Fire River’s Nixon Fork Mine Should Produce Its First Gold Within Six Months

By Alastair Ford

“The market in September pushed us back”, says Spiros Cacos of Fire River Gold. “There was a lag in results coming out of our 28,000 metre drill programme, a six-to-nine week delay.” The delay was doubly unfortunate, because although there was a general recovery across the board in resources companies September, Fire River missed out. Indeed the company’s shares have rather gone against the trend in recent months, down from the year high of just over C .70, which was hit in mid July, to recent trades at just shy of C .50. That’s tough, in such a strong gold market, but Spiros Cacos is confident that as long as he continues to tell the story, the market will eventually wake up and see the value that’s on offer at the company’s Nixon Fork gold mine in Alaska.

Nixon Fork may not be big, but to some, at least, it is beautiful. One such is Fire River’s Vice-President Mining Richard Goodwin, who told Minesite many moons ago that what Nixon Fork really needs is a whole lot of “geological love”. In 2010 Nixon Fork got that love, even if some of the assays were delayed, and the net result is a project that’s on course for production next year, first from an old 34,000 ounce tailings resource, and then from underground, where the total resource is expected to come in at between 500,000 and 700,000 ounces. That should make for, on Spiros’s reckoning, a seven or eight year mine life. First production from the tailings is due in May, he says, with the start-up underground due in September.

There’s still a fair bit of work to be done, though, not least the installation of a carbon-in-leach processing facility, at an estimated cost of C$7 million. To pay for it Fire River is in the final stages of a C$8.5 million non-brokered private placement, raising money at C
.45 per unit where each unit consists of one share and half a warrant. On 7th December, even as Spiros Cacos was winging his way home from the Mines & Money conference in London, the company announced that to date C$7 million was in. The balance is expected by the end of the year.

That money sets Fire River up nicely to take a strong run at 2011, and as a consequence investors can expect a period of busy newsflow early next year. The carbon-in-leach plant will go in, a new 43-101 report will be released on the underground resource, a second preliminary economic assessment on will be completed, and first production will commence. According to Spiros, with production slated for May, the company should receive its first cheque by June, and after that it’ll be away.

It’ll be interesting to see what happens to the share price at that stage. Aside from the delayed assays, there have also been two other factors that have been holding the company’s shares back. One is traditional – the well-recognised tendency of shares in junior miners to weaken in the lead-up to production. The other is more to do with perception. Alaska is perceived as a big country, where projects need to be big to be viable. This is the land of Pebble, Fort Knox and Pogo, and several other multi-million ounce gold resources besides. A fly-in, fly-out operation like Nixon Fork, with less than a million ounces goes against that received wisdom and renders investors understandably cautious.

The key issue, though, isn’t size, it’s profitability. “We don’t need a million ounces”, says Spiros, “we just need to get into production”. Everyone agrees that starting from scratch, Nixon Fork would never have made sense. But Fire River didn’t start from scratch. Most of the heavy lifting had already been done – from plant, to adits, to runways, to old drill data. By the time Fire River arrived it was all in place. Spiros reckons that the theoretical cost to Fire River now, were it to install that infrastructure, would come in somewhere in the region of C$200 million.

As it is, previous owner St Andrews booked most of the cost. St Andrew then got into difficulties during the financial crisis, and it was at that point that Fire River’s chief executive Harry Barr saw his opportunity – to purchase at a knock-down price a small, former producing gold mine, with most of the necessary plant and equipment already in place. Given that somebody else had already spent the money, the risk to Fire River was, and is, greatly reduced. After all, even if the resource is small, it’s worth remembering that the grades are stellar. The latest drill results, the ones that everyone gave up waiting for, are by no means out of the ordinary in showing 37 grams per tonne over 3.6 metres, and 27.6 grams per tonne over 1.4 metres. Grades like that ought, in due course, to generate plenty of margin for shareholders. They now have less than a year to wait.