Strong potential result from PEA (Case A selected):
$ 3.3 M NPV and 24% IRR
at $1000/oz gold price
$ 7.7 M NPV and 48% IRR
at $1200/oz gold price
$14.2 M NPV and 81% IRR
at $1500/oz gold price
Tailings pond contains:
92,000 tonnes at 7.87
g/t indicated resource (23,300 oz Au)
48,000 tonnes at 7.37
g/t inferred resource (11,400 oz Au)
Good recovery factors from leaching:
Positive impact of leaching on future mining:
Poised to build:
September 29, 2010. Vancouver, Canada.
Fire River Gold Corp. (TSX-V: FAU; OTCQX: FVGCF; FSE: FWR) ("FAU" or the
"Company") is pleased to announce the results of a preliminary
economic assessment (PEA) for the completion of a 250 tpd cyanidation
circuit and the implementation of leaching at the Nixon Fork Gold Mine
in Alaska's Tintina Gold Belt. The report is entitled "A Preliminary
Economic Assessment for Recovering Gold from Tailings at Nixon Fork Mine
using a CIL Process" and is prepared by George Rawsthorne, P.Eng who is
independent of the Company. This Study will be included in an NI 43-101
compliant Technical Report that will be released over the next 45 days.
The study demonstrates a potentially strong economic benefit to the
Company for all cases studied, as shown in Table 1 below. The
recommendation of the PEA is Case A, though the availability of suitable
used equipment may alter these economics to the point of changing case
Table 1: Summary of Economic Results by
Note that this is an incremental analysis,
and it is not possible to accurately incorporate taxation in this model
independent of other considerations, such as exploration expenses,
overhead costs, and taxation credits from historic exploration costs.
The Nixon Fork Gold Mine
The Nixon Fork Mine is primarily a gold-copper-silver project operated
by Mystery Creek Resources Inc. (MCRI) which is 100% owned by Fire River
Gold Corp. The Mine is located 51 km northeast of McGrath and 13 km
north of Medfra in central Alaska. It is accessed by charter plane flown
out of Anchorage, Fairbanks, or McGrath (see Figure 1).
Figure 1: Project Location
Mining on the site has been ongoing for
several years. The two most recent mining campaigns are shown in Table
2. As can be seen, the project is a low-tonnage high-grade operation.
Table 2: Historic Production at the Nixon
The mine used gravity and flotation
processes for recovery of the gold in a 150 to 200 tpd processing
facility located inside a sprung structure at site. The site is well
equipped with an 85 man camp, 1200 m airstrip, 2.3 MW power plant, an
80,000 gallon fuel farm, maintenance facility, surface and underground
mobile equipment fleets, mine dry, assay lab and technical services
offices (see Figure 2 and Figure 3). The project is also fully permitted
and a $3.6 M bond has been posted for reclamation.
Figure 2: Aerial View of Property
Figure 3: Aerial View of Nixon Fork
The mine is currently being operated as
an advanced stage exploration project with activities such as mine
rehabilitation, diamond drilling, and sampling being done at site. At
present a 28,000 m surface and underground drill program is underway
with a company drill being used underground and a contractor's drill on
The Company plans to put the underground mine and mill back into
production for both reprocessing historic mine tailings and resuming
underground mining. To that end, it is compiling a resource estimate and
preparing a mine plan. Concurrently, the Company is conducting an
extensive exploration program for the purpose of expanding the mineral
resources and increasing the confidence of the mine plan with infill
The Company's project development plan will be presented in three key
documents as follows:
- An NI 43-101 compliant resource
estimate incorporating all results of prior mining and diamond
drilling campaigns (to be released early October 2010)
- PEA #1, detailing the completion and
operation of the cyanidation plant (this Study)
- PEA #2, detailing the resumption of
Additional NI 43-101 resource
estimates will also be compiled, incorporating the results of the
2010 -- 2011 diamond drill program, but these will not be completed
in time for PEA #2.
This PEA (#1) is an intermediate step that assesses the impact of
completing a cyanidation circuit in the existing mill that was
started by the previous operator. This step is integral to the
overall plan, as it could increase combined gold recovery
significantly, from between 68 and 83% to as high as 97% (see Table
4). However, it is assessed independent of new underground
production and is based solely on the recovery of gold from the
existing tailings pond (though its impact on future mining is
evaluated and discussed). PEA #2 will incorporate the result of PEA
#1 and assess the resumption of underground mining assuming an
operating cyanidation plant.
