Firstgold’s first gold pour may be its last

Firstgold (FGD-T) has defaulted on two loans and been forced to suspend crushing activity at its Relief Canyon heap leach project near Lovelock, Nev.

The operation has been put on care and maintenance until new financing can be arranged to bridge the gap between start up of the mine and cash flow from production.

The company is actively considering various financing, restructuring and strategic alternatives including the sale of the company.

Firstgold poured its first doré bar from Relief Canyon on March 30. A day later, the company announced that it had signed a forbearance agreement with its lenders for unpaid interest and principal totaling US$2.4 million. The company also has US$3.7 million in bills that it’s unable to pay.

The company thought it had until the end of April to raise the necessary funds, but on April 22, both lenders terminated a forbearance period and declared defaults under their senior secured promissory notes.

Haywood Securities is assisting Firstgold with its financial issues.

The company spent $16 million over the last two years to get the Relief Canyon heap leach project up and running.

It’s located on the site of the past producing Pegasus mine, which produced more than 140,000 oz. gold between 1986 and 1989.

Firstgold aims to process the gold left behind on the heap leach pads, which contain 8-10 million tons of ore; historic estimates indicate the ore could contain 50,000 oz. gold. After that, Firstgold hopes to process ore from nearby exploration targets.

Originally, Firstgold had planned to produce 4,000 oz. of gold each month this year, with a plan to increase production in 2010 to 100,000 oz. gold.

The company’s first gold doré bar contained 13.62 oz. of gold and 42 oz. of silver. The company stressed that the quantity was not indicative of regular run rates, but was instead a milestone of becoming an official gold producer with a revenue source.

Firstgold shares reached a new low today, falling 51% to 9¢ apiece on a trading volume of 732,000 shares. The stock has a 52-week high of 84¢ and 131.146 million shares outstanding.