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February 24 2005 - News Release

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Thursday February 24 2005 - News Release Mr. Kerry Curtis reports CUMBERLAND ANNOUNCES FEASIBILITY STUDY RESULTS ON THE MEADOWBANK GOLD PROJECT Cumberland Resources Ltd. has released the results from the feasibility study on the company's 100-per-cent-owned Meadowbank gold project located in Nunavut, Canada. The study incorporates improvements to the mine model as a result of a redesign completed in 2004 by the company and the study manager, AMEC Americas Ltd. Construction scheduling and capital cost estimation has been prepared by Merit International Consultants Inc. Metallurgical and process testwork was completed by SGS Lakefield Research Ltd. Process design was completed by International Metallurgical and Environmental Inc. and AMEC. Supporting geotechnical engineering, hydrogeological and geochemical studies were completed by Golder Associates Ltd. The study has been prepared in accordance with the standards of disclosure for mineral projects as defined by National Instrument 43-101 (NI 43-101). The most significant improvements are from increased annual production, changes to open pit scheduling and the addition of a conventional access road. The 2005 mine design has increased mill throughput by 36 per cent (to 7,500 tonnes per day) while maintaining high gold recoveries. Resulting gold production is estimated at 316,000 ounces per year over an 8.3-year mine life. The high grade ores from the Portage and Goose Island open pits are scheduled to be mined in the first four to five years, allowing annual production to increase to an average 376,000 ounces over the first four years of production. Peak production is achieved in year one with 421,000 ounces produced from the Portage pit. A 102-kilometre-long conventional access road, to connect the project to the community of Baker Lake, is included in the new mine design. This road access has reduced on-site infrastructure requirements, improved efficiencies in construction scheduling and reduced overall operating costs. Major mining equipment will be leased, with an option to purchase. The associated costs are included in preproduction capital and sustaining capital cost estimates. Highlights of feasibility study Assumptions include a long-term gold price of $400 (U.S.) per ounce and an exchange rate of 75 U.S. cents per $1 (Canadian). MEADOWBANK GOLD PROJECT FEASIBILITY Open pit mineral reserves (proven and probable) 2,768,000 ounces Metallurgical recovery 93.5% Mine throughput 2.73 Mtpa Mine life 8.3 years Average annual production rate Years 1 to 4 376,000 ounces Life of mine 316,000 ounces Total cash cost per ounce Years 1 to 4 US$199 Life of mine US$224 Internal rate of return Pretax 14.3% After tax 10.7% Payback period 4.0 years Preproduction capital Cdn$300-million US$225-million "The Meadowbank gold project is a substantial platform for the company to emerge as a mid-tier Canadian gold producer and will provide a significant long-term economic benefit to Nunavut through job creation, new business opportunities, taxes and royalties," said Kerry Curtis, president and chief executive officer. "The exploration phase of Meadowbank has consistently returned additional resources, achieving a remarkable discovery cost of approximately $12 (U.S.) per reserve ounce gold. Considerable opportunities exist to expand the 2.8-million-ounce reserve, including the PDF deposit which is not included in the scope of the current feasibility, and other targets within the 25-kilometre-long greenstone belt. We will soon announce a 2005 exploration program designed to evaluate these opportunities with a goal of further improving the economics by extending the operational life of the mine. Moving forward through 2005, as we advance the permitting process and evaluate project finance options, we have extended the mandate of the Meadowbank feasibility review committee to continue efforts to refine capital and operating costs to further improve the economics of the project." Changes to project design The Meadowbank project is designed as a conventional open pit gold mine. Significant improvements to the Meadowbank production model were achieved in 2004 including optimization of a wide range of capital and operating items. Additional metallurgical testwork completed in 2004 confirmed that a coarser grind would not significantly affect gold recoveries. This allowed for an increase in mill throughput with minor changes to the 2003 mine design and important savings in energy costs for milling. As a result, a 36-per-cent increase in process throughput resulting in a 28-per-cent increase in annual production has been achieved, without a significant