This PEA (#1) also represents an early production scenario, as it is
possible that tailings will be reprocessed before the underground
resumes operations. It could also be considered a "minimum
production scenario" as it justifies the completion and operation of
the cyanidation plant based on positive economics for recovering
gold from the tailings independent of the outcome of the underground
mine evaluation (PEA #2).
The second study, PEA #2, is schedule for release by year end 2010.
It will be based on the October 2010 resource estimate and will
therefore not include any drill results from the 2010 drilling
program. It will represent a "starting point" for the Company, which
will be enhanced through the course of additional exploration, ore
definition, and detailed engineering which will result in a
production decision for the resumption of underground mining.
Scope of the Study
The Nixon Fork Mine had two prior operating campaigns. Both utilized
gravity and flotation methods for gold recovery (see Table 2). A
tailings pond was created during the course of these mining
campaigns (see Figure 4) that is estimated to contain 92,000 tonnes
of indicated resources grading 7.87 g/t (23,300 contained ounces)
and 48,000 tonnes of inferred resources grading 7.37 g.t (11,400
contained ounces). This resource was prepared September 27th, 2010
by Giroux Consultants Ltd. The complete estimate, including
underground resources as well as these tailings, will be included in
an NI43-101 Technical Report that will be issued within 45 days of
Figure 4: Tailings Pond
the previous operator designed, procured the equipment for, and
partially installed a cyanidation circuit in the mill. This study
assesses the viability and economic performance for completing the
cyanidation circuit and putting the operation into commercial
production by re-processing the historic tailings, although the
impact on future underground mining is discussed as well; recovery
of gold from future underground mining could potentially be
increased from 68 and 83% (see Table 2) to between 94 and 97% (see
Through the course of work, a number of optional enhancements to the
prior operator's design were detailed and analyzed for relative
capital requirement, performance and efficiency, operating costs,
and overall economic viability.
In both the prior (2005) and current (2010) Plan of Operations,
issued to the BLM in August 2010, the plan is to empty the tailings
completely through the course of the schedule, recovering the gold
through a cyanidation plant followed by detox, filtration and
disposal of the tailings in an existing dry stack (shown in Figure
5), which was constructed in 2007 (see Figure 5). This will be a
seasonal operation, shut down for the six months per year that the
pond is frozen. It will take 3.5 seasons to completely empty the
pond. When underground mining resumes, the cyanidation circuit
will be operated year-round, fed with the fresh flotation tailings
from ongoing mining, which will also be filtered and hauled to the
dry stack for disposal.
Figure 5: Existing Dry Stack
Design and Process Selection:
From 2006 to 2007, the prior operator designed, procured the
equipment for, and partially constructed a 250 tpd (227 mtpd)
carbon-in-leach (CIL) circuit as an addition to the existing gravity
and flotation processing facility. The original sprung structure for
the gravity and flotation mill was expanded by 24.4 m to accommodate
this addition. Figure 6 shows the interior of the mill; the left
portion of the picture shows the expansion for the new cyanidation
plant and the right section shows the existing gravity and flotation
Figure 6: Mill Interior - Gravity and
Flotation Mill and Cyanidation Circuit Area
The existing design (the Base Case) did
not include on-site carbon stripping -- all new and loaded carbon was
to be flown from site without recycle. This Study determined that
the economic performance of the program could be significantly
improved, and three alternate cases were developed for evaluation:
existing thickener after the cyanidation process to
recycle cyanide solution and reduce cyanide destruct
requirements; install a carbon stripping/ refining
circuit to recycle carbon plus an additional leach tank
to increase retention time.
the existing thickener plus install a new Larox filter
to increase cyanide recycle with associated reagent
costs savings; install carbon stripping/ refining
circuits to facilitate production gold bullion bars at
site plus and recycle of stripped carbon rather than
replace loaded carbon shipped offsite for gold recovery.
the existing thickener plus install a new Larox filter
for cyanide recycle and replace the carbon circuits with
a Merrill Crowe(MC- zinc precipitation) system that has
the potential to achieve higher recoveries because of
increased retention time (slurry at 45% to 50% solids
versus 40% to 45% solids for CIL).
