ounce.

The price of gold approached $350 per ounce in 2003 and an initial NI 43-101 resource study, published in August 2003 by independents Dupre and Giroux, calculated a series of options, including a bulk mineable resource (low grade using a 0.5 gpt cut-off (approximately $5.55 per tonne)) as well as a higher-grade under ground resource (using a 5 gpt cut off (approximately $55.50 per tonne). Tyhee reported both but selected the higher-grade option to headline its assets (504,000 M&I ounces plus 400,000 inferred ounces). In October 2003 an independently completed scoping study recommended a limited underground program to assess the higher grade resources.

The price of gold moved above $400 per ounce in 2004 and in May, 2004 Tyhee received another independently produced NI 43-101 report from Dupre and Kirkham, using a 5.0 gpt cut-off ($65 per tonne) identifying 700,000 ounces of M&I gold and 640,000 ounces of Inferred gold at Ormsby. The previous resource estimate on Nicholas Lake (215,000 ounces M&I plus 72,000 ounces inferred) was not recalculated.

The price of gold moved to just below $450 per ounce in 2005 and in March, 2005 Tyhee received an NI 43-101 report produced by Bullis, Pratico, Stewart, and Kirkham. All except Pratico were independent. Using a 3.5 gpt cut-off at Ormsby ($50.75 per tonne) and 5 gpt at Nicholas Lake ($72.5 per tonne) the combined M&I resource moved to 1.05 million ounces of gold plus a combined 426,000 ounces of inferred gold.

In 2006 the price of gold moved to over $600 per ounce and Tyhee received an NI 43-101 report from Bullis, Pratico and Kirkham. Again, all except Pratico are independent. Using a 1.5 gpt cut-off at Ormsby ($29 per tonne) and a 2.5 gpt cut-off at Nicholas Lake ($48 per tonne) the combined M&I resource moved to 975,000 ounces of gold plus an inferred resource of 975,000 ounces of gold.

In 2007 gold moved to over $650 per ounce and in March, Tyhee received an NI 43-101 report from Pratico. Keeping the same cut-offs ($31 per tonne for Ormsby, $52 per tonne for Nicholas Lake) the combined resource moved to 932,000 ounces of M&I gold plus 500,000 ounces of inferred gold.

The price of gold started a rapid assent in August 2007 to reach over $800 by the end of the year. In August 2007 Tyhee completed an NI 43-101 report authored by Pratico and using a 1.25 gpt cut-off for Ormsby and Bruce ($700 per ounce provided for $28 per tonne rock). Nicholas Lake still uses the previous resource figures by Bullis et al (2006) and a 2.5 gpt cut-off for $56 per tonne rock. Combined M&I resource moved to 1.2 million ounces plus 353,000 ounces inferred.

The price of gold averages $880 through June 2008 when Tyhee receives a revision of the Nicholas Lake resource via an NI 43-101 report by Pratico. The cut-offs on Ormsby and Bruce remain unchanged, the cut-offs on Nicholas Lake move to 1.1 gpt ($31 per tonne). There is a modest change to a combined M&I of 1.27 million ounces plus inferred gold resource of 374,000.

A preliminary assessment is filed in September 2008 with gold prices averaging $800 per ounce, but using $750 per ounce by Fier, Winckers, Kaehane, and Pratico. All except Pratico are independent. The economics are robust from a combined open pit and underground operation, using the June 2008 resource estimates.

In December 2008, gold prices are recovering from sub $800 to reach above $850 per ounce again. Using the same cut-offs as used in June 2008 and September 2008 resource calculations, Pratico reports 1.6 million ounces of gold in combined M&I and 178,000 ounces of combined Inferred resources.

In March, 2009 details from drilling at Goodwin and Clan Lake are received, the gold price is above $900 per ounce and Tyhee receives an NI 43-101 report from Pratico in March, 2009. The addition of Clan and Goodwin bring the total resource to 1.85 million ounces of M&I gold plus 269,000 ounces of inferred gold. The cut-offs now equate to $37.50 per tonne for Ormsby, Bruce, Goodwin and Clan, and $33 per tonne for Nicholas Lake.

