Aurizon gold mine almost ready to go

Vancouver-based Aurizon Mines (ARZ-T, AZK-X) is days away from beginning operations at its Casa Berardi gold mine in the Abitibi region of Quebec with just a few jobs left to cross off its preproduction check-list.

The mill has been processing material from the surface stockpile of development ore while the mine is commissioned for the hoisting of ore, waste and personnel.

Ian Walton, executive vice-president and CFO, said the mill is running at a production rate of 1,600 tonnes per day, but is still being shut down at night for testing. Within a year, the production rate will increase to 2,200 tonnes per day.

Walton expects the mill to be in full operation by the end of the month when mill feed will come from the 46 underground stopes in Zone 113 that are currently being developed. There are 15 stopes that are drilled and ready to be blasted.

The company estimates it will produce 185,000 oz. of gold in 2007 increasing to 200,000 oz. in 2008 at an operating cost of $250 per oz.

Aurizon has continued exploration drilling in hopes of extending Casa Berardi’s life beyond its current six-year projection. Results are coming this February.

The exploration drilling of the Principal zones, not in the current mining plan, have indicated mineral resources of 655,000 tonnes grading 6.2 grams gold per tonne including two intersected holes grading 29.7 grams gold per tonne over 20.5 metres and 20 grams gold per tonne over 1.5 metres.

Definition drilling in the Lower Inter Zone has shown potential for grades higher than the original 7.27 grams gold per tonne, with 37% of 41 holes showing grades in the double digits.

The company is also exploring elsewhere in Quebec: the Joanna gold property and the Kipawa gold-uranium property.

Aurizon reported net earnings of $4.8 million, or 3 per share, in the third quarter compared to a net loss of $800,000, or 1 per share, last year.

An unrealized mark-to-market gain on derivatives of $5.9 million was due to the decline and volatility of gold, dropping from US$614 to US$599 per ounce during the third quarter.

The company does not have any fixed-price gold contracts, allowing it to fully participate in any rise in gold prices up to an average price of US$813 per oz. in 2007, rising to US$908 per ounce in 2010. If gold prices exceed these levels, about 74% of planned production, over the term of its $75-million loan, can be sold at the higher prevailing price.

For the first nine months of 2006 Aurizon had a net loss of $12.9 million, or 9 per share, compared to a loss of $700,000, or 1 per share, last year.

Aurizon has an outstanding damages claim for $5.3 million charged to operations the cost of fighting an unsolicited take-over bid by Northgate Minerals (NGX-T, NXG-X) in May.

The bid breached a confidentiality and standstill agreement, causing Aurizon’s board to recommend shareholders to reject it.

Early this fall a Desjardins Securities mining analyst listed Aurizon as a take-over target.

“We are in the junior company-emerging producer status so it makes sense if we are seen as a target for others whether it’s on a friendly or hostile basis,” said Walton.

If another take-over bid comes along Walton said the board would have to evaluate the offer.

“If it’s fair for shareholders we are not going to be obstructive,” Walton said.