Predicted gold recoveries from the
existing tailings for the four cases are shown in Table 3.
3: Project Gold Recovery by Case
Leaching recoveries are based on test
work performed by the Company and prior operators at PRA Labs in
Richmond BC and Phillips Enterprises LLC of Golden CO.
Recovery from ongoing mining can be predicted (subject to
future testing) by considering the two prior mining campaigns, which
had very different head grades. As shown on Table 4, recovery could
be expected to vary between 94% and 97%.
Table 4: Projected Impact of Leaching
on Prior Mining Campaigns
General arrangement (GA) drawings and
flowsheets were developed for all four Cases. A typical drawing,
representing the GA for Case A is shown as Figure 7. Equipment was
colour coded for each Case as follows:
The permits to perform this work are in place, the primary permit
being work is governed by Waste Management Permit 2003-DB0055, Nixon
Fork Mine, issued by the Department of Environmental Conservation,
Division of Water, Wastewater Discharge Program, State of Alaska on
January 25, 2006 (the WMP).
Figure 7: GA of Case A, Using an
Existing Thickener and Carbon Stripping
(click on the image above to view in PDF)
Plant construction is estimated to require five months and, as most
construction is indoors, can be completed over the winter, providing
an operational plant by May 2011. A summary schedule is shown as
Figure 8. The last construction items will be the pipeline and
pumping system for the tailings pond, as they will not be started
until the snow clears in the spring of 2011. These are shown as
critical path items on the schedule.
Figure 8: Projected Production
Schedule, All Options
A six week lag has been allowed between
the start of production and receipt of the first revenue payment.
Working capital was estimated based on this duration.
Economic Evaluation: The capital costs are presented
by case in Table 5.
Table 5: Capital Cost Estimates by
equipment was assumed and quotes were obtained for all significant
items. Labour is based on use of a construction contractor. Labour
requirements and rates are based on written quotations by two
independent construction companies.
Owner's costs and indirect costs are based on current invoicing and
current employee wages.
Contingencies have been applied in the following manner;
- Equipment and material costs
with quotations carry an additional 15%
- Labour cost quotations carry an
additional 15%. The base labour rate contains an allowance
($9.42 /hr) to cover for tool and equipment rental
- Equipment, material and labour
allowances carry 30% to cover the higher contingency on these
less defined items
- Working capital includes 30%
Despite the fact that this is a
preliminary economic assessment, the Company elected to provide
a capital estimate that was more detailed and better supported
than the minimum requirements of a lower level study. This was
accomplished by seeking quotes for nearly all new equipment,
quotes for construction labour, and by using current invoice
pricing as the basis of costs wherever possible, particularly
for wages and supplies. As a result of this added detail, the
contingency applied to the capital costs, at 21 to 23%, is lower
than may be expected in a typical PEA estimate, where an average
of 30% contingency could be appropriate.
Working capital estimates are based on 1.5 months of operating
The summary of operating costs is shown in Table 6.
Table 6: Summary of Operating Costs by Case
Operating costs were estimated from
first principles using written quotations, current invoicing and
current company wages.
Note that approximately 50% of the operating costs are
associated with reagent purchase and transportation.
The Cash flow summary is shown as Table 7.
Table 7: Cash Flow Summary ($000) at $1000/oz Gold
These cost estimates result in the
pre-tax net present values (NPVs) and internal rate of returns (IRRs)
shown on Table 1.
The Pre-tax NPV was tested for sensitivity to several factors.
In general a "conservative", "median", and "optimistic" rate was
set for each element.
The base gold price used for the study is considered
conservative at $1000/oz. Ranges of $1200 and $1500 were
also tested, representing a "current" price and "optimistic"
price. The sensitivity to gold price is demonstrated in Table 1,
which is repeated as Table 8.
Other sensitivities were tested at a conservative gold price of
$1000/oz. The trends demonstrated should be valid for all gold
Capital costs were tested for a -5% improvement on the current
estimate and a +20% overrun. Capital reductions may be possible
through the use of existing equipment, an expanded owner's crew
and correspondingly reduced contractor crew, and through
competitive bidding of equipment, as opposed to budget pricing.
