ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

Caution About Forward-Looking Statements

This Form 10-Q includes "forward-looking" statements about future financial results, future business changes and other events that haven't yet occurred. For example, statements like Firstgold "expects," "anticipates" or "believes" are forward-looking statements. Investors should be aware that actual results may differ materially from Firstgold's expressed expectations because of risks and uncertainties about the future. Firstgold does not undertake to update the information in this Form 10-Q if any forward-looking statement later turns out to be inaccurate. Details about risks affecting various aspects of Firstgold's business are discussed in Firstgold's Form 10-K as well as throughout this Form 10-Q and should be considered carefully.

Overview of Operations

We are an exploration-stage company engaged in the acquisition, exploration and, if warranted, development of various mining properties located in the State of Nevada. We are currently conducting a comprehensive exploration and development program on various mineral leases associated with our Relief Canyon Mine property located near Lovelock, Nevada. The Relief Canyon Mine Property consists of 166 claims including 120 mill site claims and 46 unpatented mining claims. Since February 1, 2007 we have completed drilling 83 reverse circulation drill holes. We have also drilled a total of 57 sonic holes in the existing heap leach pads to assess the economic potential of reprocessing the ore and extracting any remaining gold. These drill results will be added to the historic drill hole database to help develop a new mining plan for Relief Canyon Mine property.

In preparation for the resumption of ore processing at the Relief Canyon Mine, on August 7, 2007 we received an "Approval of the Relief Canyon Mine Heap reprocessing amendment to the Plan of Operations" from the Bureau of Land Management ("BLM"). In conjunction with the BLM action, Firstgold increased its posted reclamation bond to $2.8 million with the BLM.

On August 16, 2008 an "Amended Reclamation Permit No. 264" issued by the Nevada Division of Environmental Protection ("NDEP") became final. In addition, Firstgold has recently received its Water Pollution Control Permit and Air quality Permit from the NDEP.

The above approvals and permits allow Firstgold to begin construction of a new heap leach pad and to construct and operate an ADR Process Plant and crushing facility at the Relief Canyon Mine site. On December 15, 2008 we completed the new heap leach pad and on December 16, 2008 commenced stacking ore on the pad. We began reprocessing material on existing heaps in November, 2008 and began applying cyanide solution to the material on our heap leach pads in February, 2009. As a result of the application of the

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cyanide solution, the resulting solution began flowing through the recently completed processing facility and on March 5, 2009 the first carbon filters were extracted and shipped off-site for processing.

We have conducted preliminary sampling of approximately 4,200 acres of potentially mineralized ground in the Horse Creek area located approximately 100 miles northeast of Reno, Nevada. During the course of the property evaluation, rock chip samples were collected showing the potential presence of intrusion-related mineral systems. During the third quarter we commenced the extensive mapping of the area's bedrock geology. Additionally, we plan to conduct an airborne geophysical survey to map the magnetic character of the rocks. Geochemical exploration efforts continued with more rock chip sampling as well as an in-depth soil sampling survey.

On January 11, 2008 we secured claims on approximately 2,300 acres of potentially mineralized ground near Fairview, Nevada referred to as the Fairview-Hunter property. We are conducting preliminary sampling of the area. During the course of the property evaluation, rock chip samples were collected. The next phase of this project will be to conduct extensive mapping of the area's bedrock geology. Additionally, we plan to conduct an airborne geophysical survey to map the magnetic character of the rocks. Geochemical exploration efforts will continue with more rock chip sampling as well as an in-depth soil sampling survey.

On February 22, 2008, we secured claims on approximately 3,300 acres of potentially mineralized ground north of Winnemucca, Nevada referred to as the Honorine Gold property. We are conducting preliminary sampling of the area. During the course of the property evaluation, rock chip samples were collected. The next phase of this project will be to conduct extensive mapping of the area's bedrock geology. We completed the initial sampling and 6 drill holes on the project. Drill results from this first round of drilling are expected only to provide basic geologic information and direction for future drill work. Additionally, we plan to conduct an airborne geophysical survey to map the magnetic character of the rocks. Geochemical exploration efforts will continue with more rock chip sampling as well as an in-depth soil sampling survey.

In July 2008, Firstgold opened a full service metals and mineral assay laboratory in leased buildings located in Lovelock, Nevada. The laboratory will process mineral samples from Firstgold's Relief Canyon Mine, other Firstgold exploration properties and provide excess capacity to process mined samples from other outside mining and exploration companies.

