Cumberland Resources Ltd. (CLG:AMEX), market capitalization $244 million, is a
highly speculative gold exploration company based in Canada’s Nunavut Territory.
It has 2.89 million ounces of proven and probable gold reserves in its 100%-owned
Meadowbank gold project.

If all goes as planned, Meadowbank will become Canada’s largest new gold mine by
late 2008 or early 2009. It will be one of Canada’s lowest-cost gold miners (with
an average cost of just $201 per ounce). And it will immediately become an
attractive takeover candidate for someone like Newmont Mining -- the world’s
second largest gold producer.

Of course, the key words in that last paragraph are “if all goes as planned.”

Although Cumberland is sitting on a literal gold mine, it can’t start production
just yet. It needs approval from the Nunavut Impact Review Board (NIRB), the
region’s governing body, with responsibilities for the environmental assessment of
projects in the Nunavut area. Until the NIRB grants Cumberland approval to proceed
with production, the company is forbidden by law to mine a single ounce in
Nunavut.

Ultimately, the NIRB holds Cumberland’s future in its hands.

If Cumberland is permitted to move ahead with production at Meadowbank, the
company is one of the best bargains in the gold sector at its current price of
$4.37 a share. Based on my calculations, the company is trading for 129% less than
its true value. And it could easily rise more than that if a larger company (like
Newmont) swoops in to buy it outright.

Cumberland is currently in final stages of the NIRB approval process right now. It
submitted the last of its environmental impact statements to Nunavut’s governing
body in November 2005. And despite the NIRB coming back to the company in April
with a few more follow-up questions, Cumberland expects to receive a final verdict
by Q3 06. In other words, sometime by this September.

Why I Am Betting Cumberland Will Get the Go-Ahead From the NIRB

While it is impossible to guess whether the NIRB will give Cumberland the
thumbs-up or thumbs-down, I would bet my new PING putter the news will be good.

In early 2004, the NIRB rejected an application by Miramar Mining to develop its
Doris gold project, 375 miles from Cumberland’s Meadowbank site. It said the
company did not adequately discuss the impact its mining operations would have on
wildlife, water supplies and the Inuit people (the native people in the Nunavut
region). But it encouraged the company to file another application when it could
concretely address these concerns. Miramar did. And in March 2006, the NIRB
granted approval for Miramar to develop its Doris mine.

This was a major step forward for all miners who wish to do business in Nunavut --
including Cumberland. Based on its recent ruling on Miramar, it is obvious that
the NIRB is not opposed to mining companies setting up shop in Nunavut, as once
previously thought.

In addition to the NIRB granting Miramar approval this spring, there is more good
news that suggests Cumberland will be allowed to proceed with its Meadowbank mine.
The company signed an agreement with the Inuit people ensuring that local
employment, training and business opportunities will be accessible to them when
Meadowbank opens up. Clearly, the Inuit people are betting the Meadowbank mine
will be given the go-ahead.

Finally, the government of Nunavut announced a fuel tax rebate to the mining
sector -- a move that encourages mining companies like Cumberland to set up shop
in this region of Canada.

At the end of the day, we’ll have to wait and see if the NIRB gives Cumberland the
thumbs-up or the thumbs-down. My guess is Cumberland will be allowed to proceed
with construction and production of its Meadowbank mine -- even if it has to jump
through a few more hoops along the way. The key here is to be patient.

Set to Rise 129%

If Cumberland’s Meadowbank mine were to open today, it would be Canada's largest
pure gold open pit reserve, with proven and probable reserves that total 2.89
million ounces. It would also be one of the lowest-cost gold producers in the
country -- with a cost per ounce of just $201. And it would have a mine life of at
least eight years.

To try to figure out what Cumberland might be worth if its Meadowbank mine were
approved for production today, I ran some numbers. The spot price of an ounce of
gold is $640. And if you assume it will cost Cumberland $250 to get a single ounce
of gold out of the ground (that’s a conservative estimate, compared with the
company’s target of $201 an ounce), its net profit per ounce is $390. So to get a
very rough estimate of what the company’s reserves are worth, you multiply 2.89
million by $390. That number works out to be $1.13 billion.

But there are some other costs you need to consider that aren't reflected in that
$1.13 billion. Namely, Cumberland will have to spend about $300 million to build
roads and fully develop its Meadowbank mine once it receives the go-ahead from the
NIRB. To finance that deal, the company has agreed to pay a consortium of banks
420,000 ounces of gold -- or 15% of its total -- reserves. With those numbers in
mind, Cumberland is worth roughly $558 million. That’s 129% greater than the
company’s market cap today.

Of course, Cumberland is only undervalued if its Meadowbank mine is allowed to
proceed with construction and production.

Because of the inherit risk associated with Cumberland, I am not recommending you
buy shares at this time. Keep Cumberland Resources Ltd. on your radar screen. It
could be the next big story in the gold world.