The sensitivity to Capital Costs is demonstrated in Table 9. As
can be seen, the project demonstrates a positive Pre-tax NPV for
all cases and is not as sensitive to capital variance as other
factors over the ranges tested.
Operating costs were also varied from -5% to +20%. A large
percentage of the operating costs are for reagent purchase and
transportation. Deviations from the predicted levels would
therefore be largely driven by the efficiency of the various
chemical processes, particularly leaching and detoxification.
The sensitivity to Operating Costs is shown in Table 10. As can
be seen, the project is most sensitive to operating costs. As
approximately 50% of the operating costs are associated with
reagent purchase and transportation, additional testwork is
warranted to confirm and optimize reagent consumption levels.
Gold recovery has been varied from -2% to +5%, representing
conservative and optimistic levels. Sensitivity to gold recovery
is shown in Table 11. As can be seen, the project is not highly
sensitive to metallurgical recovery over the ranges tested.
Table 8: Pre-tax NPV (at 5%) and
IRR varied by Gold Price ($000)
Table 9: Pre-tax NPV (at 5%)
varied by Capital Cost ($000) at $1000/oz Au
Table 10: Pre-tax NPV (at 5%)
varied by Operating Costs ($000) at $1000/oz Au
Table 11: Pre-tax NPV (at 5%)
Metallurgical Recovery ($000) at $1000/oz Au
Impact on Future Mining
Beyond the immediate financial recovery from the residual gold
in the tailings pond, the cyanidation plant would also
positively impact ongoing mining operations by increasing gold
recovery from 68 to 83% with gravity and flotation processes to
as high as 97% (see Table 4) with only incremental additional
costs. These are estimated based on the two prior mining
campaigns to be between $317 and $369/oz Au, as shown in Table
Table 12: Estimated Incremental
Leaching New Ore Based on Prior Mining Campaigns
Based on the analysis work, whether the gold in solution is
recovered onto carbon (CIL) or by zinc precipitation (MC) will
be determined after further evaluation of the availability of
used equipment and ongoing testwork.
The plan would be to sequence the construction to provide for
operation with the Case A circuit (cyanide recovery thickener
only) and gold recovery from solution by either carbon or zinc
precipitation. The addition of a filter (Case B or C) for
cyanide recovery would be completed after evaluation of plant
operation and /or availability of suitable used filters.
- Establish the availability
of suitable used equipment. Note that option selection could
be affected by pricing and availability in the used market.
- Additional testwork is
needed to provide further direction for the project ;
- Establish the impact of
finer grind on recovery versus retention time and
dewatering rates (thickening and filtration)
- Complete cyanidation
destruction tests in conjunction on the solutions above
- Complete cyanidation
tests including thickening, filtering, and detox on a
split between the finer and coarser fraction of the
- The use a pressure
filter in the cyanide recovery circuit (Cases B and C)
needs to be reviewed as the lower moisture content
provided by pressure filtration may not be optimal based
circuit water balances.
- Selection of Case A does
not preclude future modification before or after
commencing production from the cyanidation plant and the
mine operators should consider ongoing enhancement to
The Company plans to complete the cyanidation
plant and put the property into production for
re-processing the historic tailings, independent of the
timing of resuming underground mine production.
To accomplish this, the Company will engage in the
- Secure the necessary
funding to complete the cyanidation installation
based on Case A ($7.6 M)
- Continue with
metallurgical testwork as described above (estimated
- Commence detailed
engineering for final design of the selected process
(estimated at $75,000)
- Identify and procure
the equipment and materials necessary to complete
the build, including an extensive search for
suitable used equipment
- Increase staff to
manage the construction program
- Assemble a
construction team, which will be a combination of
owner and contractor personnel
feasibility analysis is planned for the cyanidation
plant, though optimization will be ongoing during
construction and into operations. It should be noted
that the company's decision to proceed without a
feasibility study represents a higher risk, as no
reserves have been identified and the economics of
this project are preliminary and not definitive.
The Independent QP for the PEA is George Rawsthorne,
P.Eng. The Qualified Person for this press release
is Richard Goodwin, P.Eng.
The PEA will be incorporated into a Technical
Report, which will be filed on SEDAR within 45 days
of this release.
On behalf of the Board of Directors,