A draft I was working on and waiting for more research had been posted by mistake. It has been deleted.

Tyhee has announced that it has agreed to issue shares against warrants issued during a previous placement.

http://www.tyhee.com/news/documents/1002WarrantV3.pdf

I was surprised by the announcement and thought it was not a good news story. Following the previous financing -December 2009- and the press releases issued I was convinced Tyhee would not need more cash for at least 6 months. The flow through financing -very special financing used by juniors Canadian companies- had to be used for CEE (Canadian Exploration Expense) and Tyhee said: "Today’s closing brings..... into the Company for investment into its wholly-owned Yellowknife Gold Project and will allow for an aggressive diamond drill program to start in three weeks”. The 3.878 millions collected were in my opinion (and still is !) enough for the winter's exploration program.
The PFS, DAR, permit costs...were, I thought, covered by the July financing (even if Tyhee had to reduce the offering due to very difficult market's conditions.).
In one word: Tyhee was covered and would not need to go for more cash before June/July 2010. This was good because I expected the share price to increase following the publication of the PFS, new resources announcement, increase gold price...

I was wrong! Tyhee needed more cash for G&A (General and Administrative expense), engineering expenses, capital cost...not payable with the flow through financing. So the board decided to raise more cash. The decision must have been very difficult. The share price was coming down following the sharp drop in the price of gold. So the board decided to convince warrants holders (from the July 2009 financing) to exercise their rights. How do you do that? By giving them free warrants (1/2) exercisable at the same date (July 15, 2011) at a low exercise price($.25). So if all holders decide to exercise their rights, Tyhee will collect $3154500. Enough for no financing until at least September 2010. The press release indicates that 9 out of 12 holders have agreed to participate.

Pros and cons of this operation for Tyhee:
PROS:
+Tyhee get the cash and should have enough to last until September 2010 minimum.
+There is no dilution with the exercise of the July 2009 warrants. They are already included in the fully diluted share capital. Since these warrants were not exercised yet, the cash did not appear on the balance sheet yet.
+The new warrants are worth $2628750 if fully exercised. The offering is worth about 20% more than the share price and about 55% more than the December offering. (20cts flow through worth about 16cts non flow through)
+When the financing is completed, we should see an increase in the share price reflecting the new "in the money" target (25cts)
+Tyhee will be able to "advertise"the cash available, making it more attractive to new investors.
CONS:
-The new warrants issued with this financing (maximum of 10515000) will have to be added to the total of fully diluted shares. I put this on the CONS side but if Tyhee had decided to go the regular way with a new financing the number of shares and warrants issued would have been higher (the price/share would have been lower -20cts instead of 25cts?- and more warrants would have been issued.
-The holders of these new shares would have twice the number of shares in their hands and have almost got their money back with the first financing (July 2009), As soon as the share price reach 25cts that will be able to get their whole investment back by selling 50% of their holdings. This could put pressure on the share price. However these are professionals and they will be cautious selling their shares.


Why would holders choose to exercise now and what could be the effect of this placement on Tyhee share price?

First, there is a holding period of 4 months, meaning that they can not sell their shares before the middle of June 2010.

Second, they expect the share price to hold at this level but more certainly to increase well above 22cts. If you agree to pay 15cts NOW it is because you expect the share price to go up in the near future, so you can either sell everything and make a very good profit or sell part of your investment to get your money back and let the balance enjoy the ride risk free.

Third, there is always the risk to see some holders using their cheap share price to short Tyhee. I do not know who these subscribers are but based on the terms of last July financing, it is a risk you have to keep in mind...after June/July 2010.

Four, it is my opinion that we will see a very difficult stock market before the summer and what we are seeing with this private placement could be the so called "smart money investors" positioning themselves for easy cash during the summer's crisis.

We just have to wait for more news shortly...

Hubert

B