Financial cloud threatens Meadowbank start-up

Cumberland delays Kivalliq gold mine by one year


Baker Lake residents may have to wait years now before they’ll get a chance to work on the proposed Meadowbank mine that’s located about about 70 km north of their community.

Cumberland Resources Ltd. announced a one-year delay last week in the estimated start-up time for the highly touted gold mine, after a consultant’s cost estimates show the mine’s pre-production start-up costs may exceed $350 million Cdn.

That’s up dramatically from preliminary start-up cost estimates of $196 million released in October of 2002.

“We are surprised and disappointed by the magnitude of the preliminary capital cost estimates for Meadowbank,” Kerry Curtis, Cumberland’s president and CEO, said in a follow-up statement issued this Monday.

“Increases in estimated construction consumables and labour requirements have been compounded by recent dramatic increases in steel, concrete and fuel costs. These challenging factors will result in a full examination of capital cost alternatives and production throughput variations,” Curtis said.

Less than a year ago, Cumberland brass were predicting big returns for investors, pointing to the mine’s low production costs when compared with rising world gold prices.

The company was prodding regulatory agencies like the Nunavut Impact Review Board to fast-track the project, saying they wanted all necessary licences and permits by March of 2004. That would have enabled mine construction in 2005, and the production of gold bars by the end of 2006.

But all that’s changed. A company management committee is taking a second look at the project, and the price of Cumberland’s stock plunged 25 per cent after news of the delay.

“It’s a big disappointment,” Graeme Currie, a mining anayst with Cannacord Capital, was quoted as saying by the Reuters news service. “Clearly, they’re going to re-evaluate the entire project.”

About 300 people would be employed in construction of the mine, while the mine itself would employ about 250 people. Many Baker Lake and other Kivalliq residents are hoping to land some of those jobs.

The company has also delayed the release of its feasibility study for Meadowbank, which is being done for them by a company called AMEC C&E Services Ltd. It was AMEC’s work that produced the disappointing numbers released last week.

The Nunavut Impact Review Board has begun an environmental review of the project, a process that will get going in earnest after the company submits an environmental impact statement.

Cumberland will spend $4.7 million on exploration at the Meadowbank site this year. Right now, they estimate the site contains about three million ounces of gold.

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