reduction in gold recovery or increase in capital cost for the process plant. In 2004, the company drilled 118 additional diamond drill holes resulting in the improvement in measured and indicated resources at the Goose Island and Vault deposits. The higher grade reserves from the Goose Island open pit have been moved forward (year two) in the mine schedule to improve the economics of the project. Conventional road access has reduced on-site infrastructure requirements, extended the access season, improved efficiencies in construction scheduling and reduced overall operating costs. Major open pit mining equipment will be leased for a five-year term with an option to purchase. The preproduction lease costs of the equipment are included in the capital cost estimate, and the continuing costs of the lease are included in sustaining capital. A revised construction schedule and capital cost estimate have been prepared by Merit Consultants International Inc., a Canadian company specializing in construction management services. Capital costs, also prepared by AMEC, are within a 14-per-cent variance of the Merit estimate. 2003 mine 2005 mine model design Mill throughput 5,500 tpd 7,500 tpd Access Winter road Conven- tional road Recovery 94.5% 93.5% Mine life 10 years 8.3 years Annual production 247,000 oz 316,000 oz Company chairman, Walter Segsworth, who also chaired the Meadowbank feasibility review committee, said: "I am very pleased with today's result. The whole project team, which considered in detail more than 40 technical and cost aspects of the project, has dramatically improved Meadowbank at a time when cost pressures have been very challenging." Increased resource estimates for feasibility study The feasibility study assessed the resources of the Portage area, Vault and Goose Island gold deposits. The PDF deposit which remains at an early stage and requires further exploration was outside the scope of the study. A total of 111,364 metres of diamond drilling (in 801 drill holes) defines the resources of the three deposits. Information from six surface trenches (366 metres) at the Third Portage and Vault deposits are also included in the data set. In January, 2004, AMEC completed a technical report (as defined in NI 43-101) on the Meadowbank resource estimates (see news release NR04-02) based on a database of 678 drill holes and trenches. An additional 118 drill holes were completed on the property between April and September, 2004, focusing on improved resource definition. Subsequent revisions to the Goose Island and Vault resource estimates were announced in November 2004 (see news release NR04-17). Revisions to the Portage area resource estimates were completed in January, 2005, and reflect the addition of 15 infill drill holes in the central portion of the deposit. The 2005 Portage area resource estimates have improved tonnage and grade resulting in a 122,000-ounce increase in the measured and indicated category resource. The Meadowbank project mineral resource estimates are based on geologically constrained grade block models that were constructed by interpolating composited assay values with inverse distance techniques. AMEC has checked the validity of the models with a number of methods and is satisfied that the resource models provide an acceptable estimate of tonnage and grade for the completion of the feasibility study. Grade capping was employed in all resource models. The updated resource estimates were prepared in conformance with the requirements set out in National Instrument 43-101 under the direction of Steven J. Blower, PGeo, of AMEC, who is an independent qualified person as defined by NI 43-101. Resource estimates for the feasibility, including the updated Portage resource, are as follows: MEADOWBANK PROJECT RESOURCES FIRST QUARTER 2005 Deposit/ category Tonnes Grade Ounces (g/t) Portage area (1.5 g/t cut-off) Measured 1,178,000 5.80 220,000 Indicated 11,120,000 4.60 1,645,000 ---------- ---- --------- Subtotal 12,298,000 4.70 1,865,000 Inferred 528,000 4.30 73,000 Goose Island (1.5 g/t cut-off) Measured - - - Indicated 2,541,000 5.50 449,000 ---------- ---- --------- Subtotal 2,541,000 5.50 449,000 Inferred 1,740,000 4.50 252,000 Vault (2.0 g/t cut-off) Measured 39,000 3.70 5,000 Indicated 8,468,000 3.70 1,007,000 ---------- ---- --------- Subtotal 8,507,000 3.70 1,012,000 Inferred 1,223,000 3.80 149,000 All deposits Measured 1,217,000 5.70 225,000 Indicated 22,129,000 4.40 3,101,000 ---------- ---- --------- Subtotal 23,346,000 4.40 3,326,000 Inferred 3,398,000 4.30 547,000 Open pit reserves Conventional open pit mining methods will be used to exploit the resources of the project. Resources from the Third Portage, Bay zone and North Portage deposits have been incorporated into a