Resumption of Underground Mining at the Nixon Fork Gold Mine, Alaska

cnw




FAU: TSX.V

FVGCF: OTCQX

FWR: FSE





VANCOUVER, Feb. 17 /CNW/ - 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) performed by Snowden Mining
Industry Consultants Inc. ("Snowden") evaluating the resumption of
underground mining at the Nixon Fork Gold Mine.


Summary and Conclusion:




The key findings of the study are as follows:



The current resource is sufficient to sustain a two year production
forecast at a production rate of 150 tonnes per day with an average
mined grade of 30.1 g/t using an average cut-off grade of approximately
15 g/t


The mineral inventories in this report are based on the most current
resource estimate (Giroux, 2010), which do not include the results of
ongoing ore definition and exploration drilling performed in 2010 and
2011. At the direction of FAU, this study focuses on the first two
years of mining, though the resources are not depleted during this
period


Capital costs to resume production are estimated to be $6.3 M with a
projected payback of 3 months


Operating costs are estimated at $434/t or $447/oz for the first two
years of operations


At a gold price of $1200 per oz Au, the project delivers an IRR of 549%
and NPV of $60.9M on an undiscounted cash flow of $64.3M over the first
two operating years



To view photos, tables and figures associated with this press release,
please follow the hyperlink below:




All units in this document are metric and all currency is in $USD unless
otherwise stated.


"We are very happy with the result of this PEA." commented Harry Barr,
President & CEO of Fire River Gold. "It demonstrates what we have
always believed about the Nixon Fork Gold Mine - that it has the
potential to generate significant profits with a minimum start up
capital requirement."


Current Company Activity:


At present the company is engaged in three primary activities at the
Nixon Fork Mine Site:



Preparing the mine for the eventual resumption of mining operations,
including: rehabilitating underground excavations, rebuilding the mine
mobile equipment, re-establishing or enhancing mine services and
facilities, ordering additional mining equipment for production, and
preparing a detailed mine plan


28,000 metre exploration and ore definition drilling to expand resources
and support the detailed mine plan


Construction of a 250 tpd cyanidation circuit in the mill for the
recovery of gold from existing and future post-gravity / post-flotation
tailings



Scope of this Study:


This PEA focuses on the resumption of underground mining and processing
with a production rate of 150 tpd. The mineral inventories in this report are based on the most current
resource estimate (Giroux, 2010), which do not include the results of
ongoing ore definition and exploration drilling performed in 2010 and
2011. At the direction of FAU, this study focuses on the first two
years of mining, though the resources are not depleted during this
period.


Details from the Study:


Geotechnical Evaluation: Stability analyses were performed based on underground mapping and core
logging by Dr. Walter Keilich of Snowden. Final recommendations for the
Crystal Mine included bolting patterns for all development and stoping
areas (normally 1.8 m bolts on 1.2 to 1.3 m spacing), as well as a
recommendation to cable bolt sublevel open stope walls.


Mining Methods: Three mining methods were identified as suitable for the ore zones:
longhole open stoping, cut-and-fill, and shrinkage. Cut-off grades
(COG) of between 12.5 g/t and 20 g/t were determined, based on mining
and access costs. Most stopes were assessed at a COG of 15 g/t.


Underground Development: Access development was designed at a uniform profile of 4.0mH x 4.0mW,
with a maximum gradient of 15% applied to ramps. Conceptual development
was generated to access all stoping blocks, with a total requirement of
1,914 m estimated to service the two-year production plan, an average
of 82 m per month.


Mineral Inventory: A potentially economic inventory of 101,249 tonnes grading 30.2 g/t was
generated for three mining areas, as shown in Table 1.


Table 1: Potentially Economic Mineral Inventories


Mining to Depth: Approximately 50% of the mineral inventory is at depth in the Crystal
Mine. At present this is a zero-discharge operation. The water table
has not been defined at present. The mine is quite dry with inflows of
1.0 l/s, though the water level at the bottom of the mine is known to
fluctuate seasonally by as much as 6 vertical metres. The Company has
several plans in place to facilitate mining to depth, including the
installation of dammed reservoirs in the mine to contain mine water,
recycling mine water for drill requirements, using spraying misters to
evaporate excess water.


Production Forecast: A processing rate of 150 tpd or 4500 tonnes per month was assumed for
the duration of the two-year production forecast. In general two to
four stoping areas are assumed to be active at a time. The forecast was
prepared with a "high grade early" strategy. During the first year,
mining only occurs in the 3000 and 330 zones of the Crystal Mine. The
Mystery Mine begins production in the 18th month.


Table 2: Project Forecast - Material Movement and Feed Grades


Metallurgy and Processing: Gold recovery assumptions were based on historical performance for
gravity and flotation circuits and the results of the August 2010 PEA
for cyanidation. An allowance was included for incremental improvement
of total recovery through start-up, from 90% on commissioning to 95% as
the assumed maximum recovery.


