Meadowbank “surprise” fells Cumberland

Shares in Cumberland Resources (CLG-T) shed another 25% on Monday, after the Vancouver-based miner said that estimated pre-production capital costs at its Meadowbank gold project in Nunavut have soared to more than $350 million.

The company says the price tag for the proposed 5,500-tonne-per-day operation has swelled owing to increases in almost all items required for construction. Cumberland hasn’t yet calculated the net asset values and rates of return for the project.

“We are surprised and disappointed by the magnitude of the preliminary capital cost estimates for Meadowbank,” said Kerry Curtis, Cumberland’s president and CEO. “Increases in estimated construction consumables and labour requirements have been compounded by recent dramatic escalations in steel, concrete and fuel costs. These challenging factors will result in a full examination of capital cost alternatives and production throughput variations.”

Cumberland’s shares have been on the slide since Mar. 17, when the company said a feasibility study at Meadowbank wouldn’t be finished by the end of the first-quarter as originally planned. The company also warned that capital costs were higher than expected, but didn’t provide a dollar figure.

Cumberland says that owing to seasonal constraints in shipping in the High Arctic region, the delay in completing the feasibility study will result in a one-year setback to the planned development of the project. In the meantime, the company plans to complete the remaining elements of the feasibility study, including mining designs, schedules and operating cost estimates.

At last count, measured and indicated resources at the wholly owned project amounted to 21.7 million tonnes running 4.3 grams gold per tonne, or nearly 3 million contained ounces of gold. Another 5.7 million tonnes running 4.3 grams are classified as inferred resources.

In early 2002, a preliminary assessment by AMEC E&C Services pegged the cost of a 4,700-tonne-per-day operation at Meadowbank at around US$123 million.

Shares in Cumberland were off 77, or more than 25%, at $2.30 in afternoon trading in Toronto on Mar. 22; the shares are off about 43% since the Mar. 17 announcement.