single, four-phase pit design. Resources from the Vault and Goose Island deposits have been incorporated into two separate single-phase open pit designs. Resources from the PDF deposit were outside of the scope of the feasibility. Open pit mine designs use extensive geotechnical engineering studies by Golder to develop pit wall slope parameters. Designs incorporate appropriate pit access ramps, wall slope angles, catchment berms and minimum mining widths for selected equipment using a long-term $400 (U.S.) gold price at an exchange rate of 75 U.S. cents per $1 (Canadian). Reserve determinations include allowance for dilution (15 per cent) and mining losses (5 per cent). The average strip ratio for open pit mining is 8.36:1 over the life of the mine. Cut-off grades for the three pit areas have been based on the calculated break-even grade of 1.5 grams per tonne for the Portage and Goose pits, and 1.75 g/t for the Vault pit. In addition a minimum minable grade thickness of three gram-metres for Portage and Goose and 3.5 gram-metres for Vault has been incorporated into the mine plan. The proven and probable open pit reserve estimate for the three pits on the project is as follows: MEADOWBANK GOLD PROJECT OPEN PIT MINING RESERVES (proven and probable) Open pit Ore Au grade Contained (t) (g/t) (ounces) Portage 11,180,000 4.27 1,534,000 Vault 8,469,000 3.18 866,000 Goose 2,247,000 5.09 368,000 ---------- ---- --------- Total 21,896,000 3.93 2,768,000 ========== ==== ========= Sensitivities to gold price have been run using Whittle, an industry recognized pit optimization program, by varying the gold price by plus or minus 10 per cent while holding all other parameters constant. On an in situ basis the contained metal varied by a maximum of 2 per cent from the base case, demonstrating the relative insensitivity of the three areas to changes in gold prices. The open pit mining reserves consist of the inventory of diluted and recovered measured and indicated blocks within the final pit designs. Inferred tonnage, within the final pit design, is not included within the reserve and has been added to waste. The reserves have been prepared in accordance with NI 43-101. Mark Pearson, PEng, principal mining engineer with AMEC Americas, is the independent qualified person responsible for preparation of stated reserves. Metallurgy The recovery of gold from ore within the Portage, Goose and Vault open pit designs is based on detailed metallurgical testwork of the materials from the Meadowbank project over the course of three years. The sampling of the deposits was extensive and testwork was completed using only drill core from ore zones which fall within the proposed mining plan. The sample materials were selected by qualified persons, and the materials best represent geological materials planned to be mined. The metallurgical test program was completed in the years 2003, 2004 and 2005, with gold recovery studies by SGS Lakefield Research Ltd. Gold recoveries are predicted as follows: SUMMARY OF EXPECTED GOLD RECOVERIES Gold Mined zone Primary grind recoveries P80 -- microns % Portage deposit 62 94.1 Goose Island deposit 62 96.1 Vault deposit 80 91.3 Open pit mining Mining of the Meadowbank project will be done by trucks and excavators, and has been projected over an eight-plus-year mine life. Ore will be extracted conventionally using drilling and blasting with truck haulage to a primary gyratory crusher located adjacent to the mill. Waste rock will be hauled to one of two waste storage areas on the property or used for dike construction or dumped into selective areas of the open pits that have previously been mined out. Mining will initially be concentrated in the Portage pit area. Waste material from the prestripping will be used as bulk construction materials for dikes, as well as for construction fill material around the site. During preproduction, ore grade material will be stockpiled close to the primary crusher. During year one all of the ore material is scheduled to come from the Portage pit. Waste material will be used to complete the construction of the Goose Island dikes, with the remaining waste hauled to the primary dump north of the Second Portage Lake. With the completion of the Goose Island dike, the Goose Island pit will be brought into production and will augment the ore flow from the Portage pit. These two pits will operate concurrently for a period of four years, from years two through five. Waste stripping will commence in the Vault pit in year four, with the start of ore mining in year four as the Goose pit comes to a close. During the last 2-1/2 years of the project life, mining will be exclusively from the Vault pit. Major mining equipment has been based on a five-year lease program. Equipment leased for