Restructuring Transaction

On July 16, 2009 we entered into a Binding Offer Letter with Northwest Non-Ferrous International Investment Company, Limited ("Northwest") which has its headquarters in Xi'an Shaanxi Province, China. The Binding Offer Letter was amended on August 7, 2009. Pursuant to the Binding Offer Letter, the parties have agreed to prepare and enter into definitive agreements having an aggregate value of approximately $26,500,000 and to make certain fundamental changes to Firstgold's Certificate of Incorporation and

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Bylaws to give effect to the Restructure transaction which collectively are referred to herein as the "Restructuring." The capital infusion by Northwest will consist of three components. All dollar amounts are stated in US dollars.

Purchase of Notes

The first capital investment component of the Restructuring provides for Northwest to acquire the currently outstanding Senior Secured Promissory Notes held by Firstgold's primary creditors, Platinum Long Term Growth, LLC ("Platinum") and Lakewood Group LLC ("Lakewood") for a one-time payment of $11,500,000. The Binding Offer Letter provides for Northwest to make an initial pre-loan payment of $1,000,000 of which $500,000 was allocated to Platinum and Lakewood as a nonrefundable deposit and $500,000 was transferred to Firstgold to be used for working capital purposes. These funds were received by Firstgold's Canadian counsel on July 16, 2009. The balance of $11,000,000 will be paid by Northwest to Platinum/Lakewood and Northwest will assume the existing secured promissory notes currently held by Platinum and Lakewood. Among other things, Northwest would assume all the security interests and title liens currently held by Platinum and Lakewood thus making Northwest our primary secured lender.

Working Capital Loan

The next capital investment component of the Restructuring is a $5,500,000 loan to be made by Northwest to Firstgold which will be used to discharge indebtedness to unsecured creditors and for general working capital. The loan will bear interest at a fixed rate of 10% per annum and the principal amount of the loan will be repaid in 24 equal monthly installments commencing on September 1, 2010. $500,000 of the loan proceeds were previously advanced to Firstgold on July 16, 2009 with the balance to be advanced to Firstgold on or before August 31, 2009. See "Extension of Restructuring Transaction" below.

Subscription for Shares

The third capital investment component of the Restructuring is the purchase of shares of Firstgold common stock whereby, on or about September 30, 2009, and subject to shareholder approval and regulatory approval, Northwest will subscribe for that number of shares from the authorized but unissued (post-split) shares which will equal 51% of the then issued and outstanding shares of Firstgold common stock for an amount of $9,500,000 (the "Subscription Transaction") and result in a change of control of Firstgold. The proceeds from this subscription Transaction will be used for general working capital including the resumption of gold exploration and processing at Firstgold's Relief Canyon mining site.

Structural Changes Required by Northwest

As part of the Restructuring, Northwest is allowed to nominate three directors to the Firstgold Board of Directors with Mr. Sun Feng (Chairman of Northwest) being designated as the new Chairman of the Firstgold Board. In addition, the Amended and

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Restated Certificate of Incorporation will be amended to provide for the Chairman of the Board to have a "casting vote" meaning that in case of a tie vote on any matter properly coming before the Board, the Chairman will have two votes compared to one vote by each of the remaining Directors thus allowing the Chairman the deciding vote in case of a tie vote on the Board. Northwest will also be granted certain preemptive rights allowing it to maintain its 51% ownership interest when and if currently outstanding warrants are exercised.

Financial Changes Required by Northwest

As a further condition of the Restructuring, Firstgold was required to reduce the amount of debt owed to creditors. Consequently, Firstgold has entered into arm's length settlement arrangements with certain of its largest unsecured creditors whereby it will issue up to 72,151,842 shares of common stock, together with cash in the amount of approximately $4,838,000 in exchange for the discharge of $8,408,735 of original indebtedness and the cancellation of outstanding warrants exercisable into at least 44,394,000 shares of common stock. In addition, 31,300,000 shares are to be issued to settle compensation and other amounts owed to directors, officers and employees of Firstgold.

Voluntary Changes Deemed Beneficial to Firstgold

In addition to the changes required by Northwest described above, the Company is seeking stockholder approval for several other changes which the Board believes to appropriate at this time including a 1-for-5 consolidation of its outstanding common stock, increasing its authorized shares to 500,000,000 shares, allowing for automatic adjustments to the number of shares issuable pursuant to the Company's 2006 Stock Option Plan and amending and restating the Company's Bylaws.

