NUNAVUT - Vancouver-based CUMBERLAND RESOURCES has secured a gold load protection program that will provide at least $254 million (and perhaps as much as $285 million) for its 420,000-oz gold load facility. Proceeds from the loan will be used to build the Meadowbank gold mine north of Baker Lake. (See www.CumberlandResources.com for complete information about the project.)
The gold loan represents approximately 15% of Meadowbank's current open pit gold reserves of 2.9 million oz. Meadowbank, host to Canada's largest pure gold open pit reserves, is forecast to produce an average of 330,000 oz of gold per year over an eight-year mine life beginning in 2009.
The gold loan protection program uses a zero cost collar method to secure a minimum dollar value for the gold loan facility. As a condition of the gold loan facility, Cumberland subsidiary MEADOWBANK MINING executed a series of transactions with two of the mandated lead arrangers. The zero cost collar consists of the purchase of put options on 420,000 oz of gold at an average strike price of Cdn$605/oz and a corresponding sale of call options on the same number of ounces at a strike price of Cdn$800/oz. All of the options expire in September 2007. Depending on the date of drawdown, all of the purchased put options and sold call options will be either closed out at the time of drawdown or will expire unexercised. Cumberland anticipates that all of the ounces under the gold loan facility will be drawn down by the end of the second quarter of 2007.