Preliminary study yields positive results for Cumberland

A preliminary scoping study of the Meadowbank gold project in the Northwest Territories shows strong economic potential, despite low gold prices.

Situated 70 km north of the ocean-accessible community of Baker Lake in the Kivalliq region of the Northwest Territories, the project is 100%-owned by Cumberland Resources (CBD-T). Total resources on the project stand at 1.5 million oz. in situ gold. The Meadowbank project is comprised of two potential open-pit deposits — Third Portage Bay and North Portage –, and a third, deeper target known as Goose Island.

The Third Portage Bay zone is the largest deposit, containing a near-surface resource of 4.5 million tonnes grading 7.06 grams gold per tonne, equivalent to 1 million contained ounces. The North Portage zone is estimated to contain a near-surface resource of 374,495 tonnes grading 9.72 grams, equivalent to 117,063 contained ounces, while the Goose Island zone hosts 976,834 tonnes grading 11.46 grams, for 359,774 contained ounces. The three zones remain open for expansion.

The preliminary study proposes that a combined open-pit and underground mine, operating at a milling rate of 2,000 tonnes per day, would produce an average 120,000 oz. per year over a mine life of 10 years at a cash cost of US$156 per oz. Required capital expenditures are estimated at $94 million, with a payback period of 2.7 years.

Under the proposed scenario, open-pit diluted minable resources are estimated at 4.95 million tonnes grading 6.46 grams, while a diluted underground resource stands at 780,000 tonnes grading 10 grams. All potential open-pit resources are within 150 metres of surface and have a projected stripping ratio averaging 7-to-1. Continuing geotechnical studies indicate there is potential to lower stripping ratios by increasing the proposed pit slope angle.

Prefeasibility-level metallurgical testwork suggests high gold recoveries (in the mid-90% range) are attainable using a combination of gravity and leach techniques. Gravity concentration methods alone recovered from 22.5% to 56.4% of the gold from samples of Third Portage zone, while Goose Island samples averaged better than 40%.

The mineralization is non-refractory and the rock is classified as moderately soft, thus the amount of energy required to crush the ore should be favorable. Mining costs are projected at $25 per tonne for open-pit operations and $68 per tonne for underground production.

The study assumes a gold price of US$325 per oz. and predicts an after-tax rate of return of 18.9%. The net present value is estimated at $63.4 million, at a 5% discount. At a lower gold price of US$300 per oz. the project rate of return falls to 15.1%, and at US$275 per oz. the rate of return is 11.1%.

While these studies are of a preliminary nature, Cumberland says the project shows outstanding economic potential even at low gold prices. A $1.8-million spring drilling program is set to begin in the next six to eight weeks; the program will focus on expanding the resource in three areas. The company has stated that it believes a project resource of 2 to 3 million contained ounces is achievable for Meadowbank.

Cumberland also holds an interest in the Meliadine gold project, situated just 11 miles north of Rankin Inlet on the shores of Hudson Bay. The project covers a 70-km long gold trend and is separated into two halves, Meliadine East and Meliadine West.

WMC International, a unit of Australian major Western Mining, is the operator of the Meliadine West property and holds a 56% interest, while Cumberland and Comaplex Minerals (cmf-t) each hold a 22% carried interest.

Since 1995, WMC has drilled more than 48,800 metres of core, with approximately 75% of the drilling focused on the Tiriruniak, F, Wolf and Pump zones. These zones comprise the newly designated Wesmeg project.

WMC recently established a preliminary diluted gold resource of just over 3.2 million oz. for two of the most advanced prospects, the Tiriruniak and F zones. This estimate is serving as the basis for a prefeasibility study, which is expected to be completed in March.

The Tiriruniak zone is estimated to contain a diluted resource of 6.8 million tonnes grading 11.9 grams, for 2.6 million contained ounces, while the F zone is estimated at 2.5 million tonnes grading 7.7 grams, equivalent to 630,000 contained ounces.

WMC has budgeted $5.9 million to conduct advanced drilling and engineering studies on the Wesmeg portion of the West Meliadine project. A further $1.3 to $2 million in exploration drilling has been proposed for targets that lie outside the Wesmeg project. This program will evaluate the potential of the 25-km-long westward extension of the project.

To maintain its interest in Meliadine West, WMC is required to provide all financing up until production. WMC has the right to purchase an additional 4% interest from the joint-venture partners after production start-up, for between $1 and $4 million, depending on the time of production.

Cumberland is the operator of Meliadine East, a 50-50 joint-venture with Comaplex. A resource of 2 million tonnes grading 0.2 oz. is outlined in what has been dubbed the Discovery zone. Follow-up work is planned in 1998 on a number of new surface gold prospects discovered last year.

Cumberland has a working capital of $10.1 million and approximately 22.7 million shares outstanding, or 24.6 million fully diluted.