Regulatory Requirements

In light of the fact that the above described transaction with Northwest will result in a change of control in Firstgold, this proxy statement is intended to meet the notice requirements of Regulation 14f-1 of the Proxy Rules promulgated under the Securities Exchange Act of 1934 to disclose the proposed change in control of the Firstgold Board of Directors as described above.

Since the Firstgold common shares are currently listed on the Toronto Stock Exchange ("TSX"), certain TSX rules and regulations require that: (i) the issuance of shares by Firstgold to Northwest in an amount equal to 51% of the then-outstanding shares resulting in a change of control, (ii) the proposed issuance of shares representing more than 25% of the currently issued and outstanding shares at a discount to the market price in settlement of indebtedness and (iii) the issuance of share compensation to certain officers and directors of the Company, must be approved by Firstgold's stockholders and are set forth below as Proposal number 2, 3 and 10.

Due to the type of transaction involved and the nature of Northwest is a Chinese entity, Northwest has been advised that an application should be made to the Committee on

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Foreign Investment in the United States ("CFIUS"). The purpose of such application is to allow CFIUS to evaluate if any issues affecting national security are included in the proposed Restructuring. While neither Northwest nor Firstgold anticipate any objections based on national security concerns, such application process is anticipated to take approximately 45 to 60 days to complete. Northwest has determined to wait for CFIUS clearance before proceeding with the Restructuring Transaction.

Information about Northwest

Northwest Nonferrous International Investment Company Ltd. is 100% owned by the Northwest Mining and Geological Exploration Group Co. for Nonferrous Metals (NWME) and is based in Xi'an city of Shaanxi province, China. Northwest has more than 6,000 employees including 800 geologists, technologists, and engineers.

Northwest is one of the top five exploration and mining Bureaus in China amongst around 100 provincial Bureaus in terms of revenue and technical capacity. Northwest was one of the first Bureaus in China to conduct exploration projects in partnership with overseas companies. In 2007, Northwest incorporated a joint venture with Yukon Nevada Gold Corporation to carry out exploration on new acquisitions. In 2008, Northwest, in partnership with Jinduicheng Molybdenum Group Co., Ltd., acquired Yukon Zinc Corporation.

Extension of Restructuring Transaction

Due to the need to prepare and file the CFIUS application referred to above, the parties have agreed to extend the closing dates for each of the Restructuring components as originally contemplated in the Binding Offer Letter. It is now anticipated that the purchase of the Platinum/Lakewood Notes and the working capital loan will occur in October, 2009 (upon receipt of CFIUS clearance) and the subscription of shares is expected to take place on or before December 1, 2009. In recognition of this extended timetable, Platinum/Lakewood were allowed to draw down the $500,000 deposit posted by Northwest and will be paid 1% of the outstanding Note balances per month until the purchase of the Notes by Northwest occurs. In addition, Northwest will advance or cause to be advanced to Firstgold approximately $500,000 to meet current operating capital requirements until the Restructuring Transaction can be consummated.

Results of Operation

Our current business strategy is to invest in, explore and if warranted, conduct mining operations of our current mining properties and other mineral producing properties. Firstgold is a public company that in the past has been engaged in the exploration, acquisition and development of gold-bearing properties in the continental United States. Currently, our principal assets include various mineral leases associated with the Relief Canyon Mine located near Lovelock, Nevada along with various items of mining equipment and improvements located at that site. We have also entered into (i) the staking of approximately 4,200 acres of property located in Humboldt County,

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Nevada; (ii) claims to explore 2,300 acres of property located near Fairview, Nevada; and (iii) mineral leases on 3,300 acres of property located near Winnemucca, Nevada.

Operating Results for the Fiscal Quarters Ended July 31, 2009 and 2008

Although we commenced efforts to re-establish our mining business early in fiscal year 2004, only minor mining operations were commenced earlier in the year and only minimal revenues from mining operations have been recognized during the quarter ended July 31, 2009 due to the fact that we were forced to suspend mining and process activities due to the lack of funds at our primary property, the Relief Canyon mine, and placed it on a care and maintenance status as of April 2009. Revenue of $82,819 was recognized for the quarter ended July 31, 2009 compared to $369,567 of revenue recognized during the same quarter of 2008. During the second quarter of fiscal year 2010 we recognized revenue from the refining of gold and performing assays for customers at our lab. During the second quarter of fiscal year 2009 we recognized revenue from the leasing of drill rigs and crews to other nearby mining operations. Costs of services expended during the quarter ended July 31, 2009 were $14,269 compared to $761,891 costs of services during the same quarter ended 2008. We have granted a 4% net smelting return royalty to a third party related to the Relief Canyon mining property which has been recorded as an $800,000 deferred option income.

