Baker Lake, Nunavut — Convinced that its wholly owned Meadowbank gold project in the Canadian Arctic has the potential to deliver 250,000 oz. annually,
The aim of the 2-prong program is to add 400,000 oz. to support a targeted 10-year mining plan, improve resource definition and provide feasibility-level metallurgical and geotechnical data. With its five closely spaced, near-surface deposits, Meadowbank ranks as Canada’s third-largest undeveloped gold project.
“There aren’t many projects like this in the world right now,” explained Senior Vice-President Kerry Curtis during a recent site tour by The Northern Miner. “Our goal is to get this project going as a mid-tier producer.”
Meadowbank is 70 km north of the inland community of Baker Lake in the heart of Nunavut. Baker Lake has daily commercial air service and is ocean-accessible. A seasonal shipping barge service to Baker Lake from the railhead in Churchill, Man., is limited to three months of ice-free conditions. Meadowbank can be reached from Baker Lake by a 30-minute helicopter ride, float Twin Otter or by winter road. The project covers some 350 sq. km of ground along a 25-km-long trend. The treeless topography consists of gentle rolling hills and is covered by glacial overburden and shallow lakes.
The 3-million-oz. Meadowbank resource is contained in a measured and indicated 7.4 million tonnes grading 6.12 grams gold per tonne, equivalent to 1.4 million oz., and an inferred 10.9 million tonnes grading 4.44 grams, or 1.6 million oz.
Set in and around the Portage Lakes, the four original Meadowbank gold deposits — Third Portage, North Portage, Goose Island and Bay Zone — are confined to the same banded iron formation unit over a strike length of 2.5 km. This concentrated area of mineralization accounts for 2.1 million oz. of the project’s total resource. The fifth deposit, known as Vault, was discovered in 2000 a further 5 km to the northeast. After completing two rounds of widely spaced drilling at Vault in 2000 and 2001, Cumberland outlined an inferred resource of 7.5 million tonnes grading 3.9 grams, equivalent to 936,700 oz., based on 42 holes totalling 6,158 metres.
The five known deposits are hosted in Archean greenstone supracrustal rocks of the Woodburn Lake Group in the Rae Craton of the Western Churchill structural province. The Meadowbank area is underlain by a structurally complex, folded package of intermediate volcaniclastics and greywacke, with interbedded magnetite-chert iron formation and lesser pelitic schists. Gold mineralization in the main deposit area, near Third Portage Lake, occurs predominantly in iron formation with associated pyrrhotite and lesser amounts of pyrite. These sulphides occur as a replacement of magnetite in the oxide iron formations.
“The key to these deposits is the sulphide content,” said Curtis. “We don’t see a lot of quartz-vein material or arsenopyrite. The mineralizing system is simple — just iron sulphide and gold. It’s non-refractory. There is not a lot of visible gold present. It’s very fine, microscopic.”
The outlying Vault deposit is a moderately dipping shear zone hosted in a complexly folded package of felsic-to-intermediate volcaniclastic rocks. Pyrite is the dominant sulphide mineral, with associated sericite and carbonate. The sulphides occur as disseminations and fracture fillings with or without quartz. The iron formations in the Vault area lack significant gold mineralization, which may be due, in part, to their discontinuous and wispy nature. Cumberland geologists believe the introduction of gold- and sulphide-bearing hydrothermal fluids during the Archean isoclinal fold event is the genetic link between the Meadowbank iron-formation-hosted deposits and the Vault volcaniclastic-hosted shear zone model.
Exploration for gold in the Meadowbank area followed the discovery of uranium in the Baker Lake basin in the 1970s. Regional grassroots exploration outlined gold-bearing Archean greenstone belts. In 1985, Asamera Minerals and
Cumberland acquired a 60% interest in the Meadowbank project, along with a half-interest in the Meliadine and Parker Lake projects, from Asamera in mid-1993 for $450,000 cash and a 2% net smelter return royalty, which was later bought out for $400,000 plus shares.
Third Portage
At the time of the purchase, Meadowbank hosted a preliminary resource of 209,000 oz. contained in the Third Portage deposit. In 1997, Cumberland acquired sole possession of Meadowbank, which had grown to exceed 1 million oz., by buying out Comaplex’s 40% share for $3.2 million cash and 1.5 million shares plus warrants. To the end of 2001, Cumberland had spent $16.5 million on Meadowbank and completed 429 drill holes in 62,000 metres of drilling. The Third Portage deposit has seen the lion’s share of the drilling.