..................................

Now, here's the Stockhouse list (in italicized letters), and Dave's paraphrased responses (in emboldened letters):

1. TDC claim to have discovered all of this gold but in reality both the Ormsby and Nicholas Lake properties already had years of exploration including hundreds of thousands of meters of drilling as well as ramps and underground drifting prior to being acquired by TDC. In fact, a good part of the reported Clan lake resources may in fact be a part of the reported 600,000 ounces of ‘historical resource’.
   1. Tyhee has not claimed to have discovered all of the gold. See the above history. There was no underground work at Nicholas Lake nor Ormsby prior to Webb’s involvement. The Clan Lake work preceded Webb’s involvement. The historic resource at CL was a factored resource estimated to a depth of 1,000 metres incorporating the Core Area (Main Zone). Additional potential not considered in the Historic Resource included the Pond and 330 Zone. Tyhee has drilled the Main Zone (Core Area) to a depth of 300 m and identified 250,000 ounces of gold in an Indicated Resource. Tyhee has not incorporated the Pond Zone or 330 Zone, and has identified the Cranberry, Morel, Iceberg and Cub Zones. The last four zones need substantial work before resources can be estimated. These zones were not known to exist to the authors of the Historic Resource.

1. The Yellowknife gold project has been worked by many companies prior to TDC and all have walked away. Why? Hmm. Guess TDC are smarter than everyone else. I will give them this: they continue to flog moose pasture and collect consulting fees, options, advance royalties etc which keeps them quite comfortable in their Vancouver residences.

a.The Yellowknife Gold Project used to consist of the Nicholas Lake Property and Discovery Mine Property. It now includes the Clan Lake and Goodwin Lake Properties as well.

b.

1.The Nicholas Lake Property was in the last 50 years owned by:

1.Tyhee

2.Webb

3.Royal Oak Mines

4.Athabaska Gold Resources

5.Chevron Minerals

None of these owners walked away.

1. 1. 1. The Discovery Mine Property was in the last 50 years owned by:
         1. Tyhee
         2. GMD Resource Corp.
         3. New Discovery Mines
         4. Rayrock Mines.

None of these owners walked away with the exception of Rayrock Mines.

1. 1. 1. The Goodwin Lake Property was in the last 50 years owned by:
         1. Tyhee
         2. an arms length Yellowknife-based businessman whom had acquired the claims by staking.
         3. GMD Resource Corp.
         4. an arms length Yellowknife-based businessman whom had acquired the claims by staking.

None of these walked away from the property

1. 1. 1. The Clan Lake Property was in the last 50 years owned by:
         1. Tyhee, acquired by staking
         2. Treminco Resources
         3. Yellowknife Gold Syndicate
         4. Noranda
         5. Canamax
         6. Precambrian Shield Resources

None of these walked away from the property with the exception of Noranda, Canamax, and Precambrian Shield Resources

Fees to consultants and employees are paid as is industry norm. Not all consultants and employees have Vancouver residences. Some live in the NWT, Alberta, Saskatchewan, Nova Scotia, Newfoundland.

1. Over the past decade TDC have reported resources at separate times for high grade underground gold mines; low grade, high tonnage open pit mines; and apparently now as both low grade surface and underground mine potential. TDC keep changing interpretation of Ormsby and have not followed a single, unique model despite having an ‘extremely qualified’ leader in DW. It is not just changing price of gold, but the fact that TDC seem to change their minds all too frequently. This could reflect capability issues.
   1. The price of gold has quadrupled over the past decade resulting in different cut-offs and mining plans to accommodate these changes. There is one unique model at Ormsby that can best be described as a large low-grade gold-enriched domain with variable grades containing numerous discontinuous high-grade domains. Mining cut-offs are determined by totaling all costs to recover gold vs. the net revenues from that recovered gold, plus any other significant payables. For example outcropping mineralization with no strip could be mined at costs to $5 per tonne, plus any waste removal costs (strip) Processing could cost around $26 per tonne including G&A and tailings assuming certain size operation and may recover 95% of the gold. Therefore some open pit material might cost $31 per tonne to mine and process which at 95% recovery requires a gold content of $32.60 to break even.