Table 3:Estimation of Capital Requirement


Capital Requirement: The capital requirement for the Project is low, as shown in Table 3,
because of the extensive existing infrastructure, facilities, and
mobile equipment at site. The primary requirement is working capital,
comprising 60% of the estimated capital requirement. Annual sustaining
capital was included at 2.5% of the start-up capital requirement.


Table 4: Average Operating Costs by Category for Two Year Plan


Operating Costs: Over the two-year duration of this study, operating costs have been
estimated to average $/oz or $/tonne, broken out by category as
follows:


Financial Model: Three gold prices were used: $1033/oz, representing a three year average price, $1200/oz, the "Base Case" price requested by FAU, and $1500/oz representing an optimistic case. The results of the analysis are shown
in Table 3.


Table 3: Summary of Financial Model for Two Year Plan


No revenues were included for copper or silver, though the operation has
received payment for both metals in the past. This was due to lack of support for a resource estimate for those two
metals. The payback period is estimated at 3 months for all cases. The short
duration is a direct result of the low capital requirement.


Sensitivity analyses were performed over the range of -25% to +25% of
the base case assumptions for gold price/process recovery, development
costs, development capacity, process and G&A costs, and underground
production costs.


As shown in Figure 1, the project is most sensitive to the gold price.


Figure 1: Sensitivity Analyses for Two Year Plan


Conclusions: Snowden has determined that there is potential for profitable operations
from the first 24 months of production at the Nixon Fork Mine based on
the most current resource estimate (Giroux, 2010). The base case of $1200/oz Au returns an undiscounted cash flow of $64.3
M and an IRR of 549% for this two year plan.


Recommendations:

Snowden makes the following recommendations:



A substantial exploration program should be maintained to replace
mineral reserves on an annual basis


Ongoing work is required to accurately determine depletion of resources
by prior mining campaigns


Ore definition drilling should be ongoing to upgrade the resources to
Measured or Indicated prior to completing a prefeasibility study


One of the principal drivers of the high cut-off grade is the processing
rate, and a mill expansion should be evaluated. The mineral inventory
at a lower cut-off grade of 10 g/t is almost double that at 15 g/t


FAU should proceed with its plans to define and control the moderate
inflows of ground water



Use of this Study:


In September 2010, the Company completed a PEA that assessed the
viability of completing a cyanidation circuit for the purpose of
recovering gold from an existing tailings pond (refer to press release
dated September 29, 2010) and increase overall gold recovery from
future mining. Construction of the cyanidation circuit began in January 2011 and is
projected to be complete and operational by Summer 2011. This study does not incorporate the resources contained in the historic
tailings pond (Indicated: 92,000 tonnes @ 7.9 g/t; inferred 48,000
tonnes @ 7.4 g/t) nor does it include the financial benefit of
recovering the gold from these tailings through the cyanidation
circuit, as defined in the September 2010 PEA.


The Company will combine the results of the two PEAs as components of an
internal operational mine plan, modelling the financial results
obtained from mining 150 tpd from the underground and operating the
cyanidation circuit at 250 tpd with supplemental feed from the historic
tailings pond for six months of the year.


The Company is well funded, with $13.8 CAD in its treasury (as at 9 Feb 2011) and estimates that the current funding will complete
the construction of the cyanidation circuit, provide the start up
capital for the mine, and sustain ongoing company G&A costs through the
production ramp up period. However, FAU will be seeking to make
available additional sources of funding of up to $10M to act as a
contingency to supplement working capital needs for the transition from
development to production, and to expand the exploration program.


As a result, the Company is pursuing alternative methods of financing
such as a line of credit, off take agreement, gold loan and/or
additional equity.


This assessment is preliminary in nature and includes the assessment of
Inferred mineral resources that are considered too speculative
geologically to have economic considerations applied to them that would
enable them to be categorized as Mineral Reserves. There is no
certainty that the evaluation reported in this preliminary assessment
will be realized.


About Fire River Gold Corp.


Fire River Gold Corp. is a near term production company with an
experienced technical team focused on bringing its flagship project,
the Nixon Fork Gold Mine, back into production in 2011. The Nixon Fork Gold Mine is a permitted
and bonded mine which include a ~200 tpd processing plant with a
gravity gold circuit, sulphide flotation circuit and a gold recovery
system (CIL circuit) that is scheduled to be completed by Summer 2011.
The mine also includes a fleet of surface & underground mining
vehicles, a self-contained power plant, maintenance facilities,
drilling equipment, an 85 person camp, office facilities and a 1.2 km
long landing strip. A 28,000 metre exploration and ore definition drill
program is in progress to expand the current resources and support the
detailed mine plan.


Fire River Gold Corp is a member of the International Metals Group.

(
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. Neither TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or accuracy
of this release. We seek safe harbour.






For further information:

Tel: +1 604 685 1870 Fax: +1 604 685 8045 Email: info@firerivergold.com or visit http://www.firerivergold.com/">www.firerivergold.com 2303 West 41st Avenue, Vancouver, B.C., Canada, V6M 2A3