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Vol. 16, No. 13 Week of March 27, 2011
Providing coverage of Alaska and Northwest Canada's mineral industry

Mining News: Fire River resumes mining at Nixon Fork

Barr hands over leadership as young junior transitions from explorer to producer; first gold from high-grade ore expected in June

Shane Lasley

Mining News

Less than two years after completing its initial public offering, Fire River Gold Corp. is positioned to commence production at its Nixon Fork Gold Mine in Interior Alaska. Building stockpiles of ore with gold grades of more than 1 ounce per metric ton, the young junior is preparing to start up the historical mine in June.

With Fire River Gold nearing a point where it will generate its own revenue stream, company founder Harry Barr is stepping down as president and CEO of the fledgling company and handing the reins to Richard Goodwin, who is now president and COO.

Barr said Goodwin, who has more than 25 years of experience in underground mine operations, engineering consulting and corporate management, is what Fire River needs as it transitions from explorer to producer.

“I have always focused on exploration, acquisitions and financings throughout my career. I am very proud to say that during my tenure as CEO with Fire River Gold, our team has either met or exceeded all of our objectives to date. From a shareholders point of view, I believe it is time to let a production team take this company to the next level,” Barr said. “I am exceptionally proud of the team of people I leave in charge. Richard Goodwin has always been the driving force behind the technical side of Fire River Gold and more specifically the development of the Nixon Fork Project to date. He has done an exceptional job building a highly regarded technical team that is poised to restart the Nixon Fork Gold Mine.”

Though a mill, underground development, an airstrip, camp, power plants and all the permitting were in place when Fire River bought the project in 2009, the company did not rush into resuming production at the high-grade gold mine. Instead, it completed a thorough geological and engineering evaluation of the project.

In 18 months of poring over documents left behind by two previous operators, Fire River re-logged several thousand meters of drill core and assessed the condition of the mill and mining equipment, a process that culminated in two preliminary economic assessments. The first, released in September, evaluates the viability of reprocessing tailings left behind by previous operators of the high-grade gold mine. The second, finished in February, investigates the resumption of underground mining at Nixon Fork.

Both studies returned positive economic results, and Fire River gold is pursuing a hybrid operation capable of churning out 50,000 ounces of gold per year.

Mining under way

Setting Fire River’s operational plan in motion, crews at Nixon Fork began mining in March. About 6,375 metric tons of ore averaging 42.1 grams per metric ton, or about 1.35 ounces per metric ton, is set to be mined at the onset. This higher grade ore found in the upper portions of the Crystal Mine will provide the initial feedstock for the mill, which is scheduled to be fired up in June.

Based on re-assaying more than 10,000 meters of core left behind by the previous operator, Nixon Fork has an underground resource of just over 100,000 metric tons averaging 30.1 grams, or nearly 1 ounce, of gold per metric ton. That’s enough ore to keep the 150-ton-per day mill operating for two years.

An initial 47,250 metric tons of ore – estimated tonnage for the first year of production, including a three-month ramp-up period – is expected to average 34.1 g/t gold, putting about 49,000 ounces of gold in Fire River’s vault.

“We are anticipating a very gentle ramp-up, about 25 percent capacity in June, 50 percent in July and 75 percent in August,” Goodwin said.

The preliminary economic assessment for underground mining estimates operating costs will run US$434 per metric ton of ore, or US$447 per ounce of gold over the first two years.

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

The roughly US$6.3 million in capital costs required to put the mine back in production is projected to be paid back within three months of firing up the plant.

“We are very happy with the result of this PEA,” Barr said. “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.”

The PEA completed in September assessed the viability of completing a 250-metric-ton-per-day cyanide circuit for recovering gold from an

Adding a CIL circuit

existing tailings pond at Nixon Fork. The historical tailings pond contains an indicated resource of 92,000 metric tons averaging 7.9 g/t gold and an inferred resource of 48,000 metric tons at 7.4 g/t gold.

Determining that it would not only benefit from the added gold coming from the tailings pond, but also increased recoveries from the underground ore, Fire River decided to complete the carbon-in-leach circuit.

Goodwin told Mining News that the mill will be fed year-round with ore at a rate of 150 tons per day from underground mining, and during the summer months, the CIL portion of the recovery circuit will be topped off with an additional 100 tpd of the gold-bearing tailings.

The construction of the cyanidation circuit is expected to be finished in July and added to the recovery system in August.

Goodwin said he expects the three circuits to catch about 96 percent of the nearly 1-ounce-per-ton ore being mined at Nixon Fork – with 20 percent recovered as free-gold in the gravity circuit, about 60 percent reporting to flotation and the remaining 17 percent captured in the CIL system.

“During the summer season all of that happens but we are also going to add 100 tons per day of wet tailings from the historic operation directly into the cyanidation circuit,” he explained.

At the 79 percent recovery rate estimated in the PEA, adding 100 tpd of tailings will add some 18 ounces of gold per day to the take at Nixon Fork.

The mining engineer said the tailings will not need additional milling or processing before being added to the CIL circuit.

Transition complete

While mining the upper portions of the Crystal Mine, crews will drive a tunnel to the Mystery Mine about 500 meters to the northeast and ramp down to the lower portions of Crystal.

“After the first six months we will start mining the Mystery side as well as the down-dip extensions on the Crystal,” Goodwin said.

Recent drilling in the lower portion of Crystal has returned encouraging results and could add to the minable high-grade ore available in this area.

Hole N10U-038, drilled at the lower extent of the 3300 Zone, cut 13.7 meters averaging 28.8 g/t gold, including a 1.3-meter subsection that averages 118.5 g/t gold and 1.32 percent copper. Hole N10U-040 intercepted 1 meter averaging 202.7 g/t at the lower extension of the 3000 Zone.

Connecting the Crystal and Mystery mines with an underground tunnel will provide multiple benefits to Fire River. One key advantage will be when crews begin mining the Mystery, underground trucks can haul the ore directly to the mill, which is adjacent to the Crystal portal.

Importantly, the link also will provide secondary egress to both mines, increasing the safety of underground miners.

The third advantage of digging the tunnel will be to provide a platform for drilling the highly prospective area between the two historical mines. Due to the vertical pipe-like columns of the ore-bodies at Nixon Fork, underground stations provide a better angle for drilling.

“We consider the gap between the mines to be probably our best exploration target, Goodwin explained. “This ore-body is difficult to drill from surface – it really needs to be drilled from underground.”

Two prospects, Southern Cross and J5A, have already been identified between the two mines. Based on drilling by previous operators, J5A has an indicated resource of 7,500 metric tons averaging 16.7 g/t, or about 0.5 oz/t. Southern Cross has an inferred resource of 11,100 metric tons at 19.6 g/t, or about 0.6 ounces per ton.

While Fire River’s operations team continues to search for additional ore for the mill in and between the two historical mines, the company has imported an exploration expert to investigate the multiple other prospects on the property.

“We have commissioned Curt Freeman of Avalon (Development Corp.) to take all of the information and come up with a plan for surface exploration,” Goodwin told Mining News.

The mining engineer said having Freeman investigate outlying exploration targets will allow his team of seasoned miners to focus on producing gold.

“We have really made the transition from junior explorer to producer,” Goodwin said.

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