It can get more complicated when waste removal is taken into account as one tonne of stripping would add another $4 to the break even costs, increasing it to $36.60 (about 1.52 gpt of gold at $750 per ounce or 1.2 gpt of gold at $950 per ounce. HOWEVER, if that tonne of waste which must be mined to get at the ore contains sufficient gold to pay for the recovery process ($26 x 95% recovery or $27.40), then it ceases to be waste and could be processed if the capacity exists to process it and recover a nickel of value).

This is to say, the cut-off value is an engineered value at reflects not only the price of gold, but assumptions on mining and milling possibilities. Prior to the prefeasibility stage, the CIM best practices guidelines requires one to use a figure that MAY be economic under reasonably foreseeable conditions. As it is reasonably foreseeable to se a 950 gold price, we really could trim this a bit, but as we’re at the PFS stage, we’ll allow current engineering practices to set these numbers.

1. TDC produced a PA which was called a Scoping Study back in 2003. It was based on small, high grade underground mines that were not considered to be economic. This report is available on Sedar as are a host of resource estimate reports (sometimes twice a year!) that often show increased gold ounces but when checked in detail are mainly a result of lowering cutoff grade.
   1. The 2003 report is terribly out of date. Several tens of thousands of metres of diamond drilling, underground development, bulk sampling, metallurgical studies and more have rendered the old reports out of date.
   2. Common practice in resource work is to revise figures when there is sufficient data to suggest the old resource is out of date or incorrect. Such triggering events might include a major drill program, and bulk sample, and underground exploration program. These should precipitate a resource revision.

1. The latest study took almost 2 years to prepare and still is considered to be quite preliminary. What have TDC been doing? Seems like they have been avoiding preparation of a prefeasibility report which would have to address real costs, reserves and the like. This is not a sign of aggressive management.
   1. The PA took a long time to complete and is quite preliminary. As Tyhee keeps adding ounces there is a desire to change the production profile. Detailed work such as engineering a tailings containment facility including all dams and treatment facilities is expensive and time consuming. Likewise, geotechnical drilling to model the pit slopes, underground support plan, and processing facility foundations are expensive. The permitting process in the NWT guides operators on what may or may not be done. For example, the dyke at Diavik underwent several modifications before, during and after the prefeasibility work and during the permitting process. These plans and costs must be considered in a PA as well as a PFS.
   2. Tyhee’s resources have been prepared by exclusively independent qualified persons in 2003 and 2004. In 2005 and 2006 Tyhee’s resource was determined by independent qualified persons with a contribution by Tyhee’s chief geologist. In 2007, 2008, and 2009 further revisions to the resource were completed by Pratico and for the PA these were reviewed and approved by independent qualified persons.
   3. A prefeasibility study will address all costs and reserves as they have been done in the PA, but to a higher degree of precision.

6.The 2008 Preliminary Assessment (PA) indicates that 1.1 million ounces of gold can be produced from the YGP. The study provides little detail on mining to support this and in fact states simply that it allocates 25% of resource to surface mining and 75% to underground mining. Sheesh. This comment has no place even in a preliminary study, especially one that boasts that it has ‘robust’ economics.

a.The PA used whittle pit modeling to determine surface mining options for waste and ore, and the sequence of each block. The cost figures were provided by independent contractors as poled by the independent engineers. These same engineers, which cumulatively have many decades of experience in operations both as employees to mine managers and as contractors including decades of work in the NWT have used there own best judgment in these and the underground operating costs, milling, power, capital costs etc.

