Fire River gets PEA on Nixon Fork

Capital costs to resume production at Fire River Gold‘s (FAU-V, FVGCF-O) flagship Nixon Fork underground gold mine in Alaska are estimated at US$6.3 million, with a projected payback of three months, according to a preliminary economic assessment (PEA) conducted by Snowden. 

The PEA focused on the resumption of underground mining and processing with a production rate of 150 tonnes per day, and found that the mine’s current resource is large enough to sustain that production rate for two years, with an average mined grade of 30.1 grams gold per tonne using an average cutoff grade of about 15 grams gold.  

The mineral inventories used in the PEA were based on a 2010 resource estimate, but did not include results from ongoing definition and exploration drilling in 2010 and so far this year.

Based on the current resource estimate, however, Snowden determined that there is potential for profitable operations from the first 24 months of production.

At a gold price of US$1,200 per oz., the project delivers an internal rate of return of 549% and a net present value of US$60.9 million on an undiscounted cash flow of US$64.3 million over the first two operating years.  

Operating costs are estimated to be US$434 per tonne or US$447 per oz. for the first two years of operations.

The forecast was prepared with a “high grade early” strategy. During the first year, mining only occurs in the 3000 and 3300 zones of the Crystal mine. The Mystery mine starts producing in the eighteenth month.

Capital requirements are low because of existing infrastructure, facilities, and equipment. The primary requirement is working capital, making up 60% of the estimated capital requirement. Annual sustaining capital was included at 2.5% of the start-up capital requirement.

In addition, revenues from copper and silver were not included in the PEA due to lack of support for a resource estimate for the two metals.

Prior to this PEA, the company completed one in September 2010 that examined the viability of completing a cyanidation circuit to recover gold from an existing tailings pond and increase overall gold recovery from future mining.

Fire River Gold started building the cyanidation circuit in January and it should be completed by this summer. 

The second PEA did not incorporate resources contained in the historic tailings pond (92,000 tonnes of indicated resources of 7.9 grams gold and inferred resources of 48,000 tonnes at 7.4 grams gold), nor did it include the financial benefit of recovering the gold from these tailings through the cyanidation circuit, as outlined in the earlier PEA completed in September.

Fire River plans to combine the results of the two PEAs as components of an internal operational mine plan, modeling the financial results obtained from mining 150 tonnes per day from underground and operating the cyanidation circuit at 250 tonnes per day, with supplemental feed from the historic tailings pond for six months of the year.

A 28,000-metre exploration and ore definition drill program is underway to expand the current resources and support the detailed mine plan.

In Toronto at presstime, Fire River Gold was trading at 54¢ per share. Over the last 52 weeks, the junior has traded in a range of 34¢ (June 2, 2010) and 72¢ (July 19).

It has about $13.8 million in its treasury.