There has been some hype at one of the investment sites I frequent over a gold junior called Premium Exploration (ticker PEM on the TSX). I did a little bit of analysis and comparison to Tyhee.

Tyhee's current total Resources (as listed in the PFS) is:

measured - 482,000 oz
indicated - 1,465,000 oz
inferred - 269,000 oz

Out of this resource pool of 2.2MM, Tyhee has Proven and probable reserves of 811,200 oz @ 3.34g/T.

Premium Exploration only has an inferred (not even measured or indicated!) resource of 549,000 @ 0.5 g/T.

But when you bump up the grade to 3.35 g/T to try to compare apples to apples you only get 56,000 inferred ounces. What this means is that to get that full 549k ounces out of the ground, the costs are going to be a fortune for only .5 g/T.

And the market cap of PEM is double that of Tyhee! Tyhee is superior to Premium Exploration in every aspects, and also about 2 years ahead of PEM.

So I asked Dave Webb some questions about Tyhee's ability to turn that 1.4MM ounces of resources into reserves. His reply was:

"We intuitively know more resources will become reserves at higher gold prices, but the definitions require a full engineering study to actually determine if this is in fact the case.

For example, with average mining costs of US$32.77 (from Table 4, page 3 of the PFS) and processing and G&A costs of US$12.37 and US$3.96 respectively for a total costs to mine and process one tonne of ore from the Ormsby open pit (on average) of $US49.10. This means if a rock contains less than US$49.10 worth of recoverable gold, then it should not be mined. As recoveries are 92%, then the rock must contain at least US$53.37 worth of gold (49.10/0.92). At US$950 per ounce (US$30.54 per gram), the rock needs more than 1.75 grams of gold per tonne on average to make money. Anything less should be left in the ground.

What really makes this interesting is when a rock contains say 1.5 gpt gold must be mined as waste to get at rock that might contain 2, 3, or 4 gpt gold (i.e. ore). The 1.5 gpt waste rock now has all of the mining costs incurred and it is in a truck ready to be dumped in the waste pile, HOWEVER, the incremental cost to process it and recover the gold is only the milling and G&A ($12.37 and$3.96 respectively). So now, all of a sudden this rock that was not economic to mine and mill, becomes valuable because it contains $45.81 worth of gold ($42.15 worth of recoverable gold (45.81 x 0.92% recovery) and will only cost and additional $16.33 to process.

At $1,250 gold ($40.19 per gram), we could be profitable mining any rock containing more than 1.33 grams of gold per tonne.

Dave"

Folks, we are already past $1250 gold and 1.33 g/T cutoff for profitability should be easily achievable as most of Tyhee's grades are in the 3.0g/T or higher. Dave Webb is a real class act and I have no doubt the reserves at Tyhee are grossly understated, especially at these higher gold prices!