Spokane-based Goldrich Mining Co. says it has signed a letter of intent to create a joint venture with Alaska-based NyacAU LLC to bring a deposit in Goldrich's Chandalar properties in Alaska into production.

Under the letter of intent, NyacAU has agreed to fund a package of loans and equity that are estimated to total about $8.5 million, subject to the timing of production, to cover costs such as start-up, capital expenditures, equipment, and drilling, a company press release says.

The loans are to be repaid from future production. The release says NyacAU is owned by the family of Dr. J. Michael James, an Anchorage-based physician and business owner, and that same family also owns Nyac Gold LLC, one of the largest producers of placer gold in Alaska.

Goldrich describes placer as minerals that are found in river sands or gravels, or hosted in soils, alluvium, or up to six feet into associated bedrock.

Goldrich's primary asset is a hard-rock exploration project within the Chandalar gold district, where the company has 437 acres patented for mining claims. Those claims are on state property, located about 190 miles north of Fairbanks. Terms of the letter of intent with NyacAU ensure that Goldrich will retain access to all of its properties for exploration purposes.

In a company press release, CEO Bill Schara says the agreement allows for the steady buildup of cash flow, helps support Goldrich's primary hard-rock exploration project at Chandalar, and funds start-up of an idle secondary property.

Subject to permit requirements, the placer production could begin by June 2013, although it might start as early as this summer, Goldrich says. It says the placer deposit could have an eventual production of about 10,000 ounces of fine gold per season, which in Alaska is generally mid-June through mid-September. That amount may go up significantly if a second wash plant is put into production, the company says.

Based on drilling of the placer to date, Goldrich estimates the mine life to be about 25 years.

As part of the agreement, Goldrich and NyacAU will form a 50-50 joint venture to operate the placer mines, with NyacAU acting as managing partner. Once all loans are repaid and working capital and budgeted reserves are established, profits from the placer production will be paid out equally between the two partners, Goldrich says.

The joint venture company will lease the mining rights to placer gold on Goldrich's Chandalar properties, but a formula will allow for Goldrich to buy back these rights if the property is needed for hard-rock mining, or if exploration significantly interferes with placer mining.

Through the joint venture, James, as manager of NyacAU, will receive 300,000 five-year Goldrich stock options at an exercise price of 20 cents per share from Goldrich's employee stock incentive program, the company says.

Last summer, Goldrich raised about $2 million in a private placement of its common stock to use toward financing a hard-rock drilling gold exploration program at Chandalar and also for general operating expenses. Its private placement that closed May 31 included the selling of investment units consisting of stock and warrants, which offer the right to buy additional shares at a later date and at a set price.

Goldrich is a publicly-traded, exploration-stage company. Formerly known as Little Squaw Gold Mining Co., it has been in business since the late 1950s. Schara became CEO in October 2009. The company says the Chandalar district is where gold was first discovered in the region in 1905.

Goldrich says it has found evidence of a gold-producing site about five miles long by about 1,800 feet wide that may have the potential for a large, bulk-tonnage gold deposit. Goldrich completed a test mine at Chandalar in 2009 and began its first step in commercial production there in 2010, producing about 1,500 ounces of gold.