Aurizon Mines poised to revive mining camp

Back in the mid-1980s, Quebec’s Casa Berardi camp was making news across Canada, including the front pages of this newspaper. The camp has since fallen on hard times, with its operations either depleted or suspended. However, Aurizon Mines (ARZ-T) is poised to breathe new life into the camp by placing the dormant Casa Berardi mine back into production at a rate of about 200,000 oz. gold per year for at least seven years.

Over the past 10 years, Aurizon has developed a reputation for being one of Canada’s best narrow-vein gold miners. It operates the 50%-held Beaufor mine, near Val d’Or, and has a 50% stake in the Sleeping Giant mine operated by Cambior, near the town of Amos, also in northwestern Quebec.

Mining analysts Brian Christie and Johann Aler of Canaccord Capital recently issued a “buy” recommendation for Aurizon, based on the company’s plans to expand its gold production beyond Beaufor and Sleeping Giant.

“We believe that the Casa Berardi mine is an excellent asset with strong potential to both upgrade and expand the reserve/resource base,” they note in a recent research report. “Even in a tough gold market, the company has delivered consistent financial results.”

Aurizon reported net earnings of $617,000 in the latest quarter, compared with net earnings of $1.5 million a year earlier. Production for the quarter totalled 16,503 oz., compared with 15,865 oz. a year earlier. Total cash costs were US$211 per oz., 3% lower than in 1999.

Aurizon expects to produce about 61,000 oz. gold this year. Of this total, Sleeping Giant is expected to contribute about 37,500 oz., whereas Beaufor is targeted to produce 23,500 oz.

Meanwhile, the analysts note that talks are under way with institutions and government agencies to advance the funding and permitting required to bring the Casa Berardi mine back into production. Capital costs are estimated at $121 million, while cash costs are expected to average US$145 per oz. over the mine’s 7-year life.

“The company is also planning a 40,000-metre drill program to test for extensions of the new 113 and 118 zones,” the analysts note, “as well as other targets in the West Mine area.”

Aler and Christie set a 12-month target of $1.80 for Aurizon shares, which currently trade at about $1.05. The company has 38.3 million shares outstanding (55.3 million fully diluted).