First Gold Exploration Inc.

First Gold Exploration Inc.

May 26, 2009 11:05 ET

First Gold Exploration Inc.: Scoping Study Confirms Economic Potential for Gold Production at Croinor Gold Deposit

LAVAL, QUEBEC--(Marketwire - May 26, 2009) - First Gold Exploration Inc. (the "Company" or "First Gold") (TSX VENTURE:EFG) (FRANKFURT:F12) and X-ORE Resources (TSX VENTURE:XOR) are pleased to announce the results of a Scoping Study (Preliminary Economic Evaluation) on the Croinor Gold Deposit located near Val-d'Or, Quebec.

The study was prepared by Francois Chabot, Eng., M.S., a Qualified Person under NI 43-101 guidelines, under engineering firm Golder Associates ("Golder"). The study confirms that the Croinor Gold Deposit is potentially economic at current gold prices with production achievable within one year.

Scoping Study Highlights

- Production of approximately 35,000 ounces per year at a cash cost of US $492 per ounce (US$-CAD$ exchange rate of 1.2);

- Pre-tax internal rate of return of 205% at US $850 gold price (US$-CAD$ exchange rate of 1.2);

- Total capital investment of CAD $11 million, of which CAD $4.8 million is for underground exploration and bulk sampling (pre-production);

- 10 month pre-production period;

- Fully permitted plants located within 100 km of site available for custom milling.

The Scoping Study makes the case for the potential to develop a robust underground mining operation at a US $850 per ounce gold price with considerable upside potential to expand resources.

The report, which will be filed on Sedar within 45 days, is based on the 2005 measured and indicated resource estimate of 504,878 tonnes grading 10.21 grams gold per tonne for approximately 165,633 ounces at 5 g/t cut off) prepared by Carl Pelletier, P.Geol. of Innovexplo Inc. and independent Qualified Person as defined under NI 43-101 guidelines (see report filed on November 8, 2005). Note that this preliminary assessment is preliminary in nature and includes mineral resources that are not mineral reserves and do not have demonstrated economic viability. There is no certainty that the preliminary assessment will be realized as presented since certain engineering parameters related to construction, environment and rocks mechanics will have to be validated at the preproduction phase.

The potential to delineate additional resources at Croinor over that reported in the 2005 resource estimate is excellent as the Scoping Study data is based on information down to the 200 metre level only, whereas the results of subsequent drilling campaigns conducted by First Gold in 2007 and 2008 totalling 16,481 metres have extended the mineralization from 200 metres to a depth of approximately 300 metres, intersecting economic values (see press release November 21, 2008). A new resource estimate incorporating these results is already in progress.

Many of today's Abitibi producing mines have started on small-scale production plans culminating in significantly larger scope operations. In the case of Richmont's Beaufor Mine, located in proximity to and displaying similar mineralization to Croinor, production commenced in January 1996 with reserves estimated to provide for production through 2001 at an average rate of 31,000 ounces per year. The mine continues to be in production today having produced approximately 1 million ounces. Pelletier observes in the case of Croinor "the presence of continuous high grade gold-bearing zones. Indicated and measured resources at 5.00 g/t Au cut-off are averaging a grade of over 10.00 g/t Au, which is better than deposits such as Beaufor, Ferderber, Sigma and Lamaque that were exploited in the Val-d'Or mining camp."

The Scoping Study also recommends an underground exploration program to upgrade and expand the current resource, as well as bulk sampling and metallurgical work towards a feasibility report. In addition, work will focus on ramp development from an existing portal.

"What makes the Croinor gold project particularly attractive is the short lead time to start up and low capital required due to existing underground infrastructure which includes a ramp to the 125 ft level and a shaft to the 525 ft level. In addition, with more than 2 km of drifts on four levels (125-250-375-500 ft) put in place by previous operators, all-weather access roads, water sedimentation pond and building; the project can rapidly progress to production at reasonable costs", added senior management of both X-ORE and First Gold, Leon Methot and Eric Leboeuf. The mining lease was obtained in 2004 and permitting is currently underway.


- Gold price of US $850 per ounce and exchange rate of US $1 equals CAD $1.15;

- Gold recovery of 97.5%;

- Production rate of about 400 tonnes per day over a 2.3 year underground mine life;

- Cumulative production of 309,800 tonnes at 8.32 grams gold per tonne for 80,800 ounces;

- Cash costs of CAD $154 per tonne (includes fixed expenses, development, stoping, transport, milling);

- Total costs of CAD $191 per tonne;

- Preproduction capital costs of CAD $4.8M and sustainable capital costs of CAD $6.1M including CAD $0.4 for reclamation;

- No provision for Quebec Refundable Exploration Tax Credit (up to 47%), which may be generated from underground exploration expenditures;

- A 15% NPI is included in the IRR and net profit before tax.

The financial analysis has been estimated based on the diluted measured and indicated resources, and production rates, development quantities and cost estimates calculated using tender offers from mining contractors.

The potential "mineable" tonnes were estimated by Golder using measured and indicated resources, 15% dilution at 0.00 g/t Au for long hole stopes (40% of stope tonnage) and 5% dilution for room and pillar stopes (60% of stope tonnage). A mining recovery factor of 80% was used for both methods. These factors will need to be confirmed by further analysis but are reasonable based on past mining experience in the camp.

The cost estimates assume contract mining and processing of the mined ore at milling facilities located roughly 100 kilometres from the mine site and are based on tender offers. Gold recovery parameters were based on results obtained from previous open-pit mining operations conducted by X-Ore Resources in 2004 and 2005.


The internal rate of return is highly sensitive to the incremental increase in gold price as shown in the table below.

Exchange Rate US $1.15

Gold Price US$ Pre-Tax Profit CAD$ IRR
1000 30,848,850 311%
950 26,899,457 262%
900 22,950,064 217%
850 19,000,671 174%
800 15,051,278 133%
750 10,526,479 91%
700 5,880,134 51%

Gold Price US$
@ US $850

Expenses Pre-Tax Profit CAD$ IRR
120% 7,985,430 57%
110% 13,902,299 110%
100% 19,000,671 174%
90% 223,985,633 258%
80% 28,970,596 378%

Neither the 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

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