the project includes the following: blast hole drills, mass excavators, front-end loader, haulage trucks and tracked dozers. All production period lease payments associated with the equipment have been included within the sustaining capital for the project. Minor equipment has been based on owner purchase. Material movement peaks in year two at a rate of 90,100 tonnes per day when the Goose Island pit is started. The average material movement over the life of the project is 68,300 tonnes per day. The rate of delivery of ore to the mill has been set at 7,500 tonnes per day for the life of the mine. Process The process design is based on a conventional gold plant flowsheet consisting of primary gyratory crushing, grinding, gravity concentration, cyanide leaching and gold recovery in a carbon-in-pulp (CIP) circuit. The mill will be designed to operate 365 days per year with a design capacity of 2.7 million tonnes of ore per year (7,500 tonnes per day). The overall gold recovery will be about 93.5 per cent, based on expectations from metallurgical testwork, with about 40 per cent typically recovered in the gravity circuit. The crushed ore is fed to a coarse ore stockpile and then reclaimed to a semi-autogenous (SAG) mill operating in closed circuit with a pebble crusher. The SAG mill operates together with a ball mill to reduce the ore to about 80 per cent passing 60 to 90 microns, depending on the ore type and its hardness. The ball mill operates in closed circuit with cyclones. The grinding circuit incorporates a gravity process to recover free gold and the free gold concentrate will be leached in an intensive cyanide leach-direct electrowinning recovery process. The cyclone overflow is thickened prior to preaeration with air and leaching in agitated tanks. The leached slurry is directed to a six-tank CIP system for gold recovery. Gold in solution from the leaching circuit is recovered on carbon and subsequently stripped by high-temperature Zadra elution and recovered form the strip solution by electrowinning, followed by smelting and the production of a dore bar. The CIP tailings are treated for the destruction of cyanide using the standard sulphur-dioxide-air process. The detoxified tailings are pumped to the permanent tailings facility. The tailings storage is designed for zero discharge, with all process water being reclaimed for reuse in the mill to minimize the water requirements for the project. Infrastructure The Meadowbank project is located 70 kilometres north of the community of Baker Lake. The project site is at 134-metre elevation in low-lying topography with numerous lakes. With a typical Arctic climate, the site experiences a wide range of average annual temperatures of between 23 C to minus 40 C with low annual precipitation. Plant site facilities will include a mill building with an attached maintenance facility, separate office and dry facilities, assay lab, and heavy vehicle maintenance shop. A separate crusher structure will flank the main process complex. Power will be supplied by an 18-megawatt diesel electric power generation plant with heat recovery and an on-site fuel storage and distribution system. A prefabricated modular type accommodation complex for 200 persons will be supported with a sewage treatment, solid waste disposal and potable water plant. The mill-service-power complex will be connected to the accommodation complex with enclosed corridors. Peripheral infrastructure includes tailings and waste impoundment areas, a seven-kilometre haul road to the Vault open pit, and a 1,100-metre-long gravel airstrip. Baker Lake facilities will include a barge landing site located several kilometres east of the community. A storage compound consisting of open storage area, a cold storage building, and a fuel storage and distribution complex with 38M L capacity will be constructed next to the barge landing facility. Baker Lake storage facilities will be linked to the mine site with a 102-kilometre-long conventional access road. Transportation Ocean transportation of fuel, equipment, bulk materials and supplies to site will be from Montreal (or Hudson Bay port facilities) via barges and ships into Baker Lake during the 2.5-month ice-free window that starts in mid-July of each year. Baker Lake storage facilities are linked to site by a 102-kilometre-long access road. Fuel and supplies will be transported to the site by conventional tractor trailer units. Transportation for personnel and air cargo will be provided on regular scheduled flights on aircraft based out of Northern Manitoba. Staff living in the surrounding communities will be transported to site by alternate arrangement. Environment and permitting The company has prepared and submitted a draft environmental impact study (DEIS) to the