“The reason we are so persistent with this project is because of the amount of near-surface resource,” said Curtis, who pointed out that about 85% of the current resource lies within 150 metres of surface.
The bulk of the exploration work up to 2000 was done on the original Meadowbank gold deposits. Prefeasibility studies, completed in early 2000 by MRDI Canada, concluded that the project required more ounces or a higher price of gold in order for it to be advanced to the feasibility stage. The original study looked at a combined open-pit and underground operation producing 160,000 oz. per year, at a milling rate of 2,500 tonnes per day, for an 8-year life. MRDI estimated that the four closely spaced deposits had a total resource of 11.2 million tonnes averaging 5.73 grams, equivalent to almost 2.1 million oz. The proven and probable component for the proposed Third Portage and Goose Island open-pits totalled 5.5 million tonnes grading 5.44 grams, for a contained 963,000 oz.
Regional prospecting in 1999 re-assessed much of the joint venture’s early work and confirmed the existence of two mineralized trends north of the known deposits. On the basis of this work, Cumberland signed an agreement with Nunavut Tunngavik (NTI) covering an additional 270 sq. km of ground contiguous with the mining leases surrounding the original Meadowbank deposits.
Vault
Intent on finding more ounces close to the known Meadowbank deposits, Cumberland zeroed in on the Vault prospect, where 46 grab samples taken over a 400-by-200-metre area returned values greater than 1 gram and up to 49 grams. The 2000 drilling program resulted in the discovery of the project’s fifth deposit.
In the fall of 2001, AMEC E&C Services was commissioned to assess the economic effect that Vault’s added ounces would have on the Meadowbank project.
“The whole project took on a new dimension,” says Curtis.
By doubling the design throughput rate to 4,700 tonnes per day (or 1.7 million tonnes per year), unit costs came down and the economics improved. Annual production estimates rose to 246,000 oz. at a projected cash cost of US$168 per oz. and a total cost of US$235 per oz. Predicted capital costs come in at US$123 million.
The proposed mining plan incorporates separate open pits on Third Portage, North Portage, Goose Island and Vault. Deeper resources at Goose Island and Vault will be mined by underground methods. Cumberland forecasts that 2.2 million oz., or 76% of the total resource, would figure in the mine plan. The open-pit portion, which makes up 85% of the propose
d mining plan, is modeled at 12.6 million tonnes averaging 4.62 grams, equivalent to 1.9 million oz., whereas the remaining underground portion is forecast at 1.8 million tonnes grading 6.52 grams, or 378,000 oz. The overall stripping ratio is modeled at 7.8-to-1. Cumberland is currently sitting with an 8.3-year mine life.
The Meadowbank resource, as it currently stands, is expected to generate US$605 million in revenue; it carries a pretax rate of return of 12.6% and a payback period of five years, based on a gold price of US$300 per oz. This preliminary assumption includes 41% of the inferred resources. One of the aims of this year’s program is to drill off a portion of the inferred resource and upgrade it to the reserve category.
10-year mine life
At a higher gold price of US$325 per oz., the 8.3-year project is forecast to produce US$653 million in revenue and carry an 18.5% pretax rate of return and a payback of 3.8 years. The addition of another 400,000 oz. will give Cumberland a 10-year mine life, boosting forecasted revenue to US$796 million and giving a higher pretax rate of return of 20.2% while shortening the payback period to 3.6 years. Cash costs of US$176 per oz. are a little higher in the target model because more underground ore from Vault will be mined.
“Meadowbank could be a pretty big mine on the Canadian mining scene,” says Curtis. “It’s very reasonable and workable, even at a gold price of three-hundred [U.S.] dollars per ounce.
“It’s the open pits that are going to make this project work, with lower capital and low risk mining. There aren’t many open pits that are planned to have a throughput of five grams. The location demands higher grades or configurations to make it work.”
The project development plan relies heavily on major earthwork structures, including water containment dykes. Cumberland has completed a geotechnical program on the dyke designs to confirm the viability and cost of construction. Cumberland began its environmental monitoring program at Meadowbank in 1996. Craig Goodings, the environmental co-ordinator, hopes to wrap up most of the studies by the end of this year.
“We don’t see any red flags,” said Goodings. “There are no permitting issues that can’t be mitigated with standard acceptable methods. It’s a good place for a mine.”