During the quarter ended July 31, 2009 we spent $265,359 for exploration, reclamation and maintenance expenses related to our mining properties. Reclamation and maintenance expenses expended during the same quarter ended July 31, 2008 were $1,239,859. These expenses relate primarily to exploration activities and installation of processing facilities at the Relief Canyon Mine. During the quarter ended July 31, 2008 we expended approximately $78,099 on preliminary exploration activities at the Horse Creek, Fairview-Hunter and Honorine Gold properties. The decrease in costs was due primarily to the lack of capital during the quarter to fully fund necessary operational expenses and reducing the mine operations to a minimal care and maintenance status. We incurred general and administrative expenses of $1,884,446 during the quarter ended July 31, 2009. Of this amount, $219,497 reflects salary for administrative staff, payroll taxes and benefits, $1,375,852 reflects officer and director compensation during the quarter and $150,378 reflect fees for outside professional services. A large portion of the increase in officer and director compensation reflects severance arrangements negotiated with the former Chief Executive Officer and Chief Operating Officer of Firstgold and the increase in board of Director meetings due to the proposed restructuring transactions referred to above. We incurred general and administrative expenses of $984,472 during the quarter ended July 31, 2008. Of this amount, $35,206 reflects promotion expense; $135,433 reflects officer and director compensation and related payroll taxes during the quarter and $286,085reflect fees for outside professional services.

Professional services incurred for the quarter ended July 31, 2009 reflects legal and accounting work pertaining to our annual and quarterly reporting on Form 10-K and Form 10-Q occurring in fiscal year 2010 and work relating to the Restructuring

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transaction. It is anticipated that both mining costs and operating expenses will be significantly curtailed until we are able to secure necessary additional financing to continue our exploration program and implement our mining operations.

We incurred interest expense of $1,764,866 during the quarter ended July 31, 2009 which compares to interest expenses of $121,305 incurred during the same quarter of 2008. The principal balance of loans outstanding at the end of the second quarter of fiscal year 2010 increased by $12,167,087 to $14,238,032 compared to a principal balance of $2,070,945 outstanding at the end of the second quarter of fiscal year 2009, which was primarily the result of an increase in senior secured promissory notes issued during the third quarter of fiscal 2009. The increase in accrued interest expense during the quarter ended July 31, 2009 was primarily due to the increase in the principal balance of promissory notes outstanding during the period and the imposition of an 18% default rate of interest as of December 15, 2008.

Our total net loss for the quarter ended July 31, 2009 increased to $4,212,865 compared to a net loss of $2,847,039 incurred for the same quarter ended July 31, 2008. The larger net loss in the quarter ending July 31, 2009 reflects the increase in the general and administrative expense as well as a substantial increase in interest expense. The increase in net loss for the quarter ended July 31, 2009 was partially offset by the lower costs of services and exploration and maintenance costs during the quarter and a small amount of revenue.

Operating results for the Six Months Ended July 31, 2009 and 2008

During the six months ended July 31, 2009 we recognized revenue of $171,538 from the initial mineral recovery of gold and silver and from performing assays for customers at our lab. During the six months ended July 31, 2008 we recognized revenue of $645,360 from the leasing of drill rigs and crew to other nearby mining operations. Costs of services expended during the six months ended July 31, 2009 were $273,336 compared to $1,221,718 costs of services during the same six month period ended 2008. We have granted a 4% net smelting return royalty to a third party related to the Relief Canyon mining property which has been recorded as an $800,000 deferred option income.

During the six months ended July 31, 2009, we spent $1,673,131 on exploration, reclamation and maintenance expenses related to our mining properties. Exploration, reclamation and maintenance expenses expended during the six months ended July 31, 2008, were $2,189,006. The decrease in costs was due primarily to the lack of capital during the quarter to fully fund necessary operational expenses and reducing the mine operations to a minimal care and maintenance status. We incurred general and administrative expenses of $3,135,307 during the six months ended July 31, 2009. Of this amount, $569,409 reflects salary for administrative staff, payroll taxes and benefits, $1,623,102 reflects officer and director compensation during the quarter and $223,045 reflect fees for outside professional services. A large portion of the increase in officer and director compensation reflects severance arrangements negotiated with the former Chief Executive Officer and Chief Operating Officer of Firstgold and the increase in

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board of Director meetings due to the proposed restructuring transactions referred to above. A large portion of the outside professional services reflects legal and accounting work pertaining to our annual and quarterly reporting on Form 10-K and Form 10-Q, legal costs associated with the litigation involving the Crescent Red Caps LLC and the Restructuring transaction. During the six months ended July 31, 2008, we incurred general and administrative expenses of $2,331,128, of which $113,505 reflects promotional expenses; $363,893 represented officer and director compensation, and $1,253,900 reflected fees for outside professional services. It is anticipated that both mining costs and operation costs will be significantly lower as we continue to operate on a significantly reduced basis pending the consummation of the Restructuring transaction.