Nunavut Impact Review Board (NIRB). The report identifies the potential impacts the Meadowbank project will have on the local environment, socio-economic impacts, and the management and mitigation measures required to minimize the impacts of the project while maximizing the benefits. The NIRB is presently reviewing the DEIS and the company anticipates it could move into the final EIS stage in the fall of 2005. Final approvals and licences are anticipated in early 2006. Engineering and construction schedule The engineering and construction schedule for the project anticipates that all necessary NIRB approvals and licences are obtained in early 2006 allowing shipping of equipment and supplies in the 2.5-month 2006 shipping season (mid-July to late September). Construction of the access road from Baker Lake to the Meadowbank site would commence in the fall of 2006. Upon completion of the access road a mine construction period of 18 months is required with production commencing in mid-2008. Capital costs The capital cost to carry out the design, supply, construction and commissioning of the project is $300-million (Canadian) ($225-million (U.S.)), estimated in fourth quarter 2004 Canadian dollars with no allowance for escalation. Lease payments for mine equipment during the preproduction period have been included in the capital cost estimate. Lease payments during mine operations have been included within the sustaining capital for the project. CAPITAL COST SUMMARY (in thousands of dollars) Description Cdn$ US$ Mining $ 28,287 $ 21,215 Process 73,400 55,050 Tailings 3,437 2,578 Ancillaries 26,266 19,700 Mine site infrastructure 48,320 36,240 Baker Lake facilities 9,174 6,881 Owners costs 8,234 6,175 Indirects 74,915 56,186 Contingency 28,062 21,046 -------- -------- Total capital cost $300,095 $225,071 ======== ======== The indirects in the above table include $25-million (Canadian) ($18.8-million (U.S.)) for third party engineering, procurement and construction management (EPCM), integrated with owner participation. Sustaining capital following plant start-up is $56-million (Canadian) ($42-million (U.S.)) including leasing costs for the mine fleet and allowance for additional open pit equipment. In addition, reclamation costs have been estimated at $18-million (Canadian) ($13.5-million (U.S.)). Operating costs All operating and maintenance costs were summarized into the major categories of mine, process plant operations, and general and administrative (G&A) costs. These costs are expressed in fourth quarter 2004 Canadian dollars with no allowance for escalation. LIFE OF MINE PROPERTY OPERATING COSTS (in thousands of dollars) Cost area Cdn$/t US$/t milled milled Open pit mining $11.93 $ 8.95 Process plant 12.24 9.18 G&A 11.18 8.39 ------ ------ Total $35.36 $26.52 ====== ====== Life-of-mine cash costs, based on Gold Institute guidelines, are shown as follows: US$/oz Direct mining costs $223 Third party refining and transportation costs $1 Cash operating costs $224 Royalties(i) $0 Total cash cost $224 (i) Note: excludes royalties payable to the Crown and Nunavut Tunngavik Inc. which are based on net income and reflected in income and mining taxes. Financial evaluation AMEC completed a financial analysis of the Meadowbank project using a discounted cash flow model incorporating applicable Nunavut and federal taxes, and royalties. The after-tax results include payment of all royalties. The base case for analysis was built assuming a $400 (U.S.) gold price and an exchange rate of 75 U.S. cents per $1 (Canadian) and 100-per-cent equity financing. Project construction capital costs including preproduction costs, continuing capital costs and mine closure costs have been included in the project cash flow projections. Operating costs are expressed as fourth quarter 2004 Canadian dollars with no allowance for escalation. MEADOWBANK PROJECT FINANCIAL ANALYSIS SUMMARY Project data Estimated value Life of mine 8.3 years Total gold produced 2.6 M oz Total ore mined 21.9 M t Total material mined 205 M t Open pit strip ratio 8.36:1 Average gold grade 3.93 g/t Base case gold price US$400/oz Total cash cost US$224/oz Construction capital cost US$225 M Sustaining capital cost US$42 M Pretax cash flow (undiscounted) US$174 M After-tax net present value at 0% US$115 M After-tax net present value at 5% US$46 M Pretax internal rate of return 14.3% After-tax internal rate of return 10.7% Payback period (from start-up) 4.0 years Note: The economic model includes the tax benefits associated with approximately $53-million (Canadian) of accumulated exploration, development and capital cost pools, which are projected to be available to the company at the end of 2005 as deductions against future taxable income. © 2005 Canjex Publishing Ltd.