This spring, Cumberland completed a $2.5-million first-phase drilling program designed, in part, to add 400,000 oz. to the proposed mine plan. The program focused on testing the resource potential of the Connector zone, an area between the North and Third Portage deposits, and the downdip component of the Vault deposit. In total, 7,135 metres in 49 diamond drill holes were completed.
Connector zone
The Connector zone was an area largely unknown. Cumberland is hoping the results allow the proposed North and Third Portage pits to join-up in a 1.8-km-long continuous pit design.
“We found a nice little zone,” said Curtis.
The structure is shallow, with high-grade and low-grade components. A highlight of the drilling included 44.7 grams across 6.7 metres in hole 397. The Connector zone should have a reducing effect on the overall stripping ratio.
Spring drilling on the Vault was devoted to extending the deposit at depth.
“The Vault gets a little spotty down there, but it’s certainly a nice addition,” said Curtis about the results.
The deposit lends itself to a small open-pit extending to a depth of 75 metres over a length of 480 metres. Deeper drilling hit 16.09 grams over 4.9 metres (including 228 grams over 0.29 metre) at 298 metres below surface. Curtis says the Vault zone has been shown to extend 1,000 metres downdip.
This summer’s phase-2 program, budgeted at $3.9 million, is geared toward pit definition of the North Portage and Vault resource with some 6,000 metres of planned diamond drilling. More than 50 infill holes have already been completed at Vault. One of the best holes to date intercepted 14.07 grams over 10.5 metres (including 1 metre of 104 grams) in hole 64.
In addition, Cumberland has 2,000 metres of exploration drilling laid out. The company intends to test several targets that were generated from spring overburden drilling completed in the 5-km-long unexplored area between the Meadowbank and Vault deposits.
Work in progress
At the time of The Northern Miner’s visit, a rig was sitting over the PDF target, 10 km north of the Vault deposit. The PDF prospect was discovered in 1999 by surface prospecting. In 2000, five widely spaced shallow holes tested the 250-metre-length of surface mineralization. The best hole intersected 7.5 grams over 2.5 metres at 20 metres below surface. With a total of 15 holes planned, Cumberland recently reported the results for the first five holes. A stepout hole, 50 metres east of the 2000 intercept, hit 18.99 grams across 4.1 metres (including 0.58 metre of 80 grams).
“We’ll keep the drill here a while yet,” said Curtis. “This is very much a work in progress.”
Cumberland has accelerated environmental, metallurgical and geotechnical studies, and is now in a position to kick off feasibility and mine permitting in the fourth quarter. Metallurgical tests on the original Meadowbank deposits indicate that gold recoveries of 92.4% are reasonable for a gravity-flotation-cleaner concentrate circuit. Gravity recoveries can account for up to 40% of the gold. Preliminary tests on the Vault deposit yielded a much more conservative recovery of 82%. Further metallurgical testing is under way in an effort to unlock Vault’s full value.
In addition to its wholly owned Meadowbank project, Cumberland holds a 22% carried interest in the idle 4.5-million oz. Meliadine West project in Nunavut, near Rankin Inlet. Australia’s
Six deposits
WMC spent $55 million advancing the project through prefeasibility studies, outlining six deposits with a total resource of 22.1 million tonnes grading 6.33 grams. The project has been shopped around to every major in the world, but, with a price tag of US$22 million, there have been no takers.
“They designed it as a big open pit,” said Curtis. “It’s just like Meadowbank: there are lots of showings and it’s open to depth. There is excellent resource potential. It’s just not quite there yet.”
Cumberland and Comaplex are carried all the way through to production on the project and hold a first right of refusal pertaining to the sale of WMC’s stake in Meliadine West. In addition, to maintain its interest in the project, WMC must make annual cash payments to its Canadian partners of $1 million at the start of each new year until commercial production has been achieved. The payments escalate to $3 million beginning in 2006. WMC is also required to keep the properties in good standing.
“WMC approached developing Meliadine West with a high throughput,” said Curtis. “They wanted to do about four-hundred thousand ounces a year. They kind of forced the engineering into a large-scale open-pit. We have always thought that a selective, high-grade, underground operation should not be discounted.”
January will be a critical time for WMC, as that is when another option payment is due.
Cumberland has almost 35.9 million shares outstanding, or 42.8 million on a fully diluted basis, and $16 million in working capital.
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