7.The PA says average gold production will be 165,000 ounces a year but gives no annual production figures for tons and grade. While open pit mines should be able to provide enough mill feed to maintain 3000 tons a day, the proposed pit grade would only produce about 85,000 ounces gold. And since it is doubtful that two small underground mines could maintain the level of production required to keep a 3000 tpd mill operating, even under a high grade scenario with underground ore better than 5 grams a ton, we would expect maximum 110,000 ounces gold production. With the reduced gold production it is doubtful that the project would be economic

a.The PA discloses all relevant information in as much detail as is relevant. More precision on the figures is like saying it is about 3.4597 miles to the store down the road, when about means +/- 25%. Better just to say 3 miles +/-25% rather than mislead someone with precision that is not relevant.

b.It is agreed that two small underground mines are unlikely to be able to produce 3,000 tpd. Tyhee is planning on having at lease one large underground mine, a more modest underground mine, and open pit operations. There are many of these in existence, many with mining costs under $50 per tonne. At a 2.5 gpt cut-off the Ormsby Zone average resource grade is 5.55 gpt and Nicholas Lake averages 6.16 gpt. You do the math.

8.The PA says mining will start with open pit mines and then proceed to underground operations. Both the existing Ormsby ramp and Nic Lake ramp will be mined out by their respective pits yet there is no indication in the PA that new and costly ramps and underground mine development have been included and must be completed prior to exhaustion of the pits. To prepare an underground mine that is below an open pit requires extensive ramping and raises for ventilation and for a daily production rate of 1500 tons the typical cost should be at least $50 million. For 2 mines that works out to plus $100 million. It looks like this is not included in any of the reported costs. Result = disaster.

a.This is a misstatement. The PA clearly has substantial underground development costs that have been incorporated into the plan.

9.The PA clearly admits that dilution and mining recovery have not been included and goes on to explain that the impact would be minor. In reality these factors typically reduce average grade, annual gold production and overall total production and therefore increase operating costs. The grade models that TDC show on their website clearly demonstrate that mineralization at the cutoff grade used is not continuous except for small units that could not be practically mined. Going to larger mining units will add an amount of dilution that will handicap all aspects of the planned operation.

a.The PA considered dilution and mining recovery and upon examination determined that the impact would be minor. The grade models Tyhee shows on their website clearly shows very large continuous blocks of mineralization above the cut-offs (the smallest being 50,000 tonnes, and the larger being in excess of 500,000 tonnes) surrounded by decreasing grades such that the sub 2.5 gpt material is surrounded by 2 gpt material which in turn is surrounded by 1.5 gpt material and so on. 500,000 tonnes of 5.5 gpt “ore” diluted by 100,000 tonnes of 2 gpt “waste” will yield 600,000 tonnes of 600,000 tonnes of 4.92 gpt broken rock. If the mining cost of $30 per tonne is applied to the 500,000 tonnes for $15 million to extract 2750 kg of gold and we use $26 per tonne to process it ($13 million) as opposed to the diluted tonnage giving us 2950 kg of gold in 600,000 tonnes and it costs $15.6 million to process it. So at 20% dilution, we would end up with 7.3% more gold for about a 9.3% incremental cost.

10.The PA indicates average mining costs of $390US an ounce. There is no annual detail provided, only average costs even though mining progresses from pit to high cost underground. Most major gold producers with higher grades than TDC and much higher production levels, and in better locations, have recently reported production costs in the $400 to $500 per ounce gold range. TDC plan to develop and operate what will be in essence 4 relatively small mines: 2 surface and 2 underground. The property is accessible for only a relatively short timeframe by a winter road. Will TDC really better Barrick and Agnico and others? Expect a feasibility study to arrive in the plus $500 an ounce cost range.

a.Again, our engineering consultants decided not to be overly precise about an estimate. This is the correct and intelligent thing to do. Costs do indeed vary as one goes from open pit to underground or as open pits evolve. Everyone in the business knows pit costs increase with depth, so what starts out very profitable is reduced as one goes deeper until the economics of the UG operation supersede that of the pit.

b.Tyhee is blessed with very large resource blocks distributed along a major structure at Ormsby. This leads to reduced costs and more ounces per vertical metre which is a major advantage. Be sure you are comparing direct cash operating costs to direct cash operating costs. Some companies will add in depreciation, amortization, and other non-cash costs

c.The property is accessible year round with winter road access on a seasonal basis.

11.TDC suggest the PA generates “robust” economics but does not provide the typical spreadsheet of annual production and costs for review. Omission of this key information is troubling.

a.Look for more detail in a PFS. Details in a PA are not required to be presented.