We incurred interest expense of $3,253,899 during the six months ended July 31, 2009, which compares to interest expenses of $155,911 incurred during the same six months of 2008. The principal balance of loans outstanding at the end of the second quarter of fiscal year 2010 increased by $12,167,087 to $14,238,032 compared to a principal balance of $2,070,945 outstanding at the end of the second quarter of fiscal year 2009, which was primarily the result of an increase in senior secured promissory notes issued during the third quarter of fiscal 2009 and other short term bridge notes. The increase in additional interest expense during the six months ended July 31, 2009, was primarily due to the increase in outstanding debt and the imposition of an 18% default rate on our senior promissory notes.

Our total net loss of the six months ended July 31, 2009, increased to $8,837,723 compared to a net loss of $5,445,606 incurred for the same six months ended July 31, 2008. The increased net loss was due primarily to a reduction in service revenue and a sharp increase in interest expenses during the first six months of fiscal 2010.

Liquidity and Capital Resources

We have incurred significant operating losses since inception which has resulted in an accumulated deficit of $54,648,110 as of July 31, 2009. At July 31, 2009, we had cash and other current assets of $171,334 compared to $389,553 at January 31, 2009 and a net working capital deficit of $16,824,071. Since the resumption of our business in February 2003, we have been dependent on borrowed or invested funds in order to finance our ongoing operations. As of July 31, 2009, we had outstanding notes payable in the gross principal amount of $13,788,032 (net balance of $8,782,963 after $4,293,110 of deferred financing costs and $711,959 of original issue discount) which reflects an increase of $11,638,124 compared to notes payable in the gross principal amount of $2,149,908, (net balance of $1,984,341 after $165,567 of deferred financing costs) as of July 31, 2008.

We have posted with the United States Department of the Interior, Bureau of Land Management a letter of credit which is secured by a certificate of deposit in the amount of $613,500. Additionally, we have posted with the United States Department of the Interior, Bureau of Land Management a cash bond deposit in the amount of $2,183,846. The letter of credit and the cash bond deposit cover future reclamation costs as required by the Nevada Division of Environmental Protection relating to the Relief Canyon Mine.

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In April, 2009 Firstgold's two primary lenders declared defaults under their respective Senior Secured Promissory Notes aggregating $13,528,160 of principal and interest as of July 31, 2009. On May 22, 2009 the lenders commenced foreclosure proceedings under their Deeds of Trust and UCC Security interests. If we are unsuccessful in closing the Restructuring transaction with Northwest or in securing alternative financing if the Northwest Transaction is not completed, these lenders could commence seizing and selling virtually all of Firstgold's assets. In light of the pending Restructuring transaction, as of September 15, 2009 the lenders had agreed to refrain from taking further action against Firstgold on a month-to-month basis for the payment of $110,000 per month in order to allow Firstgold to complete its Restructuring transaction. In the interim, until new financing can be secured we have been forced to suspend any additional processing activity at the plant and will maintain the Relief Canyon Mine property on a care and maintenance basis until such time as full operations can be restored.

We will require up to $13 million to cure the existing defaults under the Senior Secured Promissory Notes and an additional approximately $5 million to $10 million to bring the Relief Canyon Mine into full production and carry out planned exploration on our other properties. We do not have sufficient working capital to fund our current business plan for Relief Canyon. We are currently pursuing the Restructuring transaction with Northwest which, if completed, would provide for the purchase of the Senior Secured Promissory Notes and provide us with critical working capital to resume operations at the Relief Canyon mine. However, the sale of additional securities or incurring additional debt must now be approved by the holders of our Senior Secured Promissory Notes until such notes are paid off.

Due to our continuing losses from business operations, the independent auditor's report dated August 31, 2009, includes a "going concern" explanation relating to the fact that Firstgold's continuation is dependent upon obtaining additional working capital either through significantly increasing revenues or through outside financing. As of January 31, 2009, Firstgold's principal commitments included its obligation to pay a minimum of $400,000 per month on the Senior . . .