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Vol. 12, No. 12 Week of March 25, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Agnico-Eagle heading north to Nunavut

Operator of LaRonde gold mine in Quebec to purchase Cumberland Resources, owner of Meadowbank project in Canada’s Arctic

By Sarah Hurst

For Mining News

Toronto-based Agnico-Eagle Mines is venturing into the Canadian Arctic with its friendly offer to purchase Vancouver-based junior Cumberland Resources in a transaction valued at C$710 million. Agnico-Eagle will exchange 0.185 of a common share for each Cumberland share, which represents a 28.8 percent premium to Cumberland’s closing share price on Feb. 13. Cumberland currently owns 100 percent of the Meadowbank gold project in Nunavut.

Meadowbank contains proven and probable reserves of 21.3 million metric tons, grading 4.2 grams per ton, or 2.9 million ounces of gold. Agnico-Eagle anticipates that the first gold will be produced at Meadowbank in early 2010. Annual gold production is estimated to average 400,000 ounces for the first four years and 350,000 ounces over the life of the mine. Cumberland’s board of directors has recommended that the company’s shareholders accept the offer. Under certain circumstances, if the deal does not proceed to completion, Agnico-Eagle will be entitled to receive a fee of C$21 million, or approximately 3 percent of the implied transaction value.

“I believe this transaction is a good example of a win-win situation for both Cumberland’s shareholders and those of Agnico-Eagle,” said Kerry Curtis, Cumberland’s president and CEO. “The Meadowbank project will be in the good hands of a proven mine-builder in Agnico-Eagle, and they have the financial capacity and expertise to continue to expand the reserves and resources of the project and perhaps improve upon the projected annual gold output. I am also confident that Agnico-Eagle will continue to adhere to the highest standards of corporate responsibility, and will work very closely with the community of Baker Lake, the regional Inuit organizations and the government of Nunavut,” he added.

Capacity of planned processing facility could be expanded

Agnico-Eagle is evaluating the possibility of increasing the capacity of the planned processing facility at Meadowbank to 8,500 tons per day from the currently contemplated 7,500 tons per day. Agnico-Eagle’s preliminary estimate for capital expenditures to bring the project into production is C$375 million. The company estimates that it will spend an additional C$65 million of capital over the eight-year mine life, with total cash costs averaging approximately C$250 per ounce.

While Agnico-Eagle is reviewing the planned capacity of the processing plant and mine plan, construction work will continue on infrastructure such as the road, fuel storage facilities and site camp, and the exploration drilling program will also move ahead. The Meadowbank project will be supervised by Agnico-Eagle’s technical team, based in northwestern Quebec. The company thinks that the project timeline will be a good fit with its existing project development schedule, since the technical team anticipates completing construction of the Goldex and Lapa projects in 2008, immediately prior to the start of construction of Meadowbank’s surface facilities.

Agnico-Eagle’s Goldex and Lapa projects are in the Abitibi region of northwestern Quebec, near where the company operates its flagship LaRonde mine, which has produced more than 2.9 million ounces of gold since 1988. Agnico-Eagle also owns the Pinos Altos property in Mexico’s Sierra Madre gold belt and the Kittila property in Finland, both of which are advancing towards production.

Quebec-based team for mine building, supplies

“In terms of the Quebec-based team, what that’s going to involve is basically mine building, providing supplies,” Agnico-Eagle’s vice chairman and CEO, Sean Boyd, said in a conference call Feb. 14. “All of the construction management will be run out of LaRonde and that will be sort of a fly-in-fly-out operation. ... And we don’t like political risk, so what this transaction does is it increases our already-strong presence in Canada. And as far as permitting goes, we have all of the major permits here. There is a couple of water licenses that are required, but basically the project has begun construction, with the road construction having started very recently,” he told shareholders.

Meadowbank’s three closely spaced open pits will be relatively shallow, with mining planned to a depth of about 170 meters, according to Boyd. There will be a fourth pit a few miles north of the others. The mine will be technically very straightforward, according to Boyd, with traditional processing using a gravity circuit that should enable Agnico-Eagle to recover 35 percent to 50 percent of the gold, and a carbon-in-pulp circuit for the balance. “From an exploration potential perspective, this just adds another large land package with another large open deposit to our portfolio,” Boyd said.

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