Post by
Roundtrip on Sep 01, 2006 7:52pm
The Late Edition
On September 1st David Pescod wrote:
Yesterday, Cumberland Resources announced that the Nunavut Impact Review Board had recommended development of Cumberland’s Meadowbank gold project should proceed, which concludes roughly 2 1/2 years of comprehensive review and public hearing process involving multi- disciplinary Federal, Territorial, regional and community based representations.
The brokers loved it and charged big time as National Bank upped their target to $7.00 from $6.25; Orion moved their target to $8.00 from $6.50; Dundee Securities to $7.00 from $5.60; Raymond James to $7.75 from $7.00 and Canaccord Capital from $5.60 to $7.25. Obviously they like it.
This is a project that has been looked at for many years and uses some pretty conservative assumptions in their estimations such as $400 gold. Or at least we hope that’s conservative. They figure a mine life of 8 years that should produce 400,000 ounces of gold in years one to four and the remaining four years at 330,000 ounces per year at a cash cost of U.S. $175 an ounce. Looks pretty good!
But for the sake of argument, looking out our window we wonder if many of the analysts have spent much time in say, Northern Alberta recently. And we will reiterate our case. There are some pretty smart people that planned the Mackenzie Pipeline, which suddenly doesn’t cost $5 billion anymore, but closer to $10 billion or $11 billion. Some of the people out working at Suncor and other big projects, aren’t necessarily lazy or poor at math, but all of a sudden, these $3 billion projects are closer to $5 billion or $8 billion.
There’s a Tim Horton’s outside Edmonton that used to be open 24- hours a day. Now they can’t find labor and suddenly Tim Horton’s is working shorter hours. There’s a fellow who owns several Subway shops that is having to import labor from the Philippines. Welders these days (if you can find one) go for $75/hour and if he has a rig, it’s closer to $150/hr. A carpenter is worth his weight in gold...if you can find one. And if you get a job in Edmonton, you are looking at 1.5% vacancy rate for apartments, which tells you something…
Anyone looking to build a project in Northern BC, the Yukon or Northwest Territories these days, has to compete for trained labor and the costs for just about any project is going through the roof. Cumberland’s last estimate as of December, 2005 for their capital costs is around $313 million Canadian. If there’s something to worry about on the Cumberland story, watch that figure.
Meanwhile, for those following Cumberland, company officials tell us today to expect additional drilling results from their 2006 program within a week or two.
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