Cumberland looks to further improve Meadowbank

Cumberland Resources (CBD-T) has approved a budget of $2.5 million for a first phase of work at it’s Meadowbank Gold project, 70 km north of Baker Lake, Nunavut.

Cumberland is looking to further improve the project’s economics by delineating enough resources to support a 10-year mine life.

Included in the 2002 work program are plans for extensive expansion and exploration drilling and targeted engineering studies to improve resource classification in anticipation of a reserve estimation and a feasibility study.

The company has also designed an overburden drilling campaign aimed at evaluating a prospective 5-km area between the Vault gold deposit (7.5 million tonnes of inferred material running 3.9 grams gold per tonne) and Meadowbank’s other four gold deposits (Third Portage, North Portage, Bay Zone and Goose Island deposits) at Meadowbank.

A recently released preliminary economic assessment at Meadowbank points to measured and indicated resources of 7.8 million tonnes grading 5.79 grams gold per tonne, plus an inferred resource of 5.9 million tonnes. The study pegs the optimum production rate at 4,700 tonnes per day from a combination of open-pit and underground methods. That’s nearly double the 2,500 tonnes per day envisaged in an April 2000 study, thanks to the addition of the Vault zone.

Cumberland will also look to improve gold recoveries and optimize milling techniques. In October, initial metallurgical tests on the Vault deposit indicated a 92% recovery rate. Metallurgical composites from Vault yielded average flotation gold recoveries of 87.1%. Using gravity flotation processing, the recovery rate jumps to 92.1%. Earlier prefeasibility studies on Meadowbank’s four other deposits indicated that initial gravity separation followed by flotation-concentration and on-site leaching would result in a recovery rate of 92.4%.

Further improvements to the project’s economics will be sought through a review of contract mining costs and the selective use of reconditioned equipment.

Pending positive results from the first phase of work, Cumberland plans to spend up to another $2 million on the project.

The mining plan at Meadowbank calls for a single large pit to target the Third Portage and North Portage deposits, with two satellite pits exploiting the Goose and Vault deposits. The plan includes costs for underground access and development of deeper resources at the Vault and Goose Island deposits.

Running year-round, annual production is projected to average 246,000 oz. and amount to slightly more than 2 million oz. Total cash cost over the 8-year mine life are pegged at US$168 per oz. Initial capital cost are pegged at $US123.5 million, with another US$13.2 million required for sustaining capital, assuming all new mining and processing equipment is used.

Based on a life-of-mine gold price of US$300 per oz. and discount rate of 5%, the project’s net present value is estimated at US$34.7 million. The internal rate of return (after tax) is 10.4%, and the payback period comes in at 4.9 years. When the gold price drops by US$25 per oz., the net present value is more than halved to US$13.6 million. Also, the internal rate of return slips to 7.2% and the payback period increases to 6.1 years.