News Releases

• 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:

  • 79% recovery from existing tailings

• Positive impact of leaching on future mining:

  • ~ 94 to 97% total recovery from future mined ore

  • New tails leaching costs at < $400/oz Au

• Poised to build:

  • Production possible by summer 2011

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.

Conclusion:

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 selection.

Table 1: Summary of Economic Results by Case

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 Fork Mine

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 surface.

The Plan

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 drilling.

The Company's project development plan will be presented in three key documents as follows:

1. An NI 43-101 compliant resource estimate incorporating all results of prior mining and diamond drilling campaigns (to be released early October 2010)
2. PEA #1, detailing the completion and operation of the cyanidation plant (this Study)
3. PEA #2, detailing the resumption of underground mining

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 this release.

Figure 4:        Tailings Pond (Looking North)

In 2007, 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 Table 4).

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.

Operating Plan:

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 mill.

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:
 

Predicted gold recoveries from the existing tailings for the four cases are shown in Table 3.

Table 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:

Permits

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)

Schedule

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 Option ($000)

Only new 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% contingency

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 costs.

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.

Sensitivity

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 prices, however.

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%) varied by
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 12.

Table 12: Estimated Incremental Costs for
Leaching New Ore Based on Prior Mining Campaigns

Process Selection

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.

Recommendations

1. Establish the availability of suitable used equipment. Note that option selection could be affected by pricing and availability in the used market.
2. 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 tailings sample

    

3. 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.
4. 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 design.

Path Forward

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 following activities:

• Secure the necessary funding to complete the cyanidation installation based on Case A ($7.6 M)
• Continue with metallurgical testwork as described above (estimated at $50,000)
• 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

No additional 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,

"Richard Goodwin"

Richard Goodwin, P.Eng
Vice President, Mining
 

Certain information regarding the Company including management's assessment of future plans and operations, may constitute forward-looking statements under applicable securities laws and necessarily involve risks associated with mining exploration and development, volatility of prices, currency fluctuations, imprecision of resource estimates, environmental and permitting risks, access to labour and services, competition from other companies and ability to access sufficient capital. As a consequence, actual results may differ materially from those anticipated in the forward-looking statements. A feasibility study has not been completed and there is no certainty the disclosed targets will be reached nor that the proposed operations will be economically viable. The TSX Venture Exchange or its Regulation Services Provider have not reviewed and do not accept responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management. We seek safe harbour.