Since it was first discovered by Alaskan placer miners back in 1917, a number of mining companies have found it difficult to get their heads around the complex geology that is a major feature of the high grade Nixon Fork gold mine.
After investing US$54 million in the remote site, which is located about 550 kilometres northwest of Anchorage, St. Andrew Goldfields Ltd. (TSX: T.SAS, Stock Forum) suspended production in October 2007 when the mill head grade dropped to 17.1 grams per tonne from 42 grams.
"This is a mine that doesn't give up its ounces easily," said Fire River vice-president of mining Richard Goodwin while taking a party of 23 analysts and newsletter writers on a tour of the facilities on August 21.
Larry Hillesland, the Vancouver junior's Manager of Geology, believes that this because the skarn-type mineralization is found in narrow, steeply-dipping pipe-like shoots which vary in width from two to 20 metres.
"It will take a lot of drilling to define these orebodies," he said.
But despite the obvious challenges, Fire River's sister company Pacific North West Capital Corp. (TSX: T.PFN, Stock Forum) bought the mine from St. Andrew in December 2008 for US$500,000.
It did so in the belief that it was buying a production-ready asset with potential that had not been realized by its former operators due to lack of available funding.
Pacific North West then resold the mine to Fire River Gold Corp. (TSX: T.FAU, Stock Forum) in exchange for 6.4 million shares in the junior, priced at 45 cents a share. Under the agreement, Pacific North West also scooped up one million share purchase warrants, allowing it to buy one million shares of Fire River at an exercise price of 50 cents for a period of 24 months from the date of closing.
If all the warrants are exercised, Pacific North West would own about 12% of Fire River, which has 86 million shares outstanding on a fully-diluted basis.
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Fire River Gold management team
(from left to right) Richard Goodwin, vice-president, mining; Larry Hillesland, Manager of Geology; Jay Oness, vice-president, special projects; Harry Barr, President and CEO; and Mine Superintendent Leonard Therrien.
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Meanwhile Fire River, which saw its stock price fall 2% to 52 cents on Monday, has started the process of putting the mine back in production.
In the next few months, the company expects to release a newly-updated NI 43-101-compliant resource estimate, as well as a preliminary economic assessment that will look at the feasibility of processing about 140,000 tonnes of tailings material located at the site.
"We are building a team to get the mine back into production and would like to be in production this time next year," explained Fire River chief executive officer Harry Barr, who is also President and chief executive officer at Pacific North West Capital, which is part of the International Metals Group.
The company hopes to succeed by making exploration a top priority in the way that defunct Nevada Goldfields Inc. did when it operated the mine from 1995 to 1999. In that period, Nevada Goldfields produced 122,381 tonnes at an average grade of 42 grams gold per tonne.
Most of that material (101,000 tonnes of average grade 43.3 grams per tonne) has been extracted from mineralized pipe-like shoots in an area known as the Crystal mine, which is accessible from a portal and underground workings located near the mill.
Another 5,159 tonnes was also extracted from a nearby area known as the Mystery mine, which is accessible via a second portal and underground workings which remain unconnected to the Crystal mine area.
St. Andrew commissioned Roscoe-Postle Associates of Toronto to complete NI 43-101-compliant technical reports in 2003, 2005 and 2006, which reviewed the mineral reserve-resource of the property and completed a financial analysis of the proposed mining operations.
It said mineralization found at Nixon Fork is similar to other gold-copper skarns such as the Nickel Plate at Hedley, B.C. "Typically gold skarns are mined for their precious metal values and may contain other sub-economic to economic metals such as copper and zinc."
A 2006 Roscoe Postle report said the Nixon Fork mine contained 51,500 ounces of proven gold reserves at a grade of 34.05 grams per tonne, plus an additional 82,230 ounces of probably reserves, grading 18.6 grams.
The report said average mill recoveries of 84% were achieved, while cash operating costs varied from US$188 per ounce gold in 1995 to a high of US$338 in 1996. Costs for the final full year of production in 1998 were US$273 an ounce.
When a Stockhouse reporter toured the site, Fire River had just completed the geologic evaluation of 110 holes that were drilled in 2007 and 2008, mostly from underground drill stations. The results of these holes were never reported by St. Andrew and were not included in resource estimates for the mine.
Within the next four weeks, Fire River will release a new NI 43-101 resource estimate that will include results from those 110 holes as well as the preliminary economic assessment that will look at the feasibility of processing the tailings.
The company has also embarked on a 28,000-metre diamond drilling program that will focus initially on surface targets, particularly on known mineralized zones which have the potential to add material to the mine's inventory of resources.
Subsequent underground drilling will start in the Crystal mine underground workings. The aim will be to expand resources in the Crystal mine's 3300 zone and four other zones.
A second NI 43-101 resource estimate, to be released later this year, will include results of the 28,000-metre program, the company said.
As exploration continues, Barr said his company feels fortunate to be in possession of a production-ready mine with facilities and equipment that he said would cost about $150 million to replace.
These include a 200 tonne-per-day mill, equipped with a flotation plant, a gravity gold separation circuit, and sulphide flotation circuit. In 2008, a CIL gold leaching circuit was acquired and partially installed in a bid to improve the gold recoveries.
The site also contains an 85-person mining camp, 1,280-metre aircraft runway, a fleet of mining vehicles and self-contained power plant.
"It is basically set up and ready to go," said Barr.
By the end of 2010, the company hopes to have completed a preliminary economic assessment of the underground resources, at which time it hopes to make a decision to start production by the summer of 2011. "We know there is lots of potential there," said Spiros Cacos, a director with Fire River. "We just want to understand what the potential can be."
Meanwhile, there was some good news for Fire River in June when about 900 ounces of gold in ground-up ore was found when company staff was cleaning up inside the mill. That material has been sold for just over US$1 million.