12.TDC’s own staff geologist has been solely responsible for producing Resource reports. TDC’s July 2008 news release claims the PA (including the resource estimate) was prepared by Independent Qualified Persons. TDC’s geologist states in the PA that he is clearly NOT independent. This raises a major concern as to why TDC did not have an independent geological review and resource estimate as is customary when producing a PA or any feasibility study report.

a.Tyhee’s own staff geologist has been responsible for three of the past seven resource reports, one of which was audited by independent engineers and approved.

13.TDC’s executives receive remuneration as “consultants”, not employees. DW has clarified that this is to avoid liability. Huh? So what we have is a company that is run by consultants who then engage and pay themselves. Something doesn’t quite seem right about this. Where’s the accountability?

a.Tyhee’s executives provide consulting services through consulting companies as is common with most junior mining companies. This puts a level of protection in for the junior company as labour laws prohibit the hours that most executives work, provide for director guarantees of salaries and statutory withholdings and minimum holidays. It is considered to be in the best interest of the company to have these provisions in place. I’m certain the employees would love to have pensions, medical, dental, and pharmaceutical benefits as well as holidays included in their compensation packages.

14.TDC is a company that changed its name from Mongolia Gold Resources, largely after its Mongolian gold mine was ‘appropriated’. Old news releases claimed they had a “world class” gold deposit in Mongolia with resources totalling 25 million tons at a grade of 1.6 grams per ton, equivalent to 1.3 million ounces. In anyone’s books that doesn’t come close to world class. Hype seems to be ingrained into TDC’s news releases – and usually with little substance.

a.Tyhee developed a gold mine in Mongolia, and had numerous exploration permits and joint ventures including the Dornod Mine. Like the current owners of today are finding out (see Khan Resources, Western Prospector etc, these licenses and permit were “expropriated”. Mongolia has tremendous potential, certain “guarantees” where offered by the government, but perhaps the previous management got caught up in the excitement. In the 1980’s a million ounces was something, in the 1990’s not so much.

15.Timelines for development of the mine were not included in the PA. Seems just about every timeline TDC announces, like when the PA would be issued, or when financing would be completed, are not met. Probably a good idea there is no timeline for mine development.

a.Timelines will be provided when they are known. If they are not known, Tyhee won’t guess.

16.Hydro power is the selected option in the PA but since water levels in area are typically unreliable, TDC would still have to install diesel generators plus pay for the new power line – so no gain. Despite using the hydro power option, TDC have retained the large diesel fuel tanks in their plan. Contradiction to be sure, but this time it becomes a positive.

a.The PA says hydro would be the preferred plan, but all costs and estimates are completed assuming diesel generated power. Shouldn’t there be tanks for this?

17.TDC have yet to produce a plan on time that makes sense and provides the market with reason to increase value of the company.

a.The plans and timetables for regulators to make decisions, or consultants to complete work are estimates. These are revised as needed as sometimes changes necessitate delays, such as increasing the resource may force a revision in the plan. Tough nut to swallow, but these are announced as they happen.

Bottom line, the YGP in its many forms has been worked by numerous companies, with TDC as the last for over a decade…and it has only 1 million ounces of recoverable gold according to a PA that we all know is only a guesstimate at best (+/- 35%).

Bottom line, Tyhee is the first company to consolidate the YGP as it stands today. Many companies have worked on components of this in the past and individually, it would be more difficult to make one of the zones a stand alone mine. However, in much the same way as the famous mines of the Spanish Iron Belt had been worked by the Romans, or the Silver Mines in Peru or Mexico had been mined by their natives, previous exploitation doesn’t mean it a deposit is of no value today. More recently the giant tungsten mines of the Yukon/NWT which had been drilled by AMAX and abandoned, or the Hemlo properties that had been drilled by Noranda and abandoned, or the gold mines in Ladner and Eureka counties in Nevada that had been mined prior to 1960 and then abandoned only to become some of the largest gold mines in the world. Regarding the PA, Tyhee's potential, having been examined and reported on by independent professionals just might be confirmation that something might